blog_header-Apr-25-2022-04-37-32-26-PM

The differences seen in sustainable management between Europe and the rest of the world are surprising and inspiring.

Prior to the unfortunate geopolitical tension we’re now experiencing as a result of the Russian invasion of Ukraine, I had the privilege of traveling to Europe before what promised to be one of their costliest winters regarding energy matters. Yet this upsetting reality served as a reminder of the biggest impact I received from the trip–the long term vision that the “Old World” is currently taking on, defined by an almost daily bet on sustainability.

Regardless of the apparent delays in certain aspects, the presence of the concept of sustainability is remarkable. Electric vehicles, solar panels, and windmills form part of everyday life and are no longer the latest news. So much so that in most of the European capitals I visited, not only was public transportation electric, but also that of the police. Regardless of whether or not this picture is representative of our reality, the “Old World’s” progress regarding sustainability is undeniable compared to other parts of the world. The reflection of this ambitious aspiration can be seen through the European Union’s vision for achieving a climate neutral economy by 2050 (the European Green Deal). The European Climate Law, approved in April 2021, is one of the largest indicators of the economic block’s commitment for this ambition to transform into reality–one that is unfortunately being rushed due to the most painful and useless motives: the effects of war.

 

These observations lead me to ask why Europe and most of their allies have developed a sustainable mindset so different from that of Latin America and Asia. Part of the answer may reside in the countries’ past, having served as a geographic block during some of history’s most dramatic moments, reminding them of the ephemerality of the world we live in. 

 

Another possible explanation could be the sense of community built from a shared culture of values across centuries and that may–in the best case scenario–make way for leadership involving a long term vision for a plan of action. In the frame of business, this leadership is supported by a cultural matrix that forms part of the community in which it performs, and is held accountable for the impact it can create. Though this vision cannot yet be applied to every corporate scope, I was impressed by the progress and expansion of its logic, and its visibility in daily routines.

 

Sustainability cannot exist without leadership  

It’s important to keep in mind that imagining any organization or society from a sustainable standpoint implies centering it on the opportunity of its future, rather than its cost. This vision requires long term leadership that is up to the task and refuses to give in to the short term benefits of the comparison of cost and benefit–one that has the capacity of including its stakeholders’ needs. History has proven that leaders with long term visions have transformed their country’s realities. The best examples, in my opinion, are Angela Merkel, Mikhail Gorbachov, and Adolfo Suarez. This can also be applied to executives on an organizational level who have set their focus on doing what’s right, rather than what’s convenient–regardless of what they come across along the way. 

 

Though all that glitters may not be gold, Europe’s capacity to instill sustainability in the center of their model of business is inspiring. Surprisingly, the majority of these businesses are not technology-based, but rather traditional companies–many of them established half a century ago, led by their founder’s families or shareholders. Royal family Asua’s Compañía Vinícola del Norte de España (CVNE), founded in 1875 in the town of Haro, La Rioja, is an example of this, setting themselves as the first of their sector to improve their environmental footprint in 2013. They took the first step, measuring their CO2 emissions in the production of their star product, Cune Crianza, resulting in the Ecofriendly project. Focusing on their packaging and preparation, glass production, and barrel transport, Ecofriendly established the first goal in order to improve their environmental impact. They were also able to tackle their water footprint by measuring the volume of sweetwater used in their supply chain while producing their wine. They concluded that they were able to produce the necessary amount of grapes for their product by using half of the national water average, thanks to the efficient management of agricultural practices. An even more renowned example is IKEA. Founded in 1943 by Swedish Ingvar Kamprad (1926-2018), IKEA revolutionized interior design in the 50’s. Despite the company being a multinational corporation, their founder’s three sons, Peter, Jonas, and Mathias Kamprad, are members of the directive board and prioritize the impact their company has, present today in 60 countries and four continents. One of their latest announcements was their shift towards solar energy–planning to install five solar parks in Spain through a €100 million inversion and to expand their current parks in Germany for another €240 million in Germany. This is the most recent project in the series of initiatives set for a value of 6.5 billion euros, driven by their mission to reduce their ecological footprint in order to “transform into an 100% circular business by 2030.” The company aspires to be an energetically independent business and for 100% of its energy to be renewable, generating more energy than it consumes.

