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Encouraging a Culture of Sustainability

  • Benoit Leleux
  • Jan van der Kaaij
Chapter

Abstract

In the previous chapters, we have illustrated the importance of companies developing a clear sense of direction through the formulation of a clear statement of purpose. Based upon case studies, industry data and best practices from top decile sustainability leaders, we have uncovered different ways in which purpose statements can become effective drivers of sustainability programs, building on examples from adidas and Interface. The relevance of establishing a sustainability strategy based on carefully selected material issues for ESG ratings was highlighted. More importantly, we have portrayed the tendency of organizations to address too many sustainability topics that bear little to no relevance to their core businesses, which results in reducing the impact of the programs. In the following sections, we underline the significance of the leadership’s effort to embed sustainability into the core business strategy, the importance of harnessing a culture of sustainability and the impact of corporate behavior on performance. In the later sections, we suggest a tool for measuring corporate culture and stress the benefits of the systematic measurement of sustainability performance on culture, talent attraction and retention.

In the previous chapters, we have illustrated the importance of companies developing a clear sense of direction through the formulation of a clear statement of purpose. Based upon case studies, industry data and best practices from top decile sustainability leaders, we have uncovered different ways in which purpose statements can become effective drivers of sustainability programs, building on examples from adidas and Interface. The relevance of establishing a sustainability strategy based on carefully selected material issues for ESG ratings was highlighted. More importantly, we have portrayed the tendency of organizations to address too many sustainability topics that bear little to no relevance to their core businesses, which results in reducing the impact of the programs. In the following sections, we underline the significance of the leadership’s effort to embed sustainability into the core business strategy, the importance of harnessing a culture of sustainability and the impact of corporate behavior on performance. In the later sections, we suggest a tool for measuring corporate culture and stress the benefits of the systematic measurement of sustainability performance on culture, talent attraction and retention.

Leadership in Sustainability

As Simon Sinek pointed out in his famous TED Talk, now seen by over 39 million people, most organizations still think in term of what—how—why. In contrast, great leaders and great organizations are putting the why first, bringing innovation to those audiences who believe what the companies believe. For sustainable development, that same mantra applies. Those who lead sustainability transitions inspire the people around them, sparking a culture of sustainability in the company that leads to changes in behaviors and attitudes.

In the sustainability literature, iconoclastic leadership is often touted as a crucial driver of outstanding sustainability programs [1]. Fueled by inspiring stories from sustainability pioneers such as Anita Roddick (the Body Shop), Yvon Chouinard (Patagonia) and Ray Anderson (Interface), sustainability initiatives seem to always be on the lookout for directional guidance from the top-seat. In this section, we underline the importance of leadership in turning purpose into actions. At the same time, leadership should not be regarded as haarlemmerolie—Dutch for Haarlem oil, a potent mixture of sulfur, herbs and terebinth oil. The oil was invented around 1696, and it was marketed as a cure for many, if not all, ailments. Its fame was such that nowadays the term “haarlemmerolie” is still used by the Dutch to indicate a fix for all problems [2]. To successfully develop a culture of sustainability, the C-level requires help from middle management, a certain level of maturity in the industry and some closeness to consumers’ needs.

In the 2017 version of the GlobeScan—SustainAbility Survey, a 20-year running study based on the opinions of over 1000 sustainability experts, sustainability leaders scored noticeably higher on their ability to articulate a vision and define ambitious goals [3]. The experts surveyed also expressed the belief that an integrated sustainability strategy, a clear vision, innovation and transparency were prevailing qualities required for leading organizations in the decade to come. According to the same survey, leadership in sustainability has evolved from a do-less-harm era (up until about 2006), when pioneering entrepreneurs were miles ahead of all others, to a more broadly embraced sustainable growth era, when sustainability issues are embedded into the core business of companies.

