E257 | Driving A Healthier Growth Through Sustainability with Andrew Winston
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CastBoxThis week we’re learning from Andrew Winston, one of the most widely read writers on sustainable business, and a globally-recognised expert on megatrends and how to build companies that thrive by serving people and the planet.
Andrew’s journey into the realm of sustainability was a winding one. His formal education in economics and his subsequent tenure as a consultant instilled in him the strategic approach he would later need. However, it was the dot-com crash that turned the tide and urged him to follow a new path. He yearned for something more meaningful, leading him to pursue a degree in environmental management. He didn’t anticipate that his first book, written like a consultant and not an environmentalist, would become a bestseller and lay the foundation for his work in helping companies understand the role of business in society.
He passionately believes that profits and sustainability are not mutually exclusive and that the majority of a company’s value lies in its intangible aspects, such as brand value and customer loyalty.
In this episode, Andrew emphasises the need to think beyond traditional business models and consider the broader societal and environmental impacts of operations. He also discusses the B Corp certification and Benefit Corporations, encouraging small to medium-sized enterprises to explore these avenues for demonstrating their commitment to environmental and social responsibility. Andrew also addresses the perception of sustainability practices in Asian companies and dispels myths surrounding China’s efforts in renewable energy.
Download and listen to learn more.
On today’s podcast:
- Green to Gold and the two-by-two matrix
- What makes leaders care about sustainability
- The politicisation of social and environmental issues
- Multinationals and sustainability
- The value of the B Corp Certification
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From Sustainability to Profitability
Andrew Winston is a globally-recognised expert on megatrends and how to build companies that thrive by serving people and the planet. He is one of the most widely read writers on sustainable business in the world, with regular columns in Harvard Business Review and MIT Sloan Management Review.
His latest book, Net Positive: How Courageous Companies Thrive by Giving More than They Take (co-authored with renowned CEO Paul Polman), is one of Financial Times’ Best Business Books of the Year. It’s been called an “electrifying strategy for business success and unlike any other book you’ve read” by Merck Chairman Ken Frazier, a “wonderful rallying call” by Sir Richard Branson, and “pure heresy” by Arianna Huffington.
His first book, Green to Gold, has reached more than 100,000 people in seven languages. Inc. Magazine included Green to Gold on its all-time list of 30 books that every manager should own. His other book The Big Pivot was selected as one of the “Best Business Books” by Strategy+Business magazine. Andrew is also the author of the Harvard Business Review (HBR) Magazine cover story, “The Net Positive Manifesto” and the HBR “Big Idea” cover story, “Leading a New Era of Climate Action.”
His views on strategy have been sought after by many of the world’s leading companies, including 3M, DuPont, HP, J&J, Kimberly-Clark, Marriott, PepsiCo, PwC, Trane Technologies, and Unilever.
A shift towards meaningful work
Back in the 70s and 80s, sustainability in business wasn’t common, so it wasn’t on Andrew’s radar as a possible path to follow. He went to school and got a Degree in Economics. Then, he joined the Boston Consulting Group working on strategy and marketing. It was in the early 2000s that his life took a turn as the dot-com crash happened.
“I had been at a startup, and we went under, and I was all of a sudden floating and realised I wanted to do something different with kind of more meaning.”
A couple of years before that, says Andrew, he hadn’t heard the word sustainability, or carbon, or even climate change. So looking back, he entered quite early into the business sustainability world.
It was then, after the dot-com crash that Andrew went back to school and got a degree in Environmental Management. He started working with a professor, and they co-wrote Green to Gold. He admits that no one was paying him to do this work until he had spent a few years researching and writing this book.
The book was a success and companies started to use it as a platform to talk about ‘green businesses’ Then, people started calling Andrew to give some talks.
“And then bureaus called and offered me money to speak, which I didn’t know was a thing. I had never thought about that. I had a consulting background, so then it was easy to say, hey, I got this book out. I’ve been lucky. I mean, there’s been a lot of hard work behind it, but most of my business has been inbound. It’s really hard to go out and say, hey, hire me to speak. People know me, see my book, see me write something, see me on TV, and then say, hey, we should get this guy. I’ve been lucky to make that work for 17 years.”
