Our world demands new leadership

The focus on sustainability is leading companies to place different emphases. That demands a different kind of leader. People who understand where we as a society are headed and how they can respond to that. That new leadership could also provide a compass for investors.

Proactive leadership

“New leadership means taking decisions which don’t only take into account the interests of your shareholders, but also those of your other stakeholders: your employees, your customers, your suppliers, the environment, the local community and, not least, future generations.”

So says Katleen De Stobbeleir, Professor in Leadership at Vlerick Business School in Ghent, Belgium. That type of leadership is new. For decades, the focus was on ‘shareholder primacy’. The interests of shareholders were all that management were concerned with, and that was reflected in all the decisions made.

“The evolution within society towards sustainability is creating a need for businesses to focus increasingly not just on their core activities, but also on other aspects such as sustainability”, continues Katleen De Stobbeleir. “The emphasis is shifting from reactive to proactive. Where in the past companies did not appreciate the importance, or took actions purely in order to avoid problems, the tone is now changing. Companies are now more likely to see the opportunities and challenges, and are engaging in an open dialogue about them.”

New perspectives

Detecting opportunities demands a different approach from a business manager. He or she needs a broader vision, which embraces not just the economic perspective, but also the societal and social aspects.

Katleen De Stobbeleir: “In the current situation, a business manager has to dare to ask the question and be willing to follow unfamiliar paths in order to look for new solutions. That means evolving from ‘command-and-control’ leadership to an inclusive leadership style. That in turn demands a multidisciplinary approach. The problems are often so complex that it is impossible to work from a silo mentality.”

Business managers must evolve from ‘command-and-control’ leadership to an inclusive leadership style.

Katleen De Stobbeleir - professor Leadership Vlerick Business School

Authenticity and dialogue

The core mission of inclusive leaders is to bring what is happening in the outside world inside the company. A manager whose focus is not exclusively on immediate shareholders but also on all other stakeholders must first have a clear picture of the needs of those stakeholders.

According to Katleen De Stobbeleir, engaging in dialogue is the starting point. “Not just with staff”, she says, “but also with customers. A culture of openness, transparency and debate are more important than rules and codes of conduct. Co-creation and participation also play an important role here.”

“It’s also important to be authentic”, she adds. “As a business manager, you have to have a good narrative to carry people with you, so that employees can support and disseminate that narrative and personalise it in their own work. Give your staff the space they need to develop their skills and help shape the narrative. That way, you’ll complete the circle and will be able to achieve what you say you are going to do.”

How does an outsider gain a clear picture of the degree to which a company is focusing on this? Katleen De Stobbeleir: “Stakeholder engagement and authenticity are often expressed in the way in which companies are organised: how is their hierarchy structured? What is their remuneration structure like? How diverse is the team? And so on. These aspects are all interrelated: diversity in a broad sense can only lead to a richer and more interesting debate if there is sufficient mutual trust. The role of the hierarchy is crucial here: creating trust and ensuring that everyone is heard.”

Becoming more sustainable without impacting on growth

Sustainability and financial added value need not be mutually exclusive. “The world we live in is full of contradictions.

Teachers have to deliver high-quality education whilst at the same time saving money; researchers have to innovate, but regulations throw up barriers; companies have to make the transition to sustainability and at the same time safeguard their growth.

What it boils down to is reconciling two apparently irreconcilable realities.”

“It is a ‘mission impossible’ as long as you approach the contradiction from the perspective of an ‘either or’ mentality”, she continues. “Then you have to choose. And choosing is losing. But suppose you just accept the contradiction for what it is? Approaching it with a ‘both... and’ ‘mentality creates an opening to potential solutions.

You then become intrigued by the contradiction, which is transformed from a contradiction to an interesting challenge and energises you. Applied to sustainability versus economic growth, this means that you ask the question: ‘how can we become more sustainable and at the same time safeguard our growth?’”

Companies have to make the transition to sustainability and at the same time safeguard their growth. What it boils down to is reconciling two apparently irreconcilable realities.

Katleen De Stobbeleir - professor Leadership Vlerick Business School

Developing a new mindset

New leaders operate from the basis of this ‘paradox mindset’. According to Katleen De Stobbeleir, it’s also possible to develop that mindset. “You start by seeking out contradictions, preferably before they become visible”, she begins.

“Then you try to describe them in a non-judgemental way, so that everyone is aware of the different perspectives and also learns to appreciate those differences. Finally, you look for a common denominator.

For example, the common denominator between sustainability and growth might be the customer: sustainability has gradually become a new minimum standard for customers, so a business that wants to grow will have to embrace that new reality.”

Help in attracting talent

The advantages of new leadership are gradually becoming clear. Because a manager who thinks and acts in this new way is better prepared to face future challenges. “Having a ‘paradox mindset’ means you feel better, and also perform better when confronted with higher demands and more limited resources”, says Katleen De Stobbeleir. “After all, aren’t we all being confronted with higher demands and scarcer resources?”

There are other benefits, too: attracting talent and instigating self-reflection. Young potentials expect there to be ‘purpose’ in their work. They want a job which appeals to their competences and at the same time an employer who strengthens both our society and the economy. Where sustainability is about how the business can contribute to a better world, ‘purpose’ is the ‘why’ behind your actions and efforts.

Katleen De Stobbeleir: “If you incorporate that into your business operations, it gives your employees a sense of meaning, which in turn increases their commitment to achieving those sustainability goals, however challenging they may be.”

Signal for investors

For investors, it is interesting to identify those companies where new leadership is giving direction. It's a symbol of future-proofing. It’s something that KBC also goes in search of. Kenneth De Bruycker, expert in sustainable and socially responsible investment at KBC Asset Management, explains: “We apply a ‘Best-in-Class’-selection methodfor companies.

That means we only invest in companies or governments which achieve the highest scores within a comparable group on the ESG criteria. This enables us to give sustainability leaders a helping hand, while encouraging others to follow in their footsteps.”

KBC assigns a global score , based on three pillars: environment, social aspects and corporate governance. “Governance is an important element in that score”, says Kenneth De Bruycker. “We look at things such as the quality of the management, the independence of the Board of Directors, transparency in the areas of remuneration and taxation, and the quality of the financial reporting.”

Do you have any questions after the article?

Contact your relationship manager

This article is informational only and should not be considered investment advice.

Others also viewed