If the experts are right and the “ability to articulate a vision and define ambitious goals” sets leading companies apart, having a closer look at two high-flying companies should provide some interesting insights. In the following sections, Unilever, ranked first for the seventh year running as a global sustainability leader, and Interface, ranked third and the only company to be included in the leadership category ever since the establishment of the survey 20 years ago, are discussed in more detail.

Unilever

Soon after taking the helm as CEO of Unilever in 2009, Paul Polman made some courageous decisions to get the maker of Dove soap, Hellmann’s mayonnaise and Magnum ice cream back on track. He vowed to cut Unilever’s environmental footprint in half by 2020, while doubling its turnover. Under Polman’s predecessor, Unilever was far from passive on the sustainability front, but by developing the Unilever Sustainable Living Plan (USLP) in 2010, Polman and his team set new standards for corporate sustainability programs. The Sustainable Living Plan was designed not as an isolated strategy with many individual sustainability initiatives but as an integrated, themed program to fundamentally change the way Unilever conducted business, including the required management structures fully integrated into the organizational framework of the company. The company publicly committed to helping more than a billion people take action to improve their health and well-being and to source all agricultural raw materials sustainably by 2020. In its target setting, the plan decoupled the company’s intended growth from its environmental impact [4].

When I came here, this company had done everything you can think of. Created sustainable initiatives, sustainable fishery, sustainable agriculture. Round tables. But we were only 10 per cent sustainable. Now we’re 65 per cent sustainable.

Paul Polman, CEO Unilever [5]

The business was impacted, but so were shareholders. The emphasis on sustainability was not to every shareholder’s taste, with many electing to “vote with their feet,” but others, with more favorable views on the new approach, were quick to replace them. A significant change of guards but without additional volatility: before Polman took the CEO position, 60% of Unilever’s top 10 shareholders had been there for five years or more; by 2016, 70% of the top 10 had held their shares for more than seven years [5].

Interface

Interface’s story began in 1973, when Ray Anderson discovered a market for flexible flooring. With its focus on the production and marketing of modular carpet tiles, Interface catered to the quickly rising needs of the office building boom of the mid-1970s. After a stellar entry into the market, the company grew from strength to strength. Over the past decades, Interface has acquired more than 50 companies, become a $1 billion business, and cemented its position as a leader in sustainable business. Founder Anderson wanted his firm to lead by example; by 2020, this self-described “radical industrialist” wanted Interface to become the first company with zero environmental impact. With that inspiring purpose, suitably labeled Mission Zero®, the company adopted a sustainability culture that outlived even its CEO. The company’s focused commitment to eliminating any negative impact it may have on the environment instilled a strong and lasting culture of change that resulted in several breakthrough innovations in the carpet industry. As the targets of Mission Zero® came within sight, the company embarked on a new, even more ambitious mission. With Climate Take Back, Interface hoped to shift from restorative to regenerative, striving to restore nature.

Both company stories emphasize the role of a strong, iconoclastic leadership. In turn, the leadership at both Unilever and Interface provided the stickiness required to progress from a powerful purpose statement to a culture rooted in sustainability. In the sections below, the impact of a strong corporate sustainability culture is underlined with research that is more quantitative in nature.

Culture and Impact

Besides signposting qualities for future sustainability leadership, the GlobeScan—SustainAbility survey also uncovered a rapid rise in the sustainability ranking of consumer-facing brands between 2007 and 2017. Surprisingly, during that period, the head start enjoyed by the top performers grew wider, instead of narrower. In other words, the accomplishments of sustainability leaders such as Unilever, Natura (Brazil’s number one cosmetics manufacturer, ranked sixth in the expert ranking), and Nestlé (ranked eighth) outshone other players within the industry. The perception of the experts was that the performance gap was sizable and more worryingly, increasing. This disparity was more than just perception. The Unilever sustainable living brands were applauded by Unilever CEO Polman for their performance in the marketplace when he declared:

Brands that help solve problems are relevant and accepted. Not surprisingly, the stronger this purpose, the better the brands do. Our sustainable living brands are delivering more than 60% of Unilever’s growth and growing over 50% faster than the rest of the business.