Among the best examples also lies the company Hella Sonnen- und Wasserschutztechnik GmbH, which I stumbled across by chance during my trip in Austria. Led by their founder and employing 1,300 people, the family business produces aluminum blinds in their bucolic office of Abfaltersbach, in the heart of East Tyrol. Today, they export their product to 63 different countries, holding 34 subsidiaries. Ranking among the top five in their division internationally, they have transformed sustainability into a vertical axis that is taken into account in each of their business models. As a result, rather than having it be the main goal of their plan, sustainability is integrated with a culture they include in their model of business, that keeps in mind the impact they have on the community they form a part of since their foundation in 1959.

 

The message these businesses leave behind is that industrial development at its highest level of global excellence cannot only coexist but must work with the community to which it belongs and with the goals we must reach as soon as possible to make our contribution for a better world. 

It’s not a matter of size 

Volkswagen, founded in 1937, whose largest shareholder is the Piech-Porsche family, surprised the global market in June when they announced that they would only be selling electric models by 2035 for the European market and ultimately for the US, Asia, and Latin America. The main promoter of this radical change is Austrian CEO Herbert Diess, who has been leading the company since 2018. Diess took over the company during its crisis following the “Diesel-Gate” scandal that set off in 2015. He was the third CEO in five years in the company that now employs 60,000 people. Though fully aware of the risk that transforming such a bureaucratic and historic institution implied, he took advantage of the moment to lead the then largest automotive company of the world towards a transformation that meant 100% electric mobility. During the journey, he renovated the dome damaged by the Diesel-Gate, urged a strict plan of recovery and reduction costs, and initiated a 360º digitalization plan with the goal to lower the administration’s surplus. 

 

“We have no other choice, nor can we hide and wait for the storm to pass. If we aim for a future for tomorrow, and to compete in future electronic and autonomous mobility, we need to become more agile, light, and fast”, he stated in 2021 before a plenary representative session filled with 20,000 workers. He took advantage of this opportunity to take responsibility for the 7,000 work cuts that would result from the transformation and personally committed to carry it  out as responsibly as possible. The statement was received immediately. By mid 2019, the union, supported by the most resistant sectors, including part of the politics of the Land that houses the VW headquarters, promoted an operation to renew Diess's contract. Diess’ survival in the company was often questioned during this transition. However, the control directory renewed his mandate unequivocally until 2025. Few weeks later, the world identified VW as the largest competitor for Tesla, Elon Musk’s company. Diess’ reference to the need for agility and new paths was further explained only a few weeks ago, when he met personally with Elon Musk himself in a VW directive meeting

 

“It’s the economy, stupid”

The need for leaders who promote this organizational change for the long run can be seen through the examples of Diess, IKEA, or hidden champions such as Spanish CVNE and German Hella. Faced with the cost of a large personal risk, they’ve chosen to do what’s right and not what’s convenient—often regardless of political requirements. The reason is simple: they see these decisions as the only way for upcoming generations to take over the company in the future.

 

Though it may be undeniable that Europe leads this transformation due to their personal history that enables them to incite a sustainable mentality, the steps they take across the region prove the process’ feasibility. Their motivation is that of a long term, sustainable culture and mentality, and their main backbone are the consumers—impulsed by the raw reality of a pandemic, the current war, and the unstoppable consequences of climate change. These consumers are not only willing to pay more in order to do things correctly—they demand it. This leads Europe’s example to show us that businesses that don’t carry out sustainability through their model of business in their DNA will likely do so due to pressure from their value chain—or, at most, pressure from their clients, who are all of us. Otherwise, it will disappear.

Note original source here.

 

By Alberto Bethke, Associate Founder of OLIVIA