Sustainable Future News speaks with Stuart McLachlan, CEO of Anthesis Group and author of The Adventure of Sustainable Performance, on redefining ESG for business leadership, the regulatory landscape, and the leader who inspires him.
Have you ever been charged at by an elephant? Stuart McLachlan, CEO of Anthesis Group, has – and the experience turns out to be a useful reference point for sustainability-focused leadership.
There are two traditional elephant analogies in business. Either you are told to eat it one bite at a time as a metaphor for accomplishing large projects gradually, or it is the elephant in the room where people are tiptoeing around a problem. This analogy is neither. In The Adventure of Sustainable Performance: Beyond ESG Compliance to Leadership in the New Era, written by McLachlan and Anthesis colleague Dean Sanders, the book opens with the protagonist facing down the giant mammal.
We need them to get beyond that, to see that on the other side, there is a huge opportunity for value creation.
McLachlan takes up the story of his experience and how it relates to leadership. “The guide told us to stand behind him, to say nothing, and to stay still, which is what we did,” he tells Sustainable Future News. “But it was also very paralysing. In that situation, it was an act of extreme compliance.
“That’s where so much of the world is at the moment – they are paralysed in the ‘charge’ of compliance,” adds McLachlan. “We need them to get beyond that, to see that on the other side, there is a huge opportunity for value creation.
“That value creation looks like a lot of things that, as business leaders, they want to see; growth in market share, operational efficiencies, resilient supply chains, and enhanced branding.”
So that answers the ‘what’ of the book, but how about the ‘why’ – and why now? Founded in 2013, Anthesis is the largest group of sustainability consultants globally, with McLachlan leading a company of 1300 people across 20 countries. He explains how different factors aligned to make the time right for a book on leadership in this space.
“We set up Anthesis with the intent to piece together the ideal organisation for when the world really wakes up to the reality of the climate crisis,” says McLachlan. “To be honest, when we set up the business 10 years ago, we didn’t know whether the market was going to wake up to it in 2013, or 2030.
We got fascinated by looking at the systems, models, and strongholds of the old era and how they’re starting to crumble.
“The market is characterised by organisations preparing themselves for an increasingly uncertain future,” McLachlan adds. “We felt that we were coming to the end of an era, moving into what we call a liminal space. It’s a time that happens very infrequently, if we look back through history, and it’s a time when you can expect rapid and transformational change.
“We got fascinated by looking at the systems, models, and strongholds of the old era and how they’re starting to crumble, and the characteristics of leaders who are so focused on trying to shore up the walls of those strongholds, just to buy another two, three years’ time to strengthen their pension pots and remain in positions of power,” adds McLachlan.
There is one other factor which ties it all together: regulation. McLachlan argues the ‘avalanche’ of regulations is a sign of the world waking up to the problem, and leaders need to do likewise. “Even if leaders disagree with it, even if they don’t want to make the change, now they’re having to,” he says.
Regulations have always been around, but this time, however, there is a difference. Take the Corporate Sustainability Reporting Directive (CSRD) as an example, where all large companies will be required to publish regular reports on their environmental and social impact activities. “You’re seeing the big stick of compliance, unlike a lot of the compliance vehicles that we’ve seen over the last 20, 30, or 40 years where they are introduced to deliver incremental nudges, and improvement, and performance,” notes McLachlan. “Whereas the regulations we’re seeing now is to beat people out of their strongholds and get them to move, to step into this journey, into the transition.”
The book interviews various business leaders who have taken steps on this journey. One of the most notable – not to mention insightful – is Guillaume Le Cunff, CEO of Nestle Nespresso, of whom the World Economic Forum notes is not only a ‘champion of sustainability’ but has ‘transformed the Nespresso business from a niche brand to the recognised ultimate brand for coffee connoisseurs.’
You need to look at every act of compliance as an opportunity for value creation.
These two citations are not mere happenstance. As McLachlan explains, the gift of Le Cunff is to combine these two potentially disparate areas. “I find [Le Cunff] particularly inspiring because he really understands the need to get your hands around the full value system,” adds McLachlan. “He really sees the business ecosystem and the relationship between the supply chain, the coffee farmers, and the end users. The ecosystems look a lot more complex, but he gets that complexity, and he knows how to manage that and create value in that complexity.
“He says you need to look at every act of compliance as an opportunity for value creation,” says McLachlan. “So you either try and find those opportunities for value creation in parallel with your compliance activities, or you seek value creation on the other side of compliance.
“What you mustn’t do is to see this agenda is just a cost of compliance issue, where you’re going to be able to cut a cheque and get back to business as usual.”
This theme also occurs in a particularly engaging analogy in the book, which redefines the initialism of ESG with three leadership principles: entrepreneurship, spirit, and grit. McLachlan admits that the world probably doesn’t need another definition of ESG. Yet it is a useful definition to put the challenge facing leaders into context.
“What we’re finding is there are certain things really coming through strongly in terms of those leadership characteristics,” explains McLachlan. “Whether you call it an entrepreneurial form of leadership or an agile form of leadership, it’s the type of leadership that is able to embrace change, that is more pioneering, that is not going to be scared off by risk, that is able to look longer term, that is able to operate within the reality.
You’re going to achieve a huge amount of scrutiny, and a massive amount of criticism, and it’s [about] your ability to be able to have the resilience to stand up to that.
“A lot of the time we’re talking about managers and leaders who [are there to] maintain the status quo. That’s what they’re trained to do, they’re good at it, and the business schools have been spitting out these kinds of managers for decades,” adds McLachlan. “Their job is to manage risk, maintain the status quo, deliver against quarterly performance targets, and to continue to shore up the stronghold. Now the world’s saying – you’ve got to step out of that stronghold.”
The ‘G’, for grit, is all about resilience in leaders. “What we find is that when organisations step into transitions, they do get stuff wrong,” says McLachlan. “There are all sorts of people, lots of not-for-profits and NGOs, that are going to be crawling over everything that you do, and you’re going to have to publish publicly what you’re doing.
“So you’re going to achieve a huge amount of scrutiny, and a massive amount of criticism, and it’s [about] your ability to be able to have the resilience to stand up to that,” adds McLachlan. “Because otherwise, you’re just going to go running back to what you feel is that perceived stronghold.
“It doesn’t exist anymore, but you’re kind of hoping it still does.”
The Adventure of Sustainable Performance: Beyond ESG Compliance to Leadership in the New Era, by Dean Sanders and Stuart McLachlan, is published by Wiley.
