André Hoffmann's five leadership lessons for sustainable prosperity....
André Hoffmann has a message for business leaders of today and tomorrow: taking nature seriously is part of running a successful company.
“Our founding fathers, the people who decided how to run businesses, made one big omission: they decided that nature was not part of the conversation because it is inexhaustible and free,” he told me in a wide-ranging discussion for our podcast. “Now we know that’s not the case. Nature has a cost, and there is a limit to it.”
This has been a long-held conviction for the Swiss businessman, philanthropist, and environmentalist, who is also vice chairman of pharmaceutical company Roche and co-chair of the World Economic Forum. He gained it decades ago while working with the World Wide Fund for Nature (WWF), of which his father had been a founding member. After years of raising funds to protect endangered rhinos in Africa, he realized that conservation alone could not resolve the problem while poaching remained so profitable.
He argued that conservation needs to work for people and with them. “We need to understand how we can manage the demands of our society on natural resources.” This realization led him to connect nature conservation with corporate resilience, sustainable business models, and the use of finite natural resources. “That was probably one of the important deciding moments,” he said.
Nature, he said, should be a boardroom responsibility. The problem is that boards too often lose sight of the longer-term impact – and hence sustainability – of their businesses by being more concerned about short-term profitability. Board members therefore need to see nature and planetary boundaries as part of the professional role of directors and managers.
“If we continue to manage businesses the way we do now, the status quo will bring us to a disaster,” he said. “Frankly, science is unequivocal. We know that. Not taking this into account is probably not doing our job properly. It’s not being professional.”
Hoffmann recognizes why this can be uncomfortable to hear. Leaders who have succeeded within an established system can struggle to accept the need for change. Awareness of environmental risks does not automatically translate into a willingness to reconsider the practices that made a company profitable.
You manage the company for the community and not just for the individual, not just for the shareholder.
How can this gap be closed? In Hoffmann’s mind, leaders need two important qualities to be able to answer this question – humility and courage. These are essential for managers to be able to question how things are done – even if they have worked in the past or created tremendous profits – and still have the courage to change them.
“Suddenly saying that from now on, we’re not going to bother so much about our shareholders, but we’re going to bother about stakeholders, the planet, nature, our system, society, our fellow citizens, and not just the owner is not easy to do,” he said. “It’s a situation which you have to appreciate every day.”
Sustainability has become less fashionable in corporate circles in recent years; both boards and managers have been more focused on dealing with the latest crisis, whether it’s a global pandemic, an energy crisis, or a breakdown in global supply chains. But at the same time, we’ve also seen a more sophisticated understanding of the issue and a growing recognition of the gravity and urgency of the problem.
“It’s important to refocus on this,” said Hoffmann. “You manage the company for the community and not just for the individual, not just for the shareholder.”
Hoffmann challenges business schools to place this broader understanding of management at the center of their teaching. He also worries that familiar terminology can obscure the underlying issues. Biodiversity may communicate less clearly than nature and life, while sustainability is too often equated with additional costs.
Instead, he said, “It means thinking in a way where you make the long term possible,” something he calls the “urgency of the long term.”
He supports accounting rules that help to highlight this long-term view. Financial statements offer an established language for assessing performance. Changing what companies measure can change which activities appear profitable and how leaders allocate resources. But Hoffmann wants decision makers to understand the consequences of business activity for social, human, and natural capital alongside financial results.
He says it’s not only about business reporting, but bringing more transparency into the system to take the right decisions. Hoffmann therefore sees considerable promise in sustainability reporting even as he acknowledges its initial burden.
But producing disclosures alone cannot deliver the change that is needed. The value of these disclosures ultimately depends on whether the knowledge they generate influences the choices made inside the company. “The world has never been so complex. It’s moving at high speed,” he said. “If our company is only run for finance, it’s not going to work.”
Corporate purpose offers a way to guide those choices. Hoffmann points to Roche “doing today what the patient needs next.” A clear and shared purpose gives employees and directors a reference point when competing demands pull the company in different directions. Financial rewards should follow from serving the patients well.
Hoffmann acknowledges how hard it is to reconcile investor expectations with a broader understanding of value.
Capital responds to the prospect of profit or to regulation, and he says that a better recognition of environmental and social costs can change the profitability calculation. Businesses that are able to demonstrate the commercial value of managing these risks can help reconcile short and long horizons.
“We need to move towards a model of sustainable prosperity,” he said, adding it should also be inclusive to succeed. “Ambition today cannot be just replicating the old model. It has to be going further.”
Consider natural resource constraints and environmental consequences when assessing strategy, risk, and investment. Treat them as part of the job of running a resilient business.
Combine humility about past assumptions with the courage to change them. Ask whether established incentives and measures of success still serve the company’s future.
Look beyond financial returns to the consequences for people, communities, and nature. Use sustainability information to inform management choices, rather than treating disclosure as the endpoint.
Be clear who the company serves and the value it exists to create. Use that purpose to guide decisions and explain how present investments support future success.
Examine how the business model contributes to environmental pressures. Seek profitable ways to reduce those pressures at their source, alongside conservation and philanthropic efforts.
Klaus Schwab discusses the urgent need for stakeholders to collaborate to combat the climate emergency, cope with technological change and address skills gaps in an interview with Jean-François Manzoni, President of IMD...
YouTubePascal Soriot says "climate change is the biggest threat to humanity” and discusses future-looking strategy with Alexion acquisition in exclusive interview on company’s turnaround....
YouTubeExplore first person business intelligence from top minds curated for a global executive audience
Share