“I am discovering a whole new respect for chief sustainability officers,” I texted the facilitator of Leading the Sustainability Transformation.

I was general manager of a mock company, Rio Negro Bioproducts, with the express goal to transform it from a traditional business to a sustainable one — economically, environmentally and socially — over a 20-year period compressed into a 10-week virtual simulation.  

Powered by leadership readiness firm, WholeWorks through the University of Victoria, the simulation teamed me up with global counterparts, ranging from leaders at Griffith Foodsand Plant Tech Alliance to designers, consultants and a former Airbnb executive. We assumed the roles you would expect at a manufacturing site designed to supply a global market — supply chain, operations, HR, marketing, sales, IT, EHS — as well as the roles sometimes considered “fringe” but that are in reality critical success factors such as government officials (a local mayor) and civil society (an NGO leader).

We strove to adhere to Rio Negro’s vision and meet aggressive triple bottom-line targets as major systemic issues hit its operations — geopolitical tensions and natural disaster brought on by climate change. We did this all while facing, relentlessly, shareholder demands for their expected return on investment.

Companies are under immense public and competitive pressure to change — to positively contribute to problems that seem nearly impossible to solve including climate change, racial inequity, an increasing cultural divide and the global pandemic. Where should a business begin? 

The Leading the Sustainability Transformation is an opportunity to experiment with sustainable transformation — and accelerate the implications — both the good and the bad.

Here are my lessons learned.

1. Vulnerability is the birthplace of innovation — embrace the mess

A common cultural expectation of managers is to know the answer in advance, to be confident and ready to move. Researcher Brene Brown has long pointed out vulnerability is basically uncertainty, risk and emotional exposure. If it’s genuinely uncomfortable, why embrace it?

Real innovation requires walking into the unknown — sometimes alone, sometimes with others. It requires you lead by acknowledging what you don’t know and inviting others along with you. 

Sustainability is about aligning different departmental agendas and incentives, for which you have varying degrees of subject matter knowledge, to create a cohesive strategy. Allowing yourself to be vulnerable — to take risks — can open up business opportunity. Build an environment where individuals can introduce unproven or partial ideas that may not even make sense yet but have the seeds of something great. 

But how do we create the conditions for this kind of environment?

Applying the idea:

• Ask questions, rather than answer them. One person doesn’t need to have all the answers, and together with the knowledge of those around you, solutions can emerge that aren’t immediately obvious.
• When facing a particularly thorny problem, slow things down. Give people a chance to dwell more, instead of racing to the answer.

2. There are no absolutes — hypothesize, learn and adjust

When approaching systemic problems, you’re heading into a situation that’s naturally messy. It’s not quite clear where you’re going with it, so by definition, there cannot be one right universal or pre-determined answer. In some ways, the answer is the path you forge with the unique communities or stakeholders you’re working with to do that.

“Systemic problems affect people in so many different ways, there’s no one way to frame or define it. You can’t say at the onset this is one way to do it and we will know the solution when we’re done,” points out Matt Mayberry, Whole Works founder and designer of the LST curriculum.

This principle of always starting from a place of acknowledging uncertainties was an ongoing refrain throughout the course. At times, I thought something was absolutely the right answer, only to be reminded through the experience of my colleagues that I could see only one part of the whole picture. Even when I served in the most senior team role of senior vice president, blind spots were not in short supply. While perception often seems like hard facts, in reality, it’s often a subjective set of assumptions.

Applying the idea:

• Frame activities as experiments. Be upfront about your assumptions, uncertainties, and potential blind spots. This accelerates learning.  
• Move in shorter, faster intervals. What’s the easiest experiment you can do to test if what you think is aligned with where things really are? 

3. Have the courage to fail and take personal responsibility for it

Fail fast, learn and adjust. It’s a popularized notion, but it takes courage to fail. A less popular concept? Failure doesn’t feel good! Who wants to be in a high stakes situation and fail? Individuals and teams, for the most part, want to achieve their goals. Yet it’s inevitable: To create something that hasn’t been done before, you will fail along the way.

At one point in our simulation, I, along with a couple of others, made an operational call early on that took us a hypothetical decade to recover from. Those of us who made the decision said, “We feel awful about this, but we made this decision and these are the impacts.” The decision cost a lot of money. Thankfully, it was hypothetical.

Taking responsibility for the failure helped us move through it, learn and adjust. At one point, we thought our team wouldn’t recover. By acknowledging it in a provenly safe environment, our team helped others quickly learn from our failure.

Applying the idea:

• Build an environment where individuals feel safe enough to acknowledge when an activity doesn’t meet expectations.
• Model taking personal responsibility by doing so if you experience failure. This sets the stage for others to do so.