The Two-by-Two Matrix
In his book Green to Gold, the core framework was defined by a two-by-two matrix. Andrew argues that it does frame the kind of questions you ask and the way you think about strategy.
He tells the story of the time they sat down with Michael Porter at Harvard to talk about his framework for creating business value. There are a couple of big buckets, and they made a two-by-two that was basically that, but extended it over time.
“And we said, in the short run, you’re creating value by reducing cost or driving revenue, innovating, selling more stuff. But in the longer run, you’re also reducing risk, and you’re driving brand value. So it’s a two-by-two of reducing the downsides, increasing the upsides, and then short and long term and I find it still really useful.”
Whenever you see people write a business case for sustainability, it’s usually using those buckets, adds Andrew. The intangible one is the big one, which includes employee attraction and retention, customer loyalty, and brand value. For Andrew, the vast majority of companies’ value now is intangible. It’s like the market cap of the biggest companies. It reflects like five, six times more than their book value, their assets.
“So much of the world is now your brand and what you bring to the world, what you promise the world. So I think that stuff has always gotten short shrift in business because we don’t know how to measure it. But it’s the majority of the value now, and often that’s where sustainability does sit. You’re building long-term connections and resilience and all these other things that aren’t as easy to measure.”
Multinational companies and sustainability
In the last few years, there’s been a dramatic change in what’s expected of business and their role in society. They now have to chime in on climate, inequality, LGBTQ rights, guns and democracy. They’re drawn into so many things in society, and every multinational is at the table on sustainability in general.
But, what percentage of them truly gets the importance of sustainability? Andrew says, a small percentage.
“We’re about 50 years into this kind of neoliberal experiment of the only point of a business is profit. So that means everybody in business basically was raised in this, even the 65-year-old CEO, and it’s so dominant that they just believe anything else that isn’t focused only on profits is somehow a drag on profits and sustainability especially.”
On the other hand, Andrew thinks that the percentage that believes sustainability is probably the right thing to do is high, but we’ve all been taught that the right thing to do is somehow never profitable or is anti-business. So then we’re implying that a business only profits by not doing the right thing. That doesn’t seem very functional, that’s quite literally not sustainable. We can’t continue like that indefinitely, he adds.
“When I said I didn’t think it would take this long, I probably thought 20 years ago I should have worked myself out of a job by now, and sustainability officers shouldn’t be needed in companies, but we’re still a long way from getting there. We’re making progress. Things are moving, but it’s a big ship.”
How to make leaders care
Andrew admits that the challenge lies in replicating the mindset of leaders like Paul Polman, Chief Executive Officer at Unilever – with whom Andrew co-wrote his book Net Positive. Paul was a unique leader that prioritised the broader societal impact of the business.
“He believes in money and profit and growth. That’s his job. He ran a public company, but he had this deep understanding. The way he puts it on [when] people talk about purpose in business, he goes, if you have no purpose, what’s your purpose? What’s your point? And this is the question that I think just very few can really ask about their business.”
Andrew has wondered for a long time how you can make more leaders think like Paul. Andrew’s research interviewing 20 CEOs who embraced sustainability revealed that personal motivations, such as experiences in nature or conversations with their children, played a significant role in their mindset shift. The challenge is that they made those decisions from a gut feeling. It’s personal, and that is something that you can’t replicate.
“How do you change leaders? Especially since part of the way things change normally is just generational change. You just get new leaders. But with things like climate change, we don’t have time for that. We can’t wait for Gen Z to be the CEOs of the world. That’s way too late. So we have to do something that’s much harder, change people within their roles, not wait for the next generation.”
The role of B Corp Certification in promoting sustainability
The B Corp certification plays a fundamental role in advancing business sustainability by setting and enforcing high standards of environmental and social performance. This innovative certification process acknowledges that a company is balancing profit and purpose, focusing on the overall positive impact they make on their employees, communities, and the environment.
“I think for small to medium business it’s a great process because it’s a set of questions about your environmental and social impacts on the world that make you go through and say do we know? Do we have the data? And at a certain level of performance, you can get the branding.”
