Challenge of embedding Sustainability in Organizations: The role of HRM and Leadership

INTRODUCTION
In the last decade, the importance of sustainability in any part of business in any industry has increased. Sustainability needs to move from being an add-on to a way of life at the firm such that companies can balance their social, financial and environmental risks and obligations. While companies have begun identifying the need to ingrain sustainability into the organisation, most business leaders still do not have a clear idea on how to go about doing so.
THE CULTURE OF SUSTAINABILITY
When talking about sustainability in business we mean managing the ‘triple bottom line’ such that decision making takes into account not only profits but also people and the planet along with social and environmental risks and obligations. In this sense, corporate reporting takes into account the environmental and social impact of the firms operations.
But a culture of sustainability is more than just the corporate report and the face value of the initiative. It is one in which all the members of the organization share the spirit and the passion for the cause of balancing profitability with environmental accountability and social well being. Such a culture constantly strives to improve the lives of stakeholders while successfully carrying out its operations over the long term.
WHAT DIFFERENTIATES SUSTAINABILITY FROM OTHER INITIATIVES?
Most organizational change initiatives are largely confined to the boundaries of the organization. In contrast, sustainability is part of a broader societal agenda that extends beyond the organization. The motivation for a sustainability change initiative can often be driven by external forces and, at times, the benefits may not appear to directly enhance value. In cases where the change is motivated internally, the change may be initiated because one or more organizational members deem it to be ‘the right thing to do.’ This often means that organizations embarking on a sustainability journey must be willing to engage in significant inter-organizational collaboration. Lastly, and perhaps most importantly, transitions to sustainability may involve the need for paradigm-breaking business models or approaches.
CHALLENGES IN IMPLEMENTING SUSTAINABILITY IN ORGANISATION CULTURE
While the importance of moving toward sustainability is increasingly felt in boardroom meetings, companies find it difficult to drive sustainability in their organisation. Some of the obstacles which prevent organizations from implementing sustainable business practices include lack of leadership support, difficult to measure return on sustainability investment and limited understanding and involvement of sustainability across levels.
We have identified five pillars along which changes can be brought about so as to affect the culture of the organisation. These are Strategy, Structure, Processes, Metrics and People.
STRATEGY
Many corporations have initially resisted the idea of sustainability and many others defined their scope very narrowly, concentrating their efforts in CSR. But they have since realised that by making sustainability ‘central to business strategy’. This has elevated the need for HR to be integral to influence strategy instead of playing purely supportive roles. In spite of popularity of these ideas, few companies have been able to leverage their core competencies to bring about change within and outside the company.
Let us take a look at GE’s Ecomagination strategy, which was adopted in 2005 with the vision that ‘Resource efficiency makes economic sense. Green is green’. By aligning the company strategy itself in such a manner and through training and regular employee engagement, GE was able to grow a distinct workforce culture of sustainability. In the last decade, GE has made tremendous progress in implementing green and efficient designs to achieve and even go beyond the 2005 goals for 2010. The sheer size of GE and their strong client base have been a heavy influence in transforming customer industries like Aviation, Renewable energy and Health.
ECOMAGINATION -HR perspective:
Ecomagination began in 2005 with a 3 goal agenda to double GE’s clean tech R&D investment to 1.5 Billion USD, increase revenues from these technologies to 20 Billion USD and reduce greenhouse gas (GHG) emissions by 1 percent within the next 5-6 years. By 2010, GE had not just managed to achieve these targets but raised expectations, with 5 Billion USD pumped into Clean R&D investment, revenues from ecomagination touching 85 Billion USD-four times the target, reduction in GHG emissions by 22 percent and 30 percent reduction in water use. Here, we take a look at how HR practices and Employee engagement have influenced and in turn were influenced by Ecomagination.
Open Innovation: GE has laid emphasis on working with partners, whether they be customers or transport and energy companies. GE has more than 50,000 technologists working around the world encouraging global innovations in areas of energy efficiency, renewable/clean energy and seawater desalination. GE has been successfully able to encourage open innovation by hosting six global open innovation challenges till 2014.GE Ecomagination open innovation challenges included challenges in innovation like improvements to waste heat management and steam production efficiency in Canadian oil fields.
