04.04.2024

How cultural change can make the sustainable transformation a success

The sustainable transformation in companies is propelled by cultural change, with a sustainable corporate culture forming the foundation for long-term success.

Culture eats strategy for breakfast. This memorable quote from management consultant Peter Drucker is decades old now. Almost everyone has heard it at some point. And yet, my impression as an organizational psychologist is that it is still not very well understood within companies today and very seldom guides their actions. Organizational development and change management are typically the first places where cuts are made when things get tight in a project. And that is in spite of the fact that investments in these areas often carry a tremendous return if the right methods are used.[1][2]

If we add the idea of sustainability to organizational culture, that’s already two terms that are so broad and fuzzy that they are open to a wide range of interpretations. Everyone seems to have their own idea of what they mean. I frequently encounter misunderstandings and uncertainty relating to both topics in my work, which is why I’m writing this text to clear things up. There are two reasons for this. First, both subjects are absolutely crucial to the evolution and further development of our companies. And second, they are also inextricably linked. True sustainability emerges from a certain culture. [4][5] And a culture that is viable for the future requires sustainability.

Definition of a culture of sustainability:

A culture in which organizational members hold shared assumptions and beliefs about the importance of balancing economic efficiency, social equity, and environmental accountability. ^[3]

Corporate culture enables sustainability

Almost every company is currently facing the challenge of how to become sustainable. A comprehensive transformation of our economy is necessary if we are to ensure that our planet and our society remain livable. But getting there often means dealing with a whole range of complex issues. The tension between striving for growth, increased efficiency, and ecological and social responsibility seems almost impossible to reconcile. And so, many companies focus on the bare essentials: preparing for future sustainability reporting requirements. And most of them limit themselves to increasing process efficiency and introducing IT tools, which they hope will solve all their problems. This is pragmatic, and from a financial standpoint it seems to be the most effective move. But when it comes to the sustainable transformation, this strategy comes up very short. Achieving fundamental and long-term improvements in ESG performance requires a holistic approach. But what might this kind of approach look like?

Cultural change is the magic word here. Once sustainability is firmly embedded in the organization’s values, basic assumptions, mindset, and modes of action, then the transformation can start to build momentum. Which doesn’t mean it will be concluded in a short period and without any issues. Cultural change is complex by nature, and it is impossible to make detailed predictions. This uncertainty often causes companies to put their money toward moderate but still goal-oriented change management rather than process-oriented organizational development.

And yet, only organizational development enables the fundamental change needed for a successful sustainable transformation. And that is definitely cost-effective. After all, C-level micromanagement becomes obsolete once middle managers and employees are given the knowledge and responsibility they need to connect sustainability with the company’s business interests. This can be the foundation of a sustainable business model that remains solid in the long term. There is no one-size-fits-all solution for companies to reach this point.

Let’s take a look at the organizational development toolbox. Some of the methods involved are even older than Drucker’s statement, and they might be just as poorly understood. When applied properly, however, our methods make it possible for any company – established or start-up, large or small – to design its own sustainable culture.

How companies develop a culture of sustainability

The sustainable transformation is highly complex and requires the integration of many departments and corporate levels. This means central management and decisions made exclusively by the top management at large companies are not only inefficient, but actually stand in the way of long-term success. Decentralized expertise and processes are needed instead.

As they go about these changes, companies should build on the strengths of their established culture. The majority of German employees see sustainability as an important matter, with 40 percent reporting that they would likely resign from a job if their employer were to violate sustainability criteria.[6] If companies employ the right methods here, they can achieve two aims at once, not only putting the entire company on a sustainable course with only modest outlay of time, effort, and funding, but also significantly enhancing employees’ psychological empowerment.

There are four aspects to psychological empowerment in this sense. It involves the experience of competence, meaning, impact, and self-determination at work. Taken together, these aspects result in a particular feeling toward the work role, which causes employees to become more proactive. ^[7]

Campana & Schott has been advising and supporting companies through this process of change for years. I’d like to briefly introduce two of the methods we use, which I have seen succeed in establishing a sustainable corporate culture across many projects.

1. Sustainable Purpose Workshop

This workshop kicks off a company’s sustainable transformation. It brings managers and employees together to forge a shared understanding of sustainability and what it means to their organization. Alongside an analysis of the strengths of the company’s existing culture with psychological support, a vision of where the company wants to go and how to get there is worked out. Crafting this understanding as a group across different levels of the hierarchy is incredibly powerful, and it is the cornerstone of successful change.

2. Sustainability Community

We rely on our longstanding concept of community to get