Paul Polman [6]

The results from the 2017 survey also showed a strong consistency with the results of the 2012 Harvard Business School study on the impact of a culture of sustainability [7] on behaviors and performance. In their attempt to capture the elusive value of culture, HBS researchers started from the premise that the level of integration of social and environmental policies within companies was a good proxy for a firm’s culture of sustainability. Companies that had many social and environmental policies were deemed to have a stronger culture of sustainability. Comparing a sample of 90 companies that demonstrated superior adoption of sustainability policies (referred to as high-sustainability firms) with a matching sample of 90 similar firms with little or no adoption of sustainability policies (referred to as low-sustainability firms), researchers uncovered differences in performance and behaviors between the two groups over the period 1993–2011.

The research also analyzed the impact of that culture of sustainability on stock market performance by tracking 18 years of total shareholder returns (TSR) for both sub-groups. The results were intriguing: high-sustainability firms outperformed low-sustainability firms on TSR by about 4.8% annually, after taking into consideration the usual control variables! These implications were confirmed by comparing the two sub-groups on other financial performance metrics, such as return on assets and return on equity. Investing $1 in a portfolio of high-sustainability firms in 1993 would have returned $22.60 by the end of 2010. In comparison, the same $1 investment in a comparable portfolio of low-sustainability firms would have yielded only $15.40.

When analyzing the drivers of the outperformance, the authors identified governance-related factors as the main determinants; high-sustainability firms were better at involving their boards of directors and made more use of dedicated sustainability board committees. The incentive methodology of senior executives was also found to be better aligned with environmental, social and client metrics. In other words, high-sustainability companies were better at embedding sustainability into their senior management structures.

Obviously, much has evolved since the 2012 study and laggards have been making efforts to catch up, at least in certain areas (refer to Fig. 8.1). When taking a closer look at the more recent data from the Dow Jones Sustainability Index (DJSI) scores from all participating companies from 2015 to 2017 in ten different industries, the gap on governance-related factors appears to have closed almost entirely. During this period, the separation between the top decile and the industry average on governance issues was reduced to less than 9%.
Fig. 8.1

Gap between top decile and industry average on selected criteria (operational eco-efficiency and corporate governance)

But the sustainability leaders were not sitting still; over the same period, the overall gap between the identified sustainability leaders and their industry peers widened significantly. This was in large part due to top decile performers further developing their abilities to capture value from sustainability as illustrated by their operational eco-efficiency score. Sustainability leaders have turned their earlier advantage on governance into hard cash by further embedding sustainability into their business.

Measuring Culture

The previous sections highlighted the positive impact of a culture of sustainability on performance. Principally, the board of directors is charged with safeguarding the firm’s competitive advantage, ensuring that the firm is talent rich, and building a winning, ethical strategy supported by deep-operating excellence that drives long-term shareholder value. From that perspective, managing and measuring culture seems an obvious choice. Unfortunately, many directors are more attentive to key financial metrics and strategic priorities and consequently fail to recognize that their mission cannot be fulfilled without the appropriate corporate culture. An undermanaged culture can backfire badly, as exemplified by Uber, the ride-hailing company that chalked up losses of $4.5 billion in 2017 alone [8].

Uber’s aggressive workplace culture spilled out at a global all-hands meeting in late 2015 in Las Vegas, where the company hired Beyoncé to perform at the rooftop bar of the Palms Hotel. Between bouts of drinking and gambling, Uber employees used cocaine in the bathrooms at private parties, said three attendees, and a manager groped several female employees. [9]

This incident, and a number of similar ones, triggered a change of CEO later in the year. Under founder Kalanick’s leadership, the company faced allegations of a culture of sexism and sexual harassment, including a memo in which Kalanick detailed ground rules for consensual sex practices between employees. After an internal investigation, the board decided to replace Kalanick. The firm’s new CEO, Dara Khosrowshahi, stated shortly after his installation that Uber’s moral compass had been off under co-founder Kalanick [10]. Without the presence of balanced directional leadership from the C-suite and the absence of measurement of the actual state of the company culture, even one of the most successful startups in the world slipped out of control quickly.

