With an ever-increasing number of financial services organisations around the globe committing to the goal of being ‘Net-Zero’ by 2050 in accord with the Paris Agreement, the spotlight is beginning to shift from ‘when’ to ‘how’.
Organisations have started modifying their product offerings to be more ESG friendly, setting up a transition plan to divest in fossil fuels, reviewing their operations and adjusting their internal processes in order to meet this goal. These are positive steps, but if organisations fail to align their culture to their goals, they are unlikely to truly succeed.
Today, the existing culture of most financial services organisations prioritises short-term financial returns over positive environmental and social value. Traditionally competitive and short-term focused organisational cultures will be a significant barrier to achieving new sustainability goals such as Net Zero.
Organisations wanting to achieve Net Zero must look at their existing organisational cultures and consider the potential barriers, as well as enablers. Leaders and employees need to buy-into the importance of sustainability and behave in a way that truly supports this, culturally engraining sustainability into every decision they make.
So, which aspects of cultural change will support a successful transition to Net Zero?
Enlightened Board and C-Suite
Setting the “tone from the top” will be essential in driving cultural transformation to achieve Net Zero. Sustainability is a complex and multifaceted topic, and Boards and C-suite executives must understand the most relevant risks and opportunities for their business, in order to set a compelling and inspiring vision for the future business. They must also be clear on the vision for the future culture, and most importantly understand aspects of the current culture that represent barriers to success. They will need to send a clear and united message on which behaviours need to stop, and be bold in changing structures and processes to support the desired cultural change.
Leading the Change
To enable a successful transformation in the business, leaders at all levels must embody the change they want to see. The way in which leaders think, act and talk about sustainability has a direct impact on the behaviour of those around them. People naturally look to those in charge for subtle clues on how to think, act and behave. If leaders do not understand the fundamental need for change, then they will not champion the change, foster norms, tell the stories that inspire teams and praise examples of the desired values. If those leading are not embodying the change that is required to transform the business, then why should the rest of the employees?
It is crucial to bring the leaders at all levels of the organisation on the journey, provide them training, show them the impact these actions are having, help them understand what behaviours they need to reward and what behaviours are no longer acceptable.
Rewarding the Right Behaviours
Leaders must consider how individual and collective performance is measured today, how people are incentivised and rewarded. In most financial services organisations, the primary metric is likely to be financial returns. To achieve sustainability goals such as Net Zero, organisations must transform how success is measured, incentivised and rewarded. New success measures should consider value created for a broader group of stakeholders beyond shareholders; including stakeholders representative of climate, specific ecosystems, and specific segments of society. Whilst the timeline for these incentives will need to be measured on longer-term horizons than the traditional quarterly or annual reviews, starting to recognise and reward behaviours that drive sustainability will result in these behaviours becoming the new normal.
Owning the Journey
Sustainability goals, such as Net Zero, represent a major opportunity to engage people at all levels of the organisation. Clear sustainability goals provide an opportunity for employees to connect with their own personal values, to discover a personal sense of purpose connected to their role in the organisation. Simply put, it is the opportunity for each person to gain clarity on how their role contributes to the bigger sustainability goal, for example Net Zero. When organisations miss the opportunity to engage employees in the journey, they may find employees dismiss their part in the transition, believing their role makes no difference to the bigger picture.
To help drive communal ownership, there should be clear and transparent measurements of success in every business area, reported at every opportunity, reinforcing the message that everyone has a part to play in the drive for sustainability. Regular updates on the organisation’s progress given by the executive sponsors will demonstrate the continual commitment to this goal, highlighting success stories and the impact that all employees are having on their stakeholders. Over time, this will solidify a shared belief that the business stands for a greater purpose than making money. Allowing employees to discover the impact they are having on customers, broader society and the natural environment will drive purpose into the heart of their everyday work, and involving employees in finding sustainable solutions will unlock a source of innovation. Providing employees with this intrinsic motivation will result in improved engagement and attrition levels, as people feel their work is making an impact on what they believe is important.
Seeking New Perspectives
It is not news that diverse organisations with Boards and leadership representative of society tend to outperform their less diverse peers. We believe that this is particularly true for driving sustainability. The status quo has allowed sustainability, environmental and social issues to lay dormant and under-prioritised for too long. This may be because addressing these issues requires diverse and innovative thinking that challenges the current way of thinking to overcome obstacles. Some of the skill-sets needed to make most of the opportunities presented by sustainability will not exist in organisations today. Companies that are innovating to deliver sustainable solutions are already looking outside, seeking to understand the needs of a more much broader and more diverse stakeholder group, forging partnerships within and outside their own industry, and bringing in new diverse talent. Diversity in all forms cannot thrive without a culture of inclusion, and so understanding the nature of the current culture and any barriers to deep inclusion is an essential part of the culture change journey.
Culture change does not happen overnight, it requires constant thought, upkeep and iteration. Whilst there are thousands of factors, both visible and invisible that will play a part in developing a culture of sustainability, these cultural factors could make or break an organisation’s journey towards Net Zero.