It’s not just about a company’s product or service, but about how it conducts its business, how it treats its workers, and how conscious and considerate it is of the planet. In Andrew’s view, it’s clear that B Corp certification sees sustainability as more of an embodied business practice rather than a one-off accomplishment. Implementing sustainability into the fabric of a company leads to a number of benefits. He uses the example of Ikea to illustrate this. A company that has been innovative in its approach to sustainability. By producing more renewable energy than it consumes and selling excess solar energy to its customers, Ikea exemplifies being net positive on carbon emissions.
More and more, people are choosing to support businesses that align with their values, often favouring companies committed to making a positive impact on the world. The B Corp certification is a way for companies to tangibly demonstrate their commitment to sustainability, ethical business practices, and societal impact. It is not merely a badge but a commitment to a different way of doing business in a world increasingly aware of the importance and urgency of sustainability.
“These rating systems like B Corp they’re looking at a number of dimensions. And none of those say you’re perfect. And if you’re doing a lot right on some dimensions like social, that gets you more points, and it’s not a perfection meter, right? It’s an indication of again that you’re committed to something broader and that you’re making progress on both environmental and social issues.”
The politicisation of sustainability
While some countries see sustainable practices as imposed by the US and Europe, the political divide in the US hampers progress. Companies face challenges in standing up for sustainability, but Andrew argues that those that do often thrive economically.
“There are places that really feel like this ESG thing is kind of put upon them by the US and Europe in particular. So, Asian companies will say, I see the US is debating this. Does this mean we don’t have to do this? They just want out of having to worry about these things. It’s additional work; it’s additional thinking.”
And it doesn’t only happen with sustainability. In the US, there are some examples of companies publicly pulling back from a commitment to LGBTQ rights or diversity because they’re getting yelled at by conservatives, says Andrew. For example, Target pulled some merchandise from their shelves for Pride Week because there were angry customers threatening their employees because of the ‘gay merchandise’.
“It’s ridiculous. Someone threatening your employees is not a reason to back down. That’s criminal. You prosecute them, right? You don’t just change your merchandise because someone’s angry. So I think companies are in the crosshairs. They don’t always know how to do it. But I will tell you that for the most part, companies that stand up and say, no, we’re going to believe what we believe, make that effort, they actually do better economically.”
The managed narrative against China
When Andrew mentions that Asian companies feel the European standards of sustainability are a burden, it doesn’t mean they don’t believe in doing ESG. They simply want to do it their own way. Andrew explains that are plenty of companies, especially in Asia, that have a long-term view and really aggressive goals. They’re often leaders in efficiency, particularly in Japan.
“There are a lot of big myths that somehow the West is doing all this sustainability stuff, and China isn’t, and they’re dragging us down when really China is doing more than anyone. They’ve spent more money than anyone. They built the entire solar and wind industry. They produced most of it while the rest of us watched. And that’s part of what brought the cost down so dramatically.”
A recent statistic by Bloomberg shows that, in the first four months of the year, China built three times as much solar as it did in the first four months of last year. And it’s on track to build more solar this year than the US has in total.
So, Andrew says that whenever we hear that China is not doing anything, it’s a managed narrative.
“It appears on Fox and the Murdoch properties. I get the question, almost every talk, ‘Why should we do this if China’s not?’ And every word in that question is not true. They are doing it. And the why we should do it is because it’s better for our business, it’s more profitable, it’s healthier.”
The attempted takeover of Unilever
Andrew’s co-author, Paul, had been the CEO at Unilever for several years and in 2017, the head of the PE, Kraft, came to the office saying they were bidding for the whole company. It was a hostile takeover attempt, says Andrew.
“It was going to be the biggest merger in history. And all of a sudden, there was this pushback from a bunch of unusual places. All these stakeholders of Unilever that really wanted it to continue its stakeholder model and looking at its role in the world.”
Kraft was a cost-cutting machine, so it was going to be a completely different approach to business, and one in which Unilever didn’t believe.
“It was just a cultural misfit. But you had people from Greenpeace speak out and say, we want Unilever to stay at unions. And some of the investors were like, we might make money initially on the purchase, but we think Unilever will create more value on its own. So it kind of went bust fairly quickly.”
Andrew explains that Unilever had built a base of trust and stakeholder relationships and a general belief in the company that gave it that unusual support.