About a decade ago, former IBM CEO Sam Palmisano wrote about the advent of “the globally integrated enterprise” in Foreign Affairs. He argued that such companies must be structurally, operationally, and culturally different from the multinational corporations of the past so they can respond to complex supply and demand conditions.
In 2015, these conditions are increasingly being shaped by megatrends such as climate change, resource scarcity, and population growth. As we prepare for the BSR Conference 2015, which focuses on the theme of resilience, it’s a good time to revisit Palmisano’s piece—and coin a new term, the “globally resilient enterprise.”
Applying Palmisano’s formula using the lens of sustainability, here’s my take on how the globally resilient enterprise can embrace these three attributes.
1. Structural Resilience
Integrating sustainability into the business is essential for companies to build resilience to global megatrends and to capture the upside opportunities associated with them. But effective integration can happen only if the company has the right structure for sustainability in place.
This starts with the sustainability team. To foster more integrated thinking, globally resilient enterprises dispatch sustainability experts across different functions, business units, and geographies. These experts still champion the overarching sustainability strategy, and they also act as translators, describing the business risks and opportunities associated with sustainability performance in language that makes sense to teams in finance or procurement. The sustainability champions then re-translate the responses from their colleagues upward and outward.
The globally resilient enterprise also structures its engagement with external stakeholders differently, no longer relying solely on formal sessions with institutional stakeholders in the capital cities of developed economies. In an increasingly disintegrated world, strategic insights on sustainability trends and expectations come from real-time engagement with diverse stakeholder networks in high-growth markets. To gather these insights, the globally resilient enterprise sets up local stakeholder panels as part of its global materiality exercise, trains local teams to be sensitive to “soft signals” from atypical stakeholders, and empowers local teams to take action to improve local sustainability performance.
2. Operational Resilience
Companies are facing increasing risks from negative sustainability impacts across their value chains. Climate change, for instance, is making physical and input risks more acute, affecting the production and distribution hubs of companies across different industry sectors.
The globally resilient enterprise undertakes holistic sustainability risk assessments across its operations in order to protect its assets—property, plants, equipment, and people—and future-proof its business against negative impacts like climate change.
Such assessments require a full understanding of priority risks and the trade-offs between them. When considering investments in new markets, for example, the globally resilient enterprise assesses the likelihood and scale of climate risk, along with its current capacity to mitigate or adapt to the defined risk (and the associated costs). Any resulting investments account for short-term business considerations (such as market size, proximity to suppliers, and tax incentives) as well as longer-term considerations associated with those opportunities (such as how changing weather patterns might affect the transportation infrastructure necessary for distribution and logistics).
3. Cultural Resilience
Jim Collins has written about the importance of strong corporate values and identity to ensure that companies are “built to last”—that they outperform the market over the long term. Globally resilient enterprises do this by fostering a corporate culture that is consistent from the top down, middle out, and bottom up. And that means embracing transparency, accountability, and sustainability.
Globally resilient enterprises accept that transparency is now a fundamental part of the operating environment, and they bake it into their culture, policies, processes, and programs.
These companies also understand that accountability is critical, and they share responsibility for sustainability performance across functions, business units, and geographies. Some companies extend accountability into salary and bonus schemes to take into account the enterprise’s sustainability outcomes and impacts.
Finally, resilient corporate cultures embrace sustainability. Globally resilient enterprises have worked out how to give all employees—wherever they may be sitting in the organization—enough room to understand, interpret, and internalize the different sustainability risks and opportunities they see on a daily basis.
We will be exploring the attributes of the globally resilient enterprise in a special track of sessions at the BSR Conference 2015, November 3-5 in San Francisco. And we look forward to hearing your ideas: What makes a resilient company?