Steve Howard is Chief Sustainability Officer at IKEA Group and a member of its Group Management Team, a role he has held since January, 2011. He is responsible for the Company's sustainability strategy, environmental and social performance, the impact of its products. Steve believes that sustainability will be one of the mega-trends that shape society and the business landscape this century. He is committed to developing innovative ways to make sustainability attractive and affordable for everyone. GlobeScan co-CEO Chris Coulter recently interviewed Steve to shed light on how to navigate and succeed in our changing world.
Published 20 April 2016
History will tell us. It was a promising year but it is a little early to judge. It was clear that COP21 in Paris and the SDGs were potentially game changing. Government and civil society and progressive business all came together against the odds, with remarkable outcomes. But it is too soon to declare 2015 as truly transformational.
For the SDGs, business was involved to some extent, but business involvement was not as public as in the lead-up to COP21.
For Paris, We Mean Business, the coalition of businesses focused on climate action, reached out and mobilized a lot of positive voices. Hundreds of companies were constructively engaged.
This contrasts with the COP in Copenhagen in 2009. Progressive business was not sufficiently present then and the anti-climate voice of business was actually quite loud. At Paris, progressive business drowned out the negative voices and this gave governments a push to commit to action.
I think we are still early in this journey. It is just about dawn in the era of sustainable business. People are waking up and some are getting going.
In the past, too many in business have been the voice against change. This is especially true when there has been a need to make changes in regulatory policy. Today, business needs to be more supportive of required policy change and I see companies understand this much more.
In order to bring about the bold changes needed, we need a well-regulated business environment and we need forward-thinking businesses to step up. Positive business voices should be a part of the policy debate, siding with the many people and society. At IKEA we believe if it is the best thing for our customers, it will be the best thing for IKEA in the long-term. It is our view that we have a responsibility to be involved in those debates. Of course, you have to focus on the issues that are most relevant for your business, customers and co-workers.
Leadership is much more distributed than it used to be. It is becoming more distributed and moving away from national governments towards local governments, business and civil society. Business has a role to play but cannot and should not always act alone.
Leading businesses can support joined up action across this more distributed leadership context. Creating networks of players is critical in this new distributed leadership world. A hugely positive thing in our highly connected world is that we can socialize ideas and reset social norms much more quickly than in the past: we can crowdsource ideas and crowdsource change.
Within this, transparency and accountability are fundamentally important.
I do think we need to reflect objectively on where we are now. Business needs to be held accountable as much as ever, especially since short-term incentives and short-term interests continue to influence decisions. These kind of pressures don’t lead us to where we need to go. We do have examples of good Boards choosing good leaders who really are focused on creating long-term value creation in business. It is still, though, not the norm and because sustainability is so fundamental to us all, more has to be done.
I think the challenge is that businesses need to be much more widely engaged with stakeholders. Stakeholder engagement is not a central function. It is a way of being. We need to have businesses connected to society, especially given that the number of critical issues requiring attention has only increased. What we need is business without borders.
In order to be effective in engaged dialogue, business needs to develop a culture of openness and engagement, as well as develop the basic skill sets of many people across an organization. A highly centralized approach to engagement simply doesn’t work today.
Inside IKEA, we have more and more people involved in our organization, much more active today with NGOs, policy-makers, media, etc., and on topics beyond product promotion. Colleagues are discussing a whole range of issues from equality to climate change. It takes a long time to build the confidence across the team that they can be a part of those conversations, but it is fundamental.
If you are leading change today, as a CSO, change management is an important part of your role. You need to future proof business models and drive innovation. In the future, more CSOs will be seen as driving product development, business model change and having a significant commercial impact on the business.
This is the journey I have been on at IKEA. The products we have to save energy, waste and water are a $1 billion business which is growing at 29% year on year. In fact, it is growing at more than twice the rate for the underlining rate of the business.
In addition, we saved 130 million Euros since 2010 in energy efficiency in our own operations. Sustainability is not a cost center; it is a center of growth, profitability, innovation and efficiency.
This may sound self-congratulatory, but I don’t mean it to be. We set out to do something visionary, we’re making steady progress, and it will have an enduring value for the company and society. This means that in the Sustainability function we are not just hiring passionate sustainability experts, but also passionate business leaders. This is about embedding sustainability in everything we do, and we are looking for business leaders who can strongly effect change across a large organization.
It is the journey businesses go on. We have moved on from just nice to do things and have moved on to fundamental change and innovation. This requires a very different organizational mindset and people see it as both an opportunity and a responsibility.
In the end, it’s about delivering real business benefit and it is an exciting journey to be on. Business benefit with a purpose. What could be better?
I think fundamentally for most people, it unlocks something for them when they are working for a purpose. It also offers real value creation in society.
What has worked really well for IKEA is our long-standing mission – to create a better everyday life for the many people – and an obsession for well designed, beautiful, affordable and sustainable products. We have expanded on this and committed our business to have a positive impact on the world and to make our operations completely sustainable - everybody gets that it is totally consistent with who we are as a business. It doesn’t mean you have to be perfect, but at least if you are clear on the direction and how you can lead the business together, you can make great progress. That is what makes the difference.
You can’t, though, invest in a purpose that isn’t real. It has to relate to your core business. In order to contribute value to society in many ways and to make the world a better place, purpose has to be deeply embedded within an organization. If we start having a Chief Purpose Officer, we may miss the point. The CEO is the ‘CPO’.
The role of the CSO is to help everyone understand how we can align sustainability with our business agenda, with our products/services, and our primary impacts. How can we make that a part of how we create value? Most businesses can do much better on being explicit about what they do. They just have to be authentic, and it must come from co-workers from across the business. It can’t just be nicely written statements.
So, think long-term, go all in and construct the business case to do the right thing. This is our collective imperative and it is the best thing for the business in the long term. If you can build the business case to do the right thing, why would you do anything else?