Water Reduction3: Scarcity of freshwater for operations forced GE to rethink its strategies to concentrate on localities as they realised that water management is highly location based requiring newer technologies and customised integrated strategies. For instance the up gradation of waste water treatment facility at Bangalore has reduced the per capita consumption at the research centre by almost 50% in 2014 from base year 2006.
HealthAhead- HEALTHYMAGINATION
GE has invested heavily in health globally and believes in leading by example. The HealthAhead program, under the global HEALTHYMAGINATION portfolio, partners with employees and their families to ensure safety at the workplace and promote overall health. The program has already reached around positively impacted two thirds of the GE employees. Environmental, Health and Safety (EHS) program targets safety at the workplace by better controls and monitoring. Due to these efforts, the number of incidents of injury and illness has reduced by 37% by 2013 from the 2003 base year.
STRUCTURE
Structure determines where decision-making and authority lie within the organization. By means of a formal organisational structure we put in place a framework that allows the culture of sustainability to flourish. We use structure to identify key personals and champions of the cause. Developing a culture that supports sustainability requires long term efforts, as it involves redesigning of formal and informal processes and routines. Typically, sustainability structure in organisation has evolved gradually over three stages. These are Centralised Structure, Integrated Structure, and Embedded Structure.
Centralized Structure: In this stage, organisational vision for sustainability begins to emerge. This stage is led by one person or some groups of leaders as it is challenging for entire company to implement a new initiative. As initial efforts start showing some results, both employees and executives take notice of it.
Integrated Structure: In this stage, sustainability efforts spread across an organization. One leader give way to “sustainability group” and leadership develops throughout divisions of the company. Targets are set against measureable goals. Initial elements of tying compensation to sustainable performance are visible.
Embedded Structure: This is the final stage where idea of sustainability is embedded deep in the company’s culture. Company’s mission is synonyms with sustainability mission. Multiple long term goals are created, which are traced against performance metrics. The results are measured, and reported. Specific oversight committees are common.
For example, BASF has created elaborate structures to promote sustainable business activities. At the top is the Corporate Sustainability Board (CSB). It is BASF’s central steering committee which is mandated to monitor the implementation of the sustainability strategy. It defines organisation wide sustainability goals and approves corporate position papers on sustainability topics.
Figure 1: BASF Sustainability Structure
Similarly, Sustainability Advisory Council is an external independent body. Its purpose is to provide external unbiased perspective to the CSB members. Sustainability Core Team supports CSB in implementing decisions taken by CSB. It also supervises sustainability performance measures. Sustainability Committees such as Cross-Regional steering committees and cross-functional divisional teams identify focus areas in the regions, practical challenges and propose relevant projects. The Sustainability Strategy Team provides consulting services to assess business opportunities and risks. It provides support to CSB on evaluation of products and processes, and development of strategies of different business units.
METRICS
Employees/labour form a major chunk of any organisation, hence it is imperative on the part of organisation to encourage employees by incentivising them or setting metrics of performance which would motivate them to take the sustainable path in everything they do. The performance will be compared against the standard metrics and through this an evaluation by the firm and also of the firm will be done. These metrics are used to keep the morale of organizational employees up and also to encourage them to do better.
Coupled with role descriptions, organizations need to ensure that employees will know how their sustainability performance will be measured. Accountability mechanisms need to be fair and effective to maintain ongoing improvement. Employees are more engaged in the sustainability agenda if they see how it is directly related to their job.
PROCESSES
A company’s processes may be thought of as its character since it is the processes that define how the company achieves its goals. Successful businesses have processes that distinguish them from the competition. Thus it is but obvious that if a company were to take up any new initiative it would have to be incorporated in the processes of the company to make the initiative a success.
Sustainability initiatives taken up by businesses are no different. Any business, which successfully wants to perform well on its sustainability initiatives, needs to start by designing or tuning its processes to fit the requirements of the initiatives.
To illustrate the point, we will take the example of Ceasars Entertainment, the company which owns and runs the globally popular Caesars Palace Hotel and Casino. The Company started ‘Code Green’, an internally motivated sustainability initiative that was the brainchild of the CEO, Gary Loveman and a few other executives.
