Playing Kings: The CEO and President

In the third post of their 7-part series, John Elkington and Charmian Love look at how CEOs are coping with the new wild cards dealt by environmental, social and governance challenges.

Apart from Aces, who will drop from our sleeves in blog 7, Kings are the highest-ranking cards in the poker deck. For us, the Kings of the C-Suite are the Chief Executive Officers (CEOs). Where companies like General Electric, DuPont, Interface or Walmart Stores lead on sustainability challenges, it's usually because of the CEO. Sometimes they do so because their industry is exposed to issues like climate change, as in the case of DuPont or Duke Energy; sometimes because of a perceived new opportunity space (think GE); and sometimes they act--as with Interface and Walmart--because their CEO has had some sort of Eureka! moment.

With Walmart's former CEO Lee Scott, the epiphany came as Hurricane Katrina wiped out many of his stores, whereas for Interface founder Ray Anderson his "spear in the chest" moment came while reading Paul Hawken's book The Ecology of Commerce. His famous remarks at the U.S. Embassy in London sent shockwaves through his company: "I had a revelation about what industry is doing to our planet. I stood convicted as a plunderer of the earth. In the future, people like me will go to jail."

Leaders like Scott and Anderson were dealt the wildest of wild cards--but spotted the long-term implications for their business models. Happily, they're not as unusual as they once were. Picture this: No less than 400 CEOs representing Walmart's largest vendors (aka suppliers) are sitting in the same room, pondering the future of sustainability. This was the scene painted by Jeffrey Hollander, then CEO and now Executive Chairman of Seventh Generation, the green household products company. The meeting, convened by Lee Scott, was the 'Live Better Sustainability Summit' held at Walmart's HQ late in 2007--and was designed to alert other business leaders to the sustainability challenge.

Even with 100,000 vendors under pressure in Walmart's supply chains, however, most CEOs and Presidents have yet to be whacked by a hurricane or anything else on that scale. Painfully unable to learn from the lessons of others, most remain unaware of the challenges they will face in the coming decade.

You see this in the survey data. Social and environmental concerns are not a top tier issue for most CEOs, according to BusinessWeek Research Services--in a study for SAS. That said, although "still in its adolescence," says BWRS, "sustainability is being recognized by innovative executives for the opportunity it offers; more than half of executives [focused] on sustainability throughout 2009. Additionally, in the last 12 months, half of organizations have increased their focus on sustainability, while two in five have kept their emphasis on sustainability the same."

Once the CEO's office sported notices--echoing President Truman--insisting that, "The Buck Stops Here." No need for that today: CEOs know they are under the gun as never before. Their average shelf life has shrunk dramatically, to the point where we find it amazing that any still consider the true long-term interests of the business. So where does the buck for environmental, social and governance issues now stop in major corporations? Almost half of senior executives surveyed fingered the CEO (47%), with the COO a distant second (13%)

Happily, a small--but significant--minority of CEOs are now challenging the shareholder value obsession that has blighted the past couple of decades. "I do not work for the shareholder, to be honest," was the way that Unilever CEO Paul Polman put it earlier this month. "I work for the consumer, the customer. I'm not driven and I don't drive this business model by driving shareholder value."

That would have been heresy even a year or two ago. But now even Jack Welch, former CEO of General Electric and for two decades the archpriest of shareholder value, has declared that, taken to its literal conclusion, "shareholder value is the dumbest idea in the world."

You could also say that his attacks on those who wanted GE to clean up its environmental act during his tenure were pretty dumb, too. Thankfully his successor, Jeffrey Immelt, took a different line--with his courageous 2004 playing of a real wild card, Ecomagination. Thanks to sustained investment in new products designed to solve environmental challenges, GE's revenues in this area grew from $6 billion in 2004 to $17 billion in 2008--and are projected to reach $25 billion in 2010. Now a sister initiative, Healthymagination, aims to provide social benefits through inexpensive health care technology and services.

But what really excites us about Immelt's era as GE Chairman and CEO is what he dubs Reverse Innovation. This encourages companies to innovate in poor countries with local partners--bringing cheaper products both to local markets and, the wild card, back into developed markets. Successes here include GE's portable, mobile-phone-sized ultrasounds, likely to cost less than $10,000--dramatically lower than competing devices.

Other CEOs taking an early lead include Franck Riboud, CEO of French food giant Danone, who has launched an innovative joint venture--Grameen Danone Foods--with Bangladesh's Grameen Bank, founded by Nobel-winning social entrepreneur Muhammad Yunus, and Andrew Witty of pharmaceutical giant GlaxoSmithKline (GSK). Early last year, as GSK's new CEO, Witty shocked his industry by announcing breakthrough commitments to access to medicine in developing countries.

GSK plans to cut prices for all drugs in the 50 least developed countries to no more than 25% of the levels in the UK and US, less if possible. The company also pledged to make drugs more accessible in middle-income countries such as Brazil and India. Even more striking, GSK plans to move into branded generic drugs, which will help to open out access to high quality medicines to much larger numbers of poor people. Talk about taking the bull by the horns!

These CEOs accept that they have to make the best of the hands they have been dealt--and are doing so with both skill and daring. But to embed their new thinking into business models and the DNA of corporate cultures, they must powerfully motivate and align their C-Suite colleagues--starting with the people who it seems so often want to take their chips off the table: CFOs.

Series: John Elkington on the New C-Suite

John Elkington is co-founder and executive chairman of Volans Ventures and co-founder and director SustainAbility. His most recent book was The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World (Harvard Business School Press, 2008). Charmian Love is Chief Executive of Volans.

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