By Eric Roston
Number one frequently asked question: What is sustainability? For some clarity on what people talk about when they talk about it, we went to a man who helps companies define it.
Christoph Lueneburger is head of the sustainability practice at executive recruiter Egon Zehnder International. His 22-member team has placed many chief sustainability officers, and last year started finding CEOs for companies who have particular needs for sustainability leadership in their sectors. He spoke by phone last week with Eric Roston, Bloomberg’s sustainability editor.
Q: Does it ever seem like sustainability can only be defined through circular logic? It’s this practice that companies undertake in pursuit of the thing itself.
A: I hear what you're saying. There are a bunch of definitions out there of varying quality. But in the end the question is: What would have to be true for me to keep running my businesses indefinitely?
Q: Do they come in knowing that?
A: What we do in almost every conversation is tie the term sustainability, if we have to use it (and I'm not keen on the term), entirely to something on the client’s income statement or balance sheet. That gets you talking very quickly about business-model sustainability, not, you know, owls and trees.
Q: So what is sustainability? Define it.
A: Can I define it as what 'being sustainable' means?
A: ‘Being sustainable’ means having designed your business model for maximum elasticity with respect to spikes in the costs of your input resources. When I say costs I mean total costs, not just economic costs.
Q: What are the main reasons people are reaching out on sustainability?
A: Let's call them physical resource constraints. It’s the stuff that we use. Where do we get it, and what do we do with it when we're done? But the level you start at depends almost entirely on how well your corporation will listen to you. You have to be pretty far along to ask the question and not be laughed out of the room.
Water is an interesting one because it almost doesn't matter what industry you're in. Water is probably the one that touches almost everything that we see.
Q: How do you identify what that might be for a company?
A: What happens quite often is a client says, “We need a CSO” [Chief sustainability officer].
We say, “Why do you need a CSO?”
They say, “We need to get someplace on sustainability...”
Through simple questions, you find out there's a hazy definition of sustainability. There's an even more hazy definition of where they are on whatever sustainability might mean to them. We have a tool called the Sustainability Pulse Check.
Q: What would cause a company to seek a chief sustainability officer without knowing why they need one?
A: There could be an external event. They or a competitor might have a significant adverse event that broadly falls under the umbrella of sustainability.
In other cases, there's a leadership transition and sustainability is elevated to core strategy. It’s a recognition that, ‘We have to have a strategy because the way we currently do something and the way we expect to grow are on a collision course.’
Q: How fast do the returns come, and from where?
A: This is a story that was shared by the CEO of a consumer products company. I asked, How do you measure the value created by sustainability?
He said, I can build the case in terms of superior margins. The fascinating thing is, I go to recruit on campus, and I can routinely hire graduates for 15 percent less than I know they can get elsewhere.
How do I get the get the best people and how do I keep them? This is how: They work for me not because I'm paying them the most money but because they want to, because they can change things here.
He said the problem with it is they come here and they feel entitled to change stuff. So you can't say, “We're a sustainability company and we really care about it. And, oh, by the way, we really want you to live with the constraints of our current business model.”
Q: Who’s proving to be a sustainability straggler?
A: The financial sector on the whole has not been the fastest to engage. They have found it easier to divorce themselves from issues familiar to a company that, you know, has to extract 50 million tons of iron ore from the ground every day.
Q: How does this affect you personally? Is there a way you've become a more sustainable person?
A: I have one success story. I have convinced my wife, who is an ardent drinker of San Pellegrino bottled water, which is imported from Italy, to stop doing it. Now we have a little thing in our kitchen that carbonates water. I actually would say that among the successes I have notched up in the last four years, I would rank that in the top five.
Q: That's not insignificant when you think about the shipping emissions.
A: Or the muscle spasms when you're trying to carry boxes of bottles into the basement.