Code Green was started in the year 2007. In the wake of the slowdown, as the company was struggling with reduced revenues and had to cut down on in its workforce and employee benefit schemes, a few employees across the multiple locations of the company were taking initiatives to lower costs by cutting down on energy and water consumption, recycling etc. This was noticed by Loveman and other executives and that was the start of Code Green. Owing to this initiative, within 5 years’ time, Caesars Entertainment reduced its carbon footprint by 10% and energy consumption was down by 20% per square feet. Being in the casino business is considered to be a bit controversial by some. Implementing this initiative helped the company build the image of a being a better corporate citizen. This also helped in boosting the morale of the employees.
Initially, implementing the Code Green was chaotic since there was ambiguity regarding what needed to be done. There was no common baseline for starting, no unanimous understanding of Sustainability. The process was started by laying down broad goals which were to reduce energy and water consumption and to achieve these by keeping the customers and employees engaged. Soon after starting the executives involved with Code Green understood that it was difficult to tackle all the issues at once and that Code Green had to be an all-encompassing umbrella program that would require the cooperative working of people from all domains of the business – from marketing, operations, profit-centric people to environmentally conscious people – everyone had to be on board to make this initiative a success.
It is essential that the employees feel motivated to carry on therefore the initial goals should be low-hanging fruit. Attainment of these objectives would boost the morale of the employees. This would lead to a domino effect as gradually higher standards can be set. Caesars Entertainment used a visual calendar which enlisted monthly goals and what needed to be done to achieve them. The goals were put up cyclically so the next time the same goal appeared on the calendar it was to build up on the work done previously. To monitor progress, Ceasars Entertainment worked on developing a scorecard which would monitor the progress at an employee as well as a departmental level. This helped instil a spirit of healthy competition between different employees and departments to outperform each other on the Code Green initiatives. So much so that the company did not require a monetary incentive to keep the employees engaged since the belief that no one likes to be at the bottom worked. To ensure peer to peer learning, information sharing, best practices and communication the company also built a web portal. Communication was encouraged so that the best of bottom-up and top-down approach could be achieved. It was essential that the people at the bottom and the people at the top conveyed to each other, what was working and what was not. The company encouraged external publicity of different properties to share their initiatives and achievements. This brought positive word-of-mouth and boosted employee morale.
Thus the valuable process related pointers are: (1) Have a clear and common definition of Sustainability which fits your business. (2) Start by defining broad goals (3) Ensure customer and employee engagement. If the customers are satisfied and employees are happy they would ultimately lead to higher payoffs.
(4) Prioritize and break the required initiatives into bite-sized pieces, short term objectives so that it is easily manageable and easier to understand for the people. However, the objectives need to be constantly updated.
(5) Participation of all departments or internal audience is a must to ensure the initiative takes off.
(6) Use clearly defined objective Metrics to quantify the achievement of objectives. It not only helps in promoting healthy competition but also helps in judging the performance of various employees/departments and thus enables management to identify the laggards.
(7) Gamification helps in keeping employees engaged and encourages people to perform better lest they be among the worst performers.
(8) Communication is important. Free communication ensures that the both the management and the employees at even the lowest rung convey to each other what works well and what doesn’t.
(9) Periodic review of goals is important to avoid complacence. Also the goals should be progressive yet realistic, tougher but achievable. This is important to ensure that the feeling of cynicism towards the sustainability initiatives doesn’t creep in.
(10) Interaction with outside bodies encourages employees since it makes them believe that they are doing meaningful work and are being appreciated for it.
PEOPLE:
While motivating the workforce there are twin forces of fulfilling existing requirements and innovating for future practices that come into play. That is where the conversation of ‘could do’ with the backdrop of innovation comes in which involves experimentation and learning.
There are two ways a company can choose to convey the same to its workforce – through formal and informal means. Informal procedures are primarily aimed at affecting the values of people as well as the norms of society by establishing and reinforcing ways of doing things that align social practices with the sustainability journey of the company. Through the formal approach the company uses rules, systems and procedures to guide behaviour.
