Aligning financial, social and environmental purpose, known as the Triple Bottom Line, has developed over the last three decades from being an aspiration mostly found in corporate marketing and PR literature, to becoming an increasingly demanding risk management and reporting requirement. When implemented to its full potential, it now offers forward-thinking businesses a deep pool of opportunities for developing a competitive advantage.
Why does the triple bottom line matter so much now? As is well known, after many years of environmental and social stresses, we are seeing the impact of both environmental degeneration (such as climate change and the decimation of natural resources) and severe social fractures heightened by the pressures of managing the Covid19 pandemic. Understandably, this is causing enormous concern and vociferous public calls not only to the government to “build back better”*, but also to businesses to do their part. Being concerned about the planet and people is thus no longer seen as a “nice to have”. It is now seen as essential for all our futures. With that, there is increasing recognition amongst the public, politicians, corporate investors and directors that there is a major difference between businesses that merely “greenwash”*, and thus are part of the problem, and those that make a serious commitment to delivering the Triple Bottom Line.
Option One: Of course, there will be businesses that will find they can, for the moment at least, ignore these bigger picture issues. Perhaps their clients or customers are not yet that committed to Triple Bottom Line thinking. Perhaps their staff and investors are not concerned about environmental and social governance. To ignore these matters, though, will invite both a range of risks and leave open opportunities for more forward-thinking businesses. Some of these risks are fairly obvious, such as that of growing public mistrust of such businesses, the risk of increasing legislation when there are notable environmental or social failings caused by business activities, a loss of access to contracts from clients who are treating the Triple Bottom Line seriously, a loss of access to sources of ESG finance, and a reluctance of skilled people with a conscience to work for such a business. These risks may not be apparent now to some businesses, but not to prepare for such risks would be to leave the business severely exposed.
Option Two: Some businesses will have the aspiration to deliver the Triple Bottom Line, but they will not have the leadership capability to deliver its full potential. Instead, the Triple Bottom Line will become merely an accounting tool used to balance the trade-off between stakeholders in the service of increasing shareholder value. Balancing the needs of the environmental, social and financial stakeholders, and treating them equally, is not easy. It requires leaders to have a high level of psychological capability. Leaders who have not developed this capability will put their business at tremendous risk and may get accused of greenwashing. They may use the language of the Triple Bottom Line, but their actions will speak otherwise and they will fail to deliver the reality.
Option Three: For more forward-thinking businesses, whose leaders have developed a high level of psychological capability, delivering the Triple Bottom Line will not only help to mitigate the risks of options one and two, it will also create an opportunity to grow competitive advantage*. The signs of customers and clients thinking about sustainability and social equity issues in their purchasing decisions are already visible*. Calls for climate action, responsible consumption and production, the circular economy, and greater diversity, equality, and inclusion in economic and business decisions can be seen in the Sustainable Development Goals 2030 agenda and in multiple individual campaigns.
Which option a business will take is dependent on the psychological capability of its leaders. Understanding how to operate in a way that is sound for all stakeholders, meeting the needs of financial investors in a way that also helps environmental sustainability and regeneration and enhances people’s wellbeing, is not easy. It requires the development of a high level of cognitive complexity, emotional resilience, empathy, moral reasoning and behavioural flexibility. In short, it requires a high level of consciousness development.
Continuum of Leadership
How leaders respond to Triple Bottom Line stakeholder requirements can be considered in terms of a continuum from “business as usual leadership” at one end to “consciousness leadership” at the other (Figure 1.). Their response correlates with the level of the leaders’ psychological capability.
Figure 1. Continuum of Leadership
Business As Usual Leadership: Some leaders will become overwhelmed with the enormity of the problems faced by society and feel powerless to make a difference. This is threatening to a leader’s ego and, if they have not developed their emotional resilience, the most likely defence is to go into denial. As a result, when feeling threatened, they lose their cognitive complexity and see things in their simplest terms. This allows them to focus on their own survival, which they see as running the organisation as if it is “business as usual”. Leaders in denial will focus on launching new products, striving to achieve sales figures, finding ways to increase productivity, delivering projects, etc., with scant regard to their environmental or social impact.
Sustainability Leadership: The most encouraged and practised cognitive ability in our society is a logical and linear “cause and effect” way of thinking. When ensuring their business is part of the solution, rather than the problem, most leaders will look for ways to increase their “sustainability”. Measures are likely to include recycling, ensuring renewable resources are used in their supply chain, working towards becoming carbon neutral, etc. However, due to them employing their linear cause and effect thinking, each of these measures is likely to be implemented in isolation rather than as part of an integrated system. Sustainability consequently becomes a “bolt-on” to “business as usual”.
Regenerative Leadership: This is the type of leadership needed to deliver the Triple Bottom Line to its true potential, rather than using it as an accounting practice or for PR and marketing purposes. It requires leaders to have the ability to apply systems thinking so they can see sustainability as an integrated part of the purpose of their organisation rather than as a bolt-on. In doing so, they grow their capacity to work with the multiple interactions between the different stakeholders and unite them around a common purpose. Regenerative leaders guide their organisation to increase all types of capital alongside the financial, such as environmental, social and psychological. By increasing a wide range of capitals, their organisations become “regenerative”. To be able to draw on their systems thinking, the leader needs to have built up a high level of emotional resilience, so their cognition does not become constricted by anxiety and fear of failure when being put under pressure by the stakeholders who shout the loudest.
Transformation Leadership: Whether we like it or not, we are facing an era of significant transformation in society and business. Climate change alone, and the measures we put in place to avert it, will bring about significant transformation. We also face multiple other transformations as a result of technological advances, reducing pollution, tackling inequality, improving mental health and mitigating outbreaks of viruses, etc. While many good people and organisations are working hard on each transformation in isolation, the reality is they all interact in multiple and complex ways. To navigate through the next decade or so of transformation, and positively contribute to the UN Sustainable Development Goals, businesses need leaders who can work with multiple systems colliding, creating chaos. These leaders develop a greater ability to see, and work with, the patterns that emerge from chaos and create possible future scenarios around which to orientate their business. This leadership capability requires a high level of consciousness development in terms of a leader’s cognition, emotion and behaviour.
Consciousness Leadership: Humanity has reached a point where two paths lie ahead, one degenerative, the other regenerative. Our society’s current lifestyle will lead us unwittingly further down the degenerative path. As leaders’ collective decisions significantly shape our society, we now need leaders to lift societal consciousness so that we all embrace a regenerative lifestyle. This is the ‘inner psychological transformation’ society must embrace to facilitate the ‘outward transformation’ of social, economic and technological change. Leaders need to have developed to the level of consciousness where they are able to use their leadership to serve society rather than just themselves, their teams, or their businesses.
No leader can afford to ignore the environmental and societal risks we face today, but it is those who develop the psychological capability needed to make the Triple Bottom Line their truth who will have the mindset to develop a sustainable competitive advantage, based on being a driving force for a build back better future. This capacity can then be built upon as they further increase their psychological capability to lead their business, and even their industry and society, through an era of transformation, lifting all stakeholders’ consciousness onto a regenerative path. The paths of business as usual, bolt-on sustainability or greenwashing not only increase the risk of business failure, they also put all stakeholders at an increased risk of further degeneration.
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26th November 2021