The embarrassing example of Uber’s undermanaged corporate culture is unfortunately not an isolated case. In 2016 , Wells Fargo bank fired 5300 employees involved in a widespread illegal practice. To meet the performance targets of their cross-selling strategy, employees secretly created millions of unauthorized bank and credit card accounts, without clients’ knowledge [11]! The mere scale of the scandal makes it unmistakably clear that the issue was not 5300 individual bad apples, but the bad orchard that created them [12]. It was a failure of corporate culture. In recognition of its bad orchard, the bank agreed to pay a fine of $185 million, along with a $5 million refund for customers. Both Uber and Wells Fargo exemplify how flaws in corporate culture can lead to damaging business failures.

To define and measure culture, several tools are available. In addition to in-house scorecards and surveys, standardized organizational culture measurement models have been developed. The Denison Organizational Culture Model, for example, is based on over two decades of research linking culture to bottom-line performance, such as profitability, growth, quality, innovation, customer and employee satisfaction. The Denison Model identifies and assesses four key traits of cultural strength: mission, consistency, adaptability and involvement (refer to Fig. 8.2). Two of these traits, involvement and adaptability, are indicators of flexibility, openness and responsiveness; they were also found to be strong predictors of growth. The other two traits, consistency and mission, are indicators of integration, direction and vision; hence, they are better predictors of profitability [13]. Using a survey-based approach, the Denison Model benchmarks the organization’s performance against a large, diverse global database of over 1000 companies.
Fig. 8.2

The Denison organizational culture model

From its four-legged structure alone, the Denison Organizational Culture Model accentuates the importance of culture for the development and implementation of a sustainability strategy. As advocated, the definition of a meaningful long-term direction that is backed by values and systems (consistency) is essential for the development of a vectoring approach to sustainability. Moreover, listening to the marketplace (adaptability) is indispensable for staying informed on material sustainability topics. And lastly, the alignment and engagement of employees (involvement) need to be first-rate for a company to become a sustainability leader [14].

Building a Culture of Sustainability: The Power of Coalitions

After addressing the importance of sustainability leadership and the value of a strong company culture, this section concentrates on the role of coalitions to make things happen. The essential proposition is that a culture of change can be strengthened by groups of like-minded companies forming coalitions of the willing that share a common culture.

Going back 15 years, the World Business Council for Sustainable Development (WBCSD) founder Stephan Schmidheiny and his co-authors in their 2002 book Walking the Talk: The Business Case for Sustainable Development explained a telling vision on coalitions and partnerships.

Business has much experience with stakeholder dialogue, but still too little with the next step: practical partnerships composed of players in different sectors. Not only do such partnerships combine skills and provide access to constituencies that one partner might not have, but they also enhance the credibility of results—results that might be less effective and believable if they only come from business, civil society, or government. [15]

A point that was definitely true then, and one that is likely still true today.

Going even further back in history, a famous example of a coalition with a shared culture can be found in the Hanseatic League, also known as Hansa. The league was a commercial confederation of merchants that initially united the Northern German towns of Lübeck, Hamburg and Bremen in the second half of the 1100s, subsequently spreading across the Baltic and the North Sea to dominate maritime trade for over three centuries. The word “Hansa” originates from Hanse, the Middle Low German word for a convoy, referring to bands of merchants traveling between the Hanseatic cities whether by land or sea [16]. The league was created to protect the guilds’ economic interests and diplomatic privileges in their affiliated cities and countries, as well as along the trade routes. The Hanseatic cities had their own legal system and furnished their own armies for mutual protection and aid. The Hanseatic cities regularly came to the aid of one another, jointly trained pilots, erected lighthouses along the strategic routes and opened offices (Kontors) in their member cities. Despite this, the organization was not a state or a confederation of city-states as only a few cities in the league were entirely autonomous.