Practices should be ingrained at every stage of the employee life-cycle which includes Recruitment, Procedures and Compensation, Training and Development and Leadership and Succession Planning.
a. Recruitment
A critical aspect of sustainability is the ability to attract and retain the right talent to carry forward the vision into the future. Additionally, with the advent of social media, talent is becoming increasingly conscious of the impact of organizations on the environment and society at large. Therefore, right talent identifies with organisations with sustainable business practices.
For example, Aveda Corporation attracts and identifies talent which is good at their core job as well as at incorporating environmental mission in their day to day jobs responsibilities. In their online job application, Aveda explicitly communicated its requirement for people committed for environment sustainability. It asks job applicants to be environmentally sensitive in preparation of their application materials. For new hires, company’s Earth and Community Care Team conducts orientation and education programs. New hires are provided copies of company’s Green Ingredients policy and Sustainability policy. Employees are expected to abide by these policies.
b. Performance and Compensation
An organization or an institution can take up as noble or as big a sustainability initiative as it desires but the initiative would not be successful till the internal stakeholders are not convinced and hence not motivated to carry it to the desired outcome. To succeed in its sustainability initiatives, it is imperative that the progress of the organization is constantly monitored, which is basically the aggregate of the performance of the individuals. This may be achieved by: i. Clearly defining what Sustainability means to the organization ii. Lucidly drafting what the organization’s sustainability goals are iii. Breaking down the organization’s sustainability goals into small bite sized pieces which might serve as sustainability objectives for individual employees’ levels iv. Stating how the company wants to achieve the sustainability objectives v. Constantly reviewing how the necessary work is going on and suggesting changes and improvements if any vi. Ultimately, gauging how did one (individual, department, organization) perform, the learning and the setting new more ambitious goals.
Although it is hard to gauge and quantify efforts put in sustainable initiatives by employees, it is essential. Only when a company has some common denominator can it judge its overall performance and progress towards sustainable initiatives. It also helps in creating a healthy atmosphere of competitiveness and facilitates peer to peer learning.
People respond to incentives and material incentive particularly monetary compensation is the simplest tool in the hands of the management of an organization to influence the decision making process of its employees. However, leaders of organizations and even academicians who are experts at the subject are divided on the subject. One group thinks monetary compensation linked to performance is the right way to encourage employees to perform better on the sustainability front. Intel, American Express, SAP labs are some companies which link compensation to sustainability performance. The other school of thought argues that sustainability in its own right is motivation enough and if metrics are used properly and a healthy climate of competition is nurtured within the organization, employees would work hard because of the simple fact that no one likes to finish last. Caesars Entertainment Corp. is one such company which just uses a scorecard to have a comparative performance scale for sustainability but does not link it to compensation.
Training and Development
Employees expect to increase their knowledge and skills while working for an organization. The HR function can play a key role in identifying skill gaps, if any, in the organization and devise training programs that can impart necessary skills. Often, career goals are the end toward which an individual’s effort is directed. Sustainable organizations need to understand individual career goals. The HR function helps in bringing clarity around individual career goals and in developing appropriate career management frameworks to fulfil these goals. Furthermore, from a system perspective, HR must ensure that employee-aspired roles and pace of growth are calibrated with an organization’s capacity to provide the same. 
d. Leadership
Forward-thinking business leaders understand the importance of sustainable business practices for the long-term future of the organization and society. It is the leadership that drives change in an organization by establishing direction, aligning appropriate resources and inspiring through example. Leaders act as champions by taking up and supporting the cause of sustainability in the organization.
HR can evaluate the existing competency framework to check its appropriateness and incorporate the critical leadership competencies to drive and implement sustainable business practices. Identifying appropriate successors for key leadership roles to drive the business strategy and the sustainability agenda is another important facet. This can be done by evaluating the readiness of each leader through assessment of the person-role fit around sustainability dimensions and competencies.