4. Lead by asking what works

Cross-functional teams perform better when they focus on peak experiences and best practices compared to teams that focus on problems and gaps. Groups initially characterized by dysfunction and defensiveness can be revitalized and energized through an approach called Appreciative Inquiry. 

The Appreciative Inquiry approach asks what gives life to a system, what keeps it most healthy and alive. Ask questions about what’s working well and what are the possibilities of building on that. This creates a different frame than asking what is broken, who or what is causing it, and how it can be fixed. This approach does not suggest blindly ignore problems. It means leading by observing what is already giving healthy life to a system.

“When we focus on problems, we start from a hole that we must crawl our way out of” was a key principle pointed out by Mayberry during the course. “Unfortunately, when working with a group, creating a shared negative view of the world tends to lead us to dig ourselves even deeper. This is not an inspiring place to be if you’re trying to imagine a better future and think of creative ways to make it a reality.”

Applying the idea:

• When a group is faced with a difficult challenge, ask questions about what’s working well, what might be, and what should be? Frame an opportunity in a way that opens things up to a collaborative approach.
• Include the whole system in the room. Include stakeholders outside your immediate sphere of sight, such as those on the “fringe” — the poor, weak, isolated, non-legitimate and non-human (other species).

A flock of Black Swans is on our horizon. The unpredictable is becoming ever more predictable: global pandemic; climate change; inequality; and a rising demand for food, energy and water all threaten democracy, capitalism and our very lives.

In his book “Green Swans,” strategist and systems thinker John Elkington delineates between these existential crises and opportunities — described as Green Swans and Black Swans. Symbolized by an extraordinary bird that embodies grace and elegance, a Green Swan event catalyzes transformational change. Conversely, Black Swan events assume the same potential for transformation — however, these situations degenerate life on a systemic level.

Black Swans or Green Swans? It depends on your perception.

Leaders who see Green Swans — opportunity in these risks — move sustainability from the periphery of their business to its core. It requires both a shift in mindset and strategy.

Part one of this two-part article series focused on lessons I gleaned about mindset during Leading the Sustainability Transformation (LST), a virtual simulation that compressed 20 years of business transformation into 10 weeks, calling upon participants to practice building and executing a strategy transforming a corporation into a sustainable, circular and competitive business — and then to immediately apply those lessons to their own organizations.

This second part focuses on strategies for leading this transformation.

The dichotomy of creative destruction: embrace the paradox

All markets change. To survive and thrive, businesses must change. Creative destruction is the ability of a firm to destroy its current capabilities in favor of the innovations of tomorrow and create shareholder value. It’s a process of mutation that continuously revolutionizes the current structure from within.

With one leg in the present and the other in the future, businesses that lead through innovation embrace the paradox of creative destruction.

These types of companies navigate a fundamental tension between the two realities — managing today’s business and its pressure to realize short-term results and often shareholder demands, while simultaneously creating tomorrow’s technology and markets and fulfilling expectations for future growth.

The sustainable value framework developed by Stuart Hart, offers a way to manage tension by breaking down this dichotomy into a two-by-two perspective: first examining time — today and tomorrow — and then considering the needs of the organization and the needs of its stakeholders (shareholders, customers, suppliers, communities, etc.)

Do more with less

The first area in the business of today is about doing more with less. To an extent, it’s the most straightforward approach in Hart’s framework. It’s about reducing waste and optimizing resources.

While not the sexiest of topics, the efficiency of doing more with less reduces cost and corporate risk. It also has the potential to both inform and fund a broader sustainability agenda.

Applying the idea:

• Taking the LST scenario as an example, our job was to transform a manufacturing plant that was operated with high waste, high carbon emissions and high-power usage into an environmentally friendly, circular business model. Doing more with less meant intentionally considered integrated investments in capital, products, processes and employee development, while also investing in farmers in the supply chain and the broader community workforce. It meant leveraging green technologies inside and outside of the fence line.

This integrated approach led to a virtuous upwards cycle: less expense; better reputation; and productive workforce. It led to new products to meet customers’ demands, authentically earned value in the community, and ultimately a return on invested capital to meet the investors’ expectations.

Lean in and listen to the unfamiliar

Product stewardship is another strategy for managing the business of today. It’s about integrating stakeholder views into business processes, transparency and new forms of governance. It’s about accessing the voices beyond a company’s immediate control — those who would not ordinarily have a seat at the table: local communities; NGOs; the environment; the economically disadvantaged; and in some cases, even the non-human (other species) — and engaging these voices in the product lifecycle.

