Successfully implementing ESG within organizations requires leadership. But what competences does a leader need to have in order to successfully implement ESG? Reviewing the literature and practice, I, Muel Kaptain, Partner KPMG Risk & Regulatory, come to, at least, seven competences. This set of competences can be used for screening, assessing and reviewing yourself and others as well as for developing, improving and training.
ESG leaders have their own moral compass that consists of a purpose and of core values. No ESG direction without an ESG compass. Without a compass, no compassion and no passion. ESG leaders define their own personal purpose in ESG terms. ESG leaders also have clear values that serve as guiding stars for their decisions and actions. Some important values for ESG are care, sustainability, circularity, diversity, inclusiveness, and responsibility.
ESG leaders are curious. They are curious because they want to know what the ESG issues are, what these ESG issues actually entail, and how big and threatening those ESG issues are. Without knowledge of ESG issues, there is no urgency to take ESG action. The curiosity of ESG leaders comes from their moral compass. ESG leaders are empathetic, concerned, involved, sensitive. They have a great social antenna. ESG problems are problems to be solved, not to be ignored.
ESG is also about commitment. Commitment in the sense of conviction that ESG is very important now. ESG does not require a marginal change but a major transition, or even a transformation. Because an ESG transition takes a lot of time, it requires full commitment. ESG leaders believe in their own responsibility as well as in the capacities they have to initiate change. ESG requires much more than putting it on the agenda, appointing an ESG official and reporting on ESG. ESG is not a step, but a journey. Not for a while but for life.
ESG leaders make business out of ESG. An ESG leader is no stranger to business but knows how to link ESG problems to innovation, new products and services, using technology to do so. An ESG leader is not idealistic but realistic. Aristotle calls this ‘phronesis’, meaning practical wisdom. ESG leaders are creative in turning ESG issues into new business models.
ESG leaders have the courage to act and to make an impact. Regarding ESG, there is a great deal of uncertainty, a lot is at stake, many people may be against ESG changes. Bold and brave decisions and actions by leaders are necessary to renew business models, opt for a different governance model, go for long-term value creation for stakeholders instead of short-term value creation for shareholders, and implement metrics for valuing social and ecological business capital. ESG leaders are not participating in a popularity contest. They do not shy away from confrontation. ESG leaders have perseverance and willpower; they are steadfast and combative, perhaps even a bit stubborn. They are not afraid of CEO bashing, wokeism and a cancel culture. ESG leaders are willing to take risks, especially in an era where risk-taking is disapproved of. ESG leaders are willing to experiment, work according to trial-and-error and learn from mistakes.
ESG leaders are cooperative. Leading an ESG change is not something you do alone. You do this together, with each other, in collaboration, in a movement, in networks, in partnerships, in new ventures. From act to impact you need a pact. ESG is about inspiring each other and learning from each other. In that sense it is not about ESG leaders but about ESG leadership. The process and interaction with followers. ESG leaders obtain their followers in ESG. They do this in their organization by creating an ESG culture. ESG leaders turn their organization into an ESG-driven community by implementing the right ESG soft controls and by leading ESG by example.
ESG leaders are consistent. Their behavior is aligned with what they preach and teach. ESG leadership is about the details, right down to the corners of the leader's behavior. ESG has to be pure, real, sincere, because if it is false, we find it hypocritical, and soon opportunistic. Consistency does not mean that leaders have to be perfect but that their own ESG believes are implemented in a coherent way. A leader who demands the highest environmental standards at work but is a major consumer of energy in his or her own private life has a lot to explain. The same goes for a leader who sets the best human rights- targets but at the same time is lobbying against environmental protections.
By identifying the set of seven competences I do not suggest to be complete but suggest that these competences are essential for those who want to lead ESG transitions. The set of seven competences is probably too demanding. However, the pretense is not that every ESG leader fully possesses all the competences together. Leadership is not so much that you are something but that you become something by working on your ESG competences and by reflecting on where you stand and on what can be improved.
KPMG and Nyenrode have set up the ESG Innovation Institute to help organisations make the transition to sustainability. Organisations can create added value in their business operations by balancing financial and economic results, transparency, social interests and the environment. We aim to make the latest ESG knowledge, skills and ecosystem accessible to executives who want to accelerate the route to sustainability in a professional and informed way. In addition to its educational offering, the ESG Innovation Institute also includes an academic ESG chair at Nyenrode, from which research, scientific publications and opinion and debate take place. By building and harnessing a community within the ESG Innovation Institute, we want to start a movement among business leaders – to inspire them and facilitate innovative, sustainable and responsible leadership.
Prof. dr. Muel Kapten is one of the speakers in de programs.
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