Paul Polman: The Champion of Sustainability:
Paul Polman was made the Chief Executive Officer of Unilever, consumer goods giant in the world. Since then he made several bold decisions related to sustainability. Unilever pledged to reduce its environmental footprint to half by 2020 and it is a challenge for them as they also target to double their business size and operations at the same time. He announced a ten year Unilever Sustainable Living Plan and also pledged that all its raw materials procurement will done in a sustainable way by their target year , by making their supply chain management eco-friendly implying that he would want to make a positive impact on the health and wellbeing of more than billion people around the world. The Unilever Sustainable Living Plan is guided by three primary goals: improving the health and well-being, reduce environmental damage, and enhance livelihoods. These goals were supported by fundamental commitments such as water and energy conservation, reduction in GHGs, waste management, and Sustainable sourcing of raw materials, etc. by monitoring the environmental, economic, and social performances of its operations and supply chain management. It is not that easy to realize their target when more than two billion people across the globe use Uniliver goods every day. Paul Polman has taken numerous steps keeping in mind the long term objectives of the firm to achieve their target such as not announcing the earnings guidance and stopping releasing quarterly reports. He went a step further by suggesting investors to put their money in other companies if they do not believe in the idea of sustainable development which is the long term value creation equitable model. These initiates made the share price of Unilever go down by 8 percent. Through his actions, he has disappointed the investors as these would impact the financials in the short term, but was successful in becoming the face of sustainable business practices and the global sustainable business leader. Unilever has collaborated with NGOs, Other Companies, Governments and people around the world to make this happen. This year they partnered with movements like Live Earth and Global Citizen to create awareness related to the issues of sustainable development and thereby wanted to lay foundation for the COP21 which will be held in Paris.
Paul Polman has taken the corporate leadership which is supposed to be focused to profits to next level by talking about courage of looking things in long term perspective. He also says that leaders should do what they think is right rather than focusing on the productivity and profitability of the firms in the short term. Uniliver has taken its corporate responsibility to global stage by taking the lead on climate change and campaigning for prices on carbon by working closely with the United Nations Convention on Climate Change and wants to make the COP21 successful. All these things would not have been possible, had it been not for Paul Polman. One needs to have courage to take this path when all the business houses are not investing much into this. But as he says, it is about long term view of the organisation. In 2009, of the total procurement of raw materials, only 10 % were from sustainable sources, although it was the highest amongst all the comparable companies. They were also ranked number one in the Dow Jones Sustainability Index. As of now, almost 60% of their raw material is from sustainable sources. And Paul says that they have to go a long way to achieve their 100 % target by 2020. We can also comment that to become 10 % sustainably sourced, it took more than a century for them, whereas the 60 % is achieved in less than 5 years of time. The vision of Paul did not stop there, now he wants all the operations of Unilever have green energy. They also have achieved the rare feet of having zero waste in all its factories. Since 2008, it also has reduced the CO2 emission through energy consumption by more than 37 % while the reduction through water consumption is around 32 percent. Out of the sustainable raw material sourcing, more than 55 % is done through sustainable agriculture practices. Unilever has also focused on bringing innovation into products which require less water, thereby reduced water consumption on consumer side as well. It has reduced the waste related to the disposal of its products by 12 % compared to the level of 2010.
Though he initially believed that achieving their targets is not very easy by 2020, but hoped that these would bring about a change in the attitude of people which can make the people’s behaviour more sensitive to environment. This attitude change did not happen overnight, he has to make all the stakeholders a part of the organisation goal. The employees need to couple the productivity part and sustainability. Only then the change would bring the desired result. Traditionally, going sustainable way implies that, comprising on the profitability or productivity. Paul has been successful in achieving this as the company has grown by 30 % since then. Under his leadership, Down Jones Sustainability index named Uniliver as the leader in the food, Beverage and Tobacco sectors. He also believes that by making the sustainability a part of its organisation strategy, Uniliver could attract talent who are sensitive to the environmental issues. Unilever have also created young Social entrepreneur’s award, where people across all the divisions would participate in making their supply chain and operations better and sustainable. All these have made him the torchbearer of sustainability amongst the giant companies. Paul is also the chairman of World Business Council of Sustainable Development. He received numerous awards for his contribution such as UNEP Champion of Earth, Guardian Sustainable Leader Award, Champion of global Change Award, Award for Responsible Capitalism, European Business Leader for the year 2012, to name a few.

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