At its peak, the League stretched from Novgorod in the East to London in the West, with an impressive list of cities, such as Tallinn, Riga, Gdańsk, Berlin, Groningen, Cologne, Antwerp, Brugge, Stockholm, Bergen, Kiel, Rostock, Turku, Wroclaw and Kaliningrad, all becoming members of the League at some point in time. The guilds traded many commodities, such as fur, wool, wood, silver, cod and salt with little formal structure in the arrangement. In fact, the absence of an organizational superstructure was key to the working of the Hansa: it was the coalition of the willing that created a great cultural and architectural heritage. Hanseatic merchants were known for the high-ethical standards they held in business, virtues that continued to be cultivated by the Honourable Society of Hamburg Merchants well into the twenty-first century.

Nowadays, with what could be regarded as a modernized version of guilds, similar partnerships are established. Companies with strong sustainability cultures are forming coalitions with like-minded companies to advance knowledge, create momentum and engage partners in developing value chains that possess a higher level of sustainability.

In Chap.  3, we introduced Tony’s Chocolonely, the child-labor-free chocolate pioneer. The NGO-turned-company elected to be accredited as a B Corp, a certification available to companies certified by an independent body, the B Lab [17]. To obtain the B Corp certification, the companies must pass rigorous standards of social and environmental performance, accountability and transparency. Started in the US in 2006 as a tool for impact assessment, B Corps have become a lively community of more than 2100 companies endeavoring to become a force for good [17]. All members, from 50 countries and representing over 130 industries, are obliged to use the power of the markets to solve social and environmental problems and to create benefits for stakeholders at large, not just shareholders. With leading member companies such as Ben & Jerry’s and Ecover, the certification label became more than a status symbol; it helped secure the culture and company values from farmer to end consumers in a holistic way, providing tangible stimulus to all stakeholders to keep raising the sustainability bar.

Patagonia, another early B Corp member, was an iconic role model. Founded by rock-climbing aficionado Yvon Chouinard in 1973, the firm became one of the most admired outdoor apparel brands in the world. Its company mission was simple: build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis. That mission helped Patagonia develop a sustainability culture from day one and, for instance, change to 100% organic cotton sportswear as early as 1996. While growing awareness on environmental issues and climate change, the company was continuously on the lookout for new ways to make its supply chain more sustainable, inspired by the leadership of Chouinard.

Creating Your Own Coalition

A possible alternative to becoming a member of an existing movement is to create a coalition of your own. This is what wine company CEO Miguel Torres elected to do in a pioneering effort to protect the Torres heritage and culture. Obviously, the Torres family was not alone in its endeavor to maintain family values and company culture. The highly fragmented wine industry is, almost by default, a family business with a strong sense of tradition. The culture of the vine and the slow, meticulous creation of the best wines, require a long-term perspective and a great sense of respect for nature and the company’s impact on it.

So, when Miguel Torres was looking for ways to harness his company culture and heritage, he launched an association called the “Primum Familiae Vini” (first families of wine). As the association’s charter (outlined if Table 8.1) details, members of the Primum Familiae Vini concentrate on ensuring their legacies with a strong sense for environmental and social responsibility, while jointly improving their businesses.
Table 8.1

The primum familiae vini charter [18]

As custodians of national heritage, the members uphold regional winemaking traditions and:

 • They share the challenges of running independent family businesses and passing them from one generation to the next

 • They exchange viticultural/oenological information and promote the traditional methods that underpin the quality of their wines and respect for terroir

 • They foster environmental and social responsibility in family winemaking businesses

 • They increase awareness of the benefits of moderation in the consumption of fine wines, essential for their appreciation, and for a healthy lifestyle

Besides representing a successful vehicle for harnessing family values and exchanging knowledge, the Primum Familiae Vini turned out to be a powerful marketing instrument for its members. As some of the most admired wine brands in the world and their family owners joined the club, including the Antinori, Vega-Sicilia, Torres, Joseph Drouhin and Mouton Rothschild families, the Primum Familiae Vini started to yield significant influence within the world of wine and beyond. The shared family values brought together a coalition that was making an effort to protect its heritage, in business and in nature.

Coalitions can also be forged around sustainability issues, as the previously mentioned initiative of the Champions 12.3 illustrates (see Chap.  5). This coalition of almost 40 leading CEOs, ministers and other global leaders is dedicated to achieving the Sustainable Development Goals (SDGs) on food loss and waste. The Champions regularly get together to assess progress on achieving the SDG target 12.3, sharing best practices and analyses on food loss and waste reduction and how to overcome barriers to the application of those best practices. The results of the initiative are openly shared with internal and external stakeholders.

Open image in new window GMA Garnet and the Hanseatic Culture [19]

Nowhere is the Hanseatic culture better illustrated than in the experience of GMA Garnet, a world leader in the production, distribution and recycling of garnet, one of the Earth’s most resistant minerals. In this abridged case, we investigate the contribution made by culture and values to the creation of the long-term partnerships.

GMA Garnet and Jebsen & Jessen Family Enterprise

Torsten Ketelsen discovered the fledgling West Australian mining operation of Garnet Millers Associates (later renamed GMA Garnet) in the late 1980s and, as GMA Garnet’s agent, he started to develop a market for garnet in the Arabian Gulf ship-building/repair and oil industries from his newly established Ketelsen Enterprise, based in Perth. At the time, garnet was still a largely unknown industrial commodity. A natural mineral belonging to a group of silicates used since the Bronze Age, principally as gemstones, garnet was known not only for its hardness but also for its toughness and density—which made it exceptionally effective as an industrial abrasive with excellent cutting capabilities.

In the late 1980s, GMA Garnet started developing a market for garnet by creating a series of differentiated products with clever marketing and branding, ultimately establishing itself as a market leader with a 40% global market share, by replacing traditional abrasives and opening new applications. By 2016, there were over 40 garnet applications in the waterjet-cutting and abrasive blasting industries, including steel and marble cutting in shipyards and aircraft production facilities, and new applications were being developed regularly. Torsten recalled:

The first 20 years of my journey were the toughest: I kept bringing samples of garnet to a region where traditional abrasives such as sand were well established, very cheap and easily available. You can imagine there is no shortage of sand in the Middle East … From the beginning we realized the only way forward was to offer a superior value proposition, including supreme efficiency and environmental safety. Initially, our customers were too busy sandblasting to even try our product: it was more expensive up-front, and profits only showed up later. But when they tried it, they usually fell for it quickly. They would often say, “Why didn’t you come to me 10 years ago?”

When the first Gulf War broke out, Torsten looked to distribute the abrasive in Europe, starting first at Jebsen & Jessen Hamburg, the European trading house of the Jebsen & Jessen Family Enterprise (JJFE). At the time, Jebsen & Jessen Hamburg was trading mainly chemicals and textiles between Asia and Europe, and garnet would be a complete novelty for the firm. However, the firm’s familiarity with shipyards (garnet’s first application area) and its openness to diversification helped.

In 1991, Torsten Ketelsen and Wolfhart Putzier—CEO of Jebsen & Jessen Hamburg and a non-family shareholder in JJFE—established a joint venture between Ketelsen Enterprise Pty Ltd and Jebsen & Jessen Hamburg and named it GMA Garnet (Europe) GmbH. The new entity was fully embedded in Jebsen & Jessen Hamburg’s offices with the purpose of distributing and selling garnet in Europe.

Full Integration and Moving Up the Value Chain

Ten years later, in 2001, GMA Garnet (Europe) and Torsten’s Middle East & South-East Asia distribution networks accounted for almost the entire production offtake of GMA Garnet, but they still did not actually own the mining operation. To secure uninterrupted product supply, Torsten, together with the two principal family shareholders of JJFE (Hans Michael Jebsen and Heinrich Jessen) and Wolfhart Putzier, established Garnet International Resources Ltd (GIRL), a vehicle that then purchased a 50% share in the GMA Garnet mining and processing operation in Western Australia.

GIRL was integrated into JJFE on terms similar to its other operating entities. GIRL’s board included the two Jebsen & Jessen principal shareholders, two non-family shareholders—Torsten Ketelsen and Wolfhart Putzier—and a fifth director nominated by Hans Michael Jebsen and Heinrich Jessen to reflect their controlling stake. The two non-family shareholders remained operationally involved and enjoyed a great deal of latitude to develop the business.

GIRL’s single purpose was to acquire the West Australian mining & processing operations of GMA Garnet, but the journey to full vertical integration in the garnet business was only beginning. After protracted negotiations and a convoluted acquisition process, GIRL took full ownership of GMA’s West Australian mining and production assets in 2005. As a result, GIRL became the largest producer and distributor of industrial garnet in the world, with the distribution assets of Ketelsen Enterprise in the Middle East and Southeast Asia as well as the joint European distribution of GMA Garnet Europe JV. GIRL then bought a second mine in Montana, which processed a hard-rock garnet using a very different manufacturing process. This secured GMA Garnet a presence in the biggest garnet market worldwide—the US.

The Quest for Environmental Mining

GMA Garnet moved down the value chain by adding garnet recycling capabilities to its portfolio. With its extraordinary hardness and toughness, garnet retained most of its abrasive characteristics after use and could be recycled up to seven times. Large industrial-scale recycling plants were established close to major customer centers, that is, Dubai, Saudi Arabia, Italy, Philadelphia and New Orleans.

This recycling capability completed the company’s control over the entire production and distribution value chain, from mining through processing, logistics and shipping to distribution to the final users worldwide as well as reprocessing and recycling. The GMA Garnet vertical integration/circular economy model was progressively adopted in other parts of the Jebsen & Jessen Family Enterprise; the traditional trading model was no longer able to safeguard the existence of the firm.

Even though Australia had very high mining, waste and land management standards, GMA Garnet went way beyond environmental compliance. Before starting mining operations, it first collected plant seeds and only then removed the top soil. After extracting the garnet, it completely rehabilitated the grounds with the original seeds and top soil.

Additionally, GMA Garnet relied on gravity and centrifugal processing and used only water to clean the extractions, a much safer approach than the traditional chemical processing. Finally, garnet itself was a much safer abrasive than silica sand, which was banned in most countries because the dust it created is linked to silicosis—a fatal lung disease. Garnet was preferable to other alternative abrasives such as coal and copper slags, which are also associated with environmental and health hazards.

A Front-Door Exit for a Successful Endeavour

Torsten Ketelsen could look back at the last 15 years with great pride. Under his leadership, the company had grown tremendously, increasing its value more than 15 times, all without new external financing. It was now time for him to consider the well-deserved next step—retirement.

In terms of ownership, GMA Garnet started negotiations with a reputed private equity firm. A thorough due diligence was performed over eight months, concluding with a strong valuation proposal. It quickly became clear, however, that the buyer and seller were not aligned in their views of the future of the company. The private equity firm was focused on an accelerated value creation game plan, leading to a fast exit in the form of an IPO or a trade sale, putting the long-term sustainability of the business into question.

The tipping point came when the full purchase offer showed figures on critical key performance indicators (KPIs) that were quite different from the originally negotiated numbers. An emergency meeting of the board in Hong Kong was arranged, and within a day they had worked out an alternative ownership exit—an internal one. The internal exit price ended up being based on the external valuation and the due diligence. Two successive buyouts of shares from both Torsten and Wolfhart would result in them completely exiting their ownership of GMA Garnet.

With the ownership exit engineered, it was now time to consider the management exit. Torsten was fully aware that GMA Garnet in 2015 was very different from the original company, with a dominant global market share and a fairly flat corporate structure. Suitable successors were found in Stephen Gobby, taking over as CEO, and Keith Gordon, as non-executive chairman of the board of directors. Having finalized the exit, Torsten Ketelsen retired from the CEO function in June 2015, fully confident the company was in the hands of a formidable management team, and caring owners.

New Management: Renewed Energy

GMA Garnet’s new management team established lofty goals for the company, striving to double the value of the business again within the next five-year period by finding new applications for garnet and expanding the market for GMA Garnet worldwide. Time would tell if the top management team, major shareholders for the first time, would still prioritize the firm’s long-term sustainability over its quest to achieve this growth, and whether the full integration of GMA Garnet into the Jebsen & Jessen Family Enterprise would effectively support or hamper the company along the way.

In true Hanseatic style, the new management team carried forward the existing sustainability principles. One of the signs of the company’s focus on sustainability and eagerness to partner was indeed visible when, in October 2017, GMA Garnet signed a long-term agreement with Advanced Energy Resources (AER) to construct a three-megawatt wind and solar farm in Western Australia. This collaboration would eventually result in 100% renewable energy for the mine’s electricity requirements [20].

Tips, Traps and Takeaways

Open image in new window Tips

  • Involve the middle management early to help turn the firm’s statement of purpose into an effective culture of sustainability.

  • Check for coalitions that are compatible with the company culture on the topic of sustainability for knowledge exchange and gaining momentum.

  • Measure, and keep measuring, the current state of corporate culture and respond to the outcomes of these surveys.

Open image in new window Traps

  • Although buy-in from the top is an essential component for success, it is not enough. Be careful not to focus on the boardroom only.

  • Avoid launching a spree of well-intended sustainability initiatives from the top, especially without an appropriate unifying theme and/or overarching target.

  • Compliance on governance issues is just a starting point. Once the governance within the organization has been covered, redirect the sustainability efforts toward value capture from innovation and operational eco-efficiencies.

Open image in new window Takeaways

This chapter highlighted the positive impact a culture of sustainability has on corporate performance and on corporate behavior. Firms with high-sustainability cultures deliver significantly better stock market performance than those with low-sustainability cultures. Developing a potent sustainability culture requires leadership qualities very similar to those required to lead major change processes. Best-in-class examples from Unilever and Interface illustrated the fact that outstanding leaders are able to develop cutting-edge sustainability programs. The business performance of these two sustainability leaders confirmed the positive impact of a sustainability culture. Unilever has claimed its sustainable living brands are responsible for more than 60% of its growth and are growing 50% faster than the rest of the business; Interfaces’ breakthrough innovations turned the company from a startup into a global $1 billion carpet tile business with a sustainability reputation second to none.

Laggards have taken notice and are not sitting on their hands. The divide on the performance of governance-related factors between decile extremes has been decreasing, even though sustainability pioneers seem to continue to harvest the fruits of their early starts. Experts predict that sustainability leaders will have to excel at integrated sustainability strategies, vision, innovation and transparency in the future to maintain their prime positions.

Examples from the ride-hailing company Uber and Wells Fargo bank provides empirical evidence that measuring a company culture is essential, and that failures in corporate culture can lead to major shortcomings in the business. To help prevent such failures, the Denison Organizational Culture Model was introduced as a possible culture measurement and management instrument.

Coalitions are shown to be powerful vehicles for exchanging information on sustainability programs, jointly raising awareness and gaining momentum for cultural change with internal and external stakeholders. In the absence of a suitable established coalition, companies have at times resorted to creating their own, as was shown with Champions 12.3 on food waste and the Torres wine company on ensuring its legacy regarding environmental and social responsibility.

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Benoit Leleux
    • 1
  • Jan van der Kaaij
    • 2
  1. 1.International Institute for Management DevelopmentLausanneSwitzerland
  2. 2.Finch & BeakBredaThe Netherlands

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