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Sustainability skills

Sustainability

Bridging the sustainability skills gap

Published 22 August 2022 in Sustainability • 7 min read

To prepare for the green revolution, companies need to rethink their approach to skills development starting in the boardroom.

 

The world is in the throes of a green revolution, with the global economy, notionally at least, in the process of decarbonizing. Wind turbines, solar panels, and biofuels are displacing fossil fuels, electric vehicles are gradually making the internal combustion engine obsolete, and plant-based foods are competing ever more strongly with meat and dairy products. 

It would be easy to regard these changes as natural evolution, but they require directed human resources and revised business strategies. Moreover, they will give rise to new jobs and, by extension, create demand for new skills. In its Global Green Skills Report 2022, LinkedIn says that the number of jobs requiring green skills has grown by an average 8% annually over the past five years. It expects millions of new jobs to be created globally in the next decade, driven by new climate policies and commitments. Similarly, the International Energy Agency (IEA) estimates that green energy infrastructure alone will need to fill 14m new roles around the world by 2030. 

However, the need for green skills spreads far beyond the traditional environmental sectors such as ecosystem management, environmental policy, and pollution prevention. The LinkedIn report flags that the vast majority of green skills are now being used in roles that aren’t traditionally thought of as green, including fleet managers, data scientists, and health workers, and now affect roles from fund managers to farmers, and aircraft makers to accountants. 

These skills will not emerge unassisted. Governments and companies need to plan now for how they will train new entrants to the job market and upskill scores of existing workers to ensure they are prepared to make the decarbonized economy a reality. 

It starts in the boardroom  

This need for upskilling applies throughout the workforce, but it is imperative that it begins at the top. If boards and C-suites lack the necessary skills to navigate the energy transition and sustainability’s move to center stage, then companies will struggle to adapt. Some markets have begun to acknowledge this. The Climate Governance Initiative, for example, mobilizes boards of directors around the world to address climate change through their businesses. The initiative, which has networks in 31 countries around the world, aims to give members the skills and knowledge to make climate a boardroom priority, building on the World Economic Forum’s Principles for Effective Climate Governance. 

Legal opinions have been formally issued in Singapore, Australia, New Zealand, and Canada, concluding that board directors must consider taking measures to mitigate climate risks part of their remit. This is part of a growing global trend: the UK has made it mandatory for companies to report on their climate risks, in line with the findings of the Task Force on Climate-Related Financial Disclosures (TCFD), while the Securities and Exchange Commission (SEC) in the US has just released guidance on a similar initiative.  

Boards can no longer get away with paying lip service to climate risks. A new government in Australia is set to bring climate change to the forefront of policymaking. In 2021, Shell was ordered by a court in the Netherlands to accelerate its emissions-cutting schedule (it is currently appealing this decision). Meanwhile, the highlight of a host of climate-related shareholder resolutions in the US saw ExxonMobil mandated to appoint three climate-focused directors to its board after years of resistance. 

Risk and opportunity  

Beyond the risk management aspect of sustainability, there’s also huge opportunity. The global market for green energy is set to exceed $1.1tn by 2027, while new economic models such as the sharing economy provide a wider perspective on developing green businesses. While exciting, these opportunities will require new skills to be brought in or developed in-house.  

This presents a challenge to human resources leaders, but also the chance to refresh companies’ skillsets. So, where should HR leaders focus their attention?  

Climate change energy
The global market for green energy is set to exceed $1.1tn by 2027, while new economic models such as the sharing economy provide a wider perspective on developing green businesses.

CHRO checklist: four steps for embedding sustainability skills  

1. Prepare your leaders  

Getting your organization ready for sustainability starts with the board. Training should be both reactive and proactive; reactive because market conditions are changing fast and directors need to be able to get up to speed quickly to spot risks and opportunities, and proactive because they need to prepare the company for the future rather than pretend the future will be the status quo.  

An example of how not to go about this was provided by the “dieselgate” scandal at VW. Its homogeneous board, all raised in the traditional automotive industry, saw limited benefit in the widespread switch to e-mobility, with cars increasingly managed by their internal software. This inaction constituted a disastrous lack of response to the fundamental changes underway in the industry. VW has since been able to turn this situation around, which represents an impressive shift in both capability and culture.   

An increasing number of boards are becoming proactive on the issue, however, bringing in external expertise and engaging in specialist coaching. This might entail workshops to simulate managing a dissatisfied activist investor (and how to avoid getting to that point in the first place). In turn, this helps to ensure that the CEO and the board are on the same page as to how to address these issues.  

In addition, it’s important for boards to get the right mix of people and skills in place, ensuring strong diversity of views and experience. Boards and management teams benefit from greater diversity in gender, age, geography, and skillsets to allow them to see more clearly how they can future-proof their businesses. 

2. Identify the skills that you need – and where to find them 

Product innovation, for example, will have to consider new constraints around energy consumption, supply chain transparency, and end-of-life recycling, while brands will need to show more of a focus on issues such as traceability, welfare standards, and reduced carbon footprints to gain traction with new and existing customers. To deliver on all this, there will be a need for more radical thinking and breakthrough innovation, putting pressure on companies in ways they may not be used to.  

3. Change mindsets 

Companies already have many of the skills required to thrive in the new, more sustainable economy – but, sometimes, they’re hiding in plain sight. Take the manufacturing industry’s embrace of lean production over the past several decades; lean production incorporates a sharp focus on waste reduction and increased efficiency, which, in turn, is closely linked to sustainability. Rather than any radical shift in skillset, a change in mindset could tilt lean production to focus more on the circular economy, reducing and reusing materials. People who are great at lean will bring these skills to sustainability.  

Change has to start at the top, and the board and C-suite need to walk the walk, setting the tone for the rest of the company. Secondly, leaders need to train the whole company to deal with the relevant issues and understand the overall business strategy, so that everyone is driving the business forward together. To embed these issues into company strategy and the mindset of the company’s leaders, boards need to ensure that incentive schemes are set up to encourage greater sustainability rather than marginalizing it by an outmoded emphasis on short-term financial gain.  

4. Engage with government and the education system at all levels to ensure the right skills are available 

Governments need to ensure that education systems encompass all these new developments. There needs to be more of a focus on climate, clean energy, and the circular economy, so that the businesses of the future have access to the skills of the future. That has to extend across the system, from primary and secondary schools right through to universities, research institutions, and business schools. HR leaders can play a role here by reaching out and engaging with institutions to discuss the skills that the business world will need in the decades to come, actively helping to shape the wider education agenda to provide them.  

Authors

Knut Hanaaes - IMD Professor

Knut Haanaes

Lundin Chair Professor of Sustainability at IMD

Knut Haanaes is a former Dean of the Global Leadership Institute at the World Economic Forum. At IMD he teaches in many of the key programs including the MBA, EMBA, and other executive programs. He is Program Co-Director of the new Leading Sustainable Business Transformation program and the Driving Sustainability from the Boardroom program. His research interests are related to strategy, digital transformation, and sustainability.

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