In the 1700s, the Homo economicus, immortalized in Adam Smith’s “The Wealth of Nations” and exalted by John Stuart Mill, created a platform for economists to develop mathematical models of utility maximization and market equilibrium that relied on the assumptions of rational, self-interested individuals.

Laura Vargas is a Founder of Leading with Purpose and a Boardman Member

Since at least Thorstein Veblen’s “The Theory of the Leisure Class” (1899), the notion of the rational man, central to mainstream economics, has been strongly challenged. In addition, the hypothesis that business is a zero-sum game and Milton Freedman’s deeply ingrained “shareholder-first” approach has also been challenged for several decades.

To move beyond the 1700s doctrine, our imperative as leaders must be to lead beyond shareholder-centricity and “without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development 1987).

Navigating the Slow Shift in Leadership

It is clear that while we have improved the efficiency and efficacy of capital investments, we remain sluggish in protecting human integrity in the workplace, and burnout is more commonplace than ever in our history. Despite improvements in physical working conditions, mental working conditions have not significantly improved.

Although workplace safety has improved, psychological safety still lags. In summary, how we have been leading globally (my opinion: focused on building shareholder value nearly exclusively) has brought us to an unsustainable present, to a planet in crisis, and a new way of leading is required to take us into a viable future.

Despite progress in Equity, Diversity, Inclusion, and Respect (EDIR or DIRE), Sustainable Development Goals (SDG’s), environmental, social, and corporate governance (ESG), Principles for Responsible Management Education (PRME), Corporate social responsibility (CSR), Corporate Sustainability (CS), circular economy, sustainable innovation, social entrepreneurship, sustainable investing, science-based targets (SBTs), net positive, carbon-free, green supply chain management (GSCM), sustainable supply chain management (SSCM), green transformational leadership (GTL), green human resource management (GHRM) practices, employees’ green behavior (EGB), sustainability assessment frameworks, and conscious capitalism, leadership practices seem sluggish in leaving the industrial era behind.

John Elkington wrote in his well-read article expressing a “product” recall for his triple-bottom-line concept:

Indeed, none of these sustainability frameworks will be enough, as long as they lack the suitable pace and scale — the necessary radical intent — needed to stop us all overshooting our planetary boundaries (John Elkington 2018).

Sustainable Leadership: Bridging Boards and Executive Teams for Long-Term Success

Already in 2005, Keith Grint wrote that leadership is “the authority form most suited for the collective addressing of Wicked Problems, while Management is more suited to the deployment of tried and tested processes to resolve Tame Problems.”

Grand Challenges such as climate change, water scarcity, poverty alleviation, and the safeguarding of human rights are indeed Wicked Problems, and leadership is required to address them. The kind of leadership required is a purpose-driven leadership practice that goes beyond shareholder centricity and embraces the accountability that cannot be delegated. This is Sustainable Leadership.

Sustainable Leadership can be part of the “necessary radical intent,” and it will require a thriving partnership between Boards of Directors and Executive Leadership Teams to lead through a long-term orientation in thinking and decision-making beyond creating shareholder value and to engage with a regenerative mindset.

As Boards of Directors and Executive Leadership Teams become even more intentional in embracing the accountability that cannot be delegated, we will need to polish our long-term discipline and engage with a regenerative mindset to go beyond the basics of creating shareholder value and lead in a way that does not compromise “the ability of future generations to meet their own needs.”

How can you advance Sustainable Leadership in your organization?

Author

Laura Vargas is from Costa Rica, and for the last 30 years of her professional life, she has worked empowering leaders to grow, shine, and lead with purpose, creating more inspiring organizations and delivering amazing results sustainably. She is a Leadership Developer, Executive Coach, Management Consultant, Doctoral Researcher at the University of Turku (where she is currently working on a PhD in the subject of sustainable leadership), and the founder of www.leadingwithpurpose.fi. Laura completed Boardman’s “Corporate Governance and Board Work in Finland” training in 2021, is currently participating with the first cohort of Boardman’s Board Buddy Program, and looks forward to contributing to Boards of Directors in Finland.

Read about Boardman’s English-language membership