Applying the idea:

In 2017, over 40 percent of Romanians were among the most exposed in Europe to the risks of poverty, social exclusion and stigmatization. Energy theft and fuel poverty in these groups was high. While many initiatives approached the theft through a punitive lens, renewables energy company, Enel, spotted opportunity. Why did these communities face persistent problems around energy access? How might Enel Romania engage them authentically?

Teaming up with local NGOs, Enel Romania took a customer-centric approach. It listened. Through dozens of community engagement meetings with citizens, an energy community mediator and a customer care team dedicated to solving energy access issues, the company immersed itself in the lives of people and voices beyond its immediate line of sight.

Issues became immediately apparent. As an example, in just one geography, families used improvised electrical heating during the winter that was dangerous and inefficient. Many found it difficult to navigate a large utility company such as Enel Romania. Buildings weren’t connected to the district’s heating and gas and were poorly insulated. All this resulted in a significant portion of the Romanian population in need of energy yet disengaged in electrical services.

In response, Enel Romania came up with a series of development initiatives that contributed to solving problems for these communities, ranging from energy efficiency and safety trainings to debt restructure to enable payments, better access education and medical services. This built trust in the community. Today, Enel Romania has a new and loyal customer segment, increased revenues and more effective business processes based on direct feedback from these communities.

Product stewardship requires managers to immerse themselves in perspectives they may not ordinarily encounter. While this sounds straightforward, it is challenging when managers’ view beyond a core set of stakeholders is limited. These perspectives are in many ways opposite of many managers’ current business context. It’s hard to see what you cannot see.

Invest in the future: It comes slowly – yet suddenly

The second axis — investing in tomorrow — is, in part, about acquiring the skills, competencies and technologies to position an organization for future growth. It’s about embracing new kinds of logic.

Weak signals, indicators of an emerging issue that may become significant in the future, can grow strong over time, building into trends can be blindsiding if one isn’t listening for them. A company that invests in the competencies and technologies for the future is positioning itself to develop these nascent signals into high-value opportunities and capitalize on them as they mature.

Applying the idea:

Patagonia created a corporate venture capital fund, Tin Shed Ventures, to invest in startups that offer solutions to the environmental crisis, and technologies for the future.

Bureo, a social enterprise and Patagonia grantee, has made a business of introducing plastic fishing nets into the company’s supply chain — as a raw material. Fishing supports a way of life across South America. Yet, hundreds of millions of pounds of nets live in the ocean, killing the marine life where fisherman continue to fish.

Bureo discovered that these nets are often highly recyclable. With Patagonia’s support, Bureo is partnering with fisheries across South America and has pulled 3.1 million pounds of plastics out of the ocean. These nets are in the raw material for Patagonia’s hat brims, previously made from virgin plastics. (Watch the story here.)

The mainstream pivot towards circular economy processes is still young. Bureo is just a couple of years old. Patagonia is investing in a scalable infrastructure by which it can reimagine some of its most iconic products. It’s also setting a standard that companies can model to remove exponentially more plastics from the ocean.

Co-create future markets with historically marginalized stakeholders

Managing tomorrow’s business is about building future markets through co-creation with stakeholders, many of whom have been overlooked or exploited by capitalism. It is about building business models in ways that reconstruct the current economic system to be more equitable and inclusive.  

Similar to the Enel Romania example, it’s about understanding the context of different communities and then building future competitive business models, and new products and services in collaboration with these stakeholders.

Applying the idea:

The Circular Cities Coalition, facilitated by PYXERA Global is one approach to this. This coalition of organizations is working together with U.S. and global city governments to create a new way of operating for urban and regional economies.

Underpinning the coalition’s approach is that of ownership and circularity — enabling economic transformation among historically marginalized and Black, Indigenous and people of color (BIPOC) communities by co-creating regenerative business models. Along with comprehensive landscape assessment in critical areas such as materials flow, impacts and policy gaps, Coalition members are conducting community engagement workshops in areas such as Nome, Alaska; Lake County, Montana; and Takoradi, Ghana, to design the needs, problems and opportunities encountered by these groups into the circular economy roadmaps.

The coalition is working with these communities to co-create a host of profitable and regenerative business models that will reset their economic foundation for years to come and leave ownership in the communities. These models range from repurposing and selling used plastics to standardizing re-sell and repair shops to investments in entrepreneurs who are creating and owning the next regenerative business model in their communities.

A Green Swan can emerge from a Black Swan

It takes insight, tenacity, vulnerability and a lot of experimentation to find the opportunities hidden in Black Swans. Shedding light on Black Swans turns them to Green.

By helping your company see what other companies may be missing — managing for today, while building the future — you can identify opportunities inclusive, equitable business models that create disruptive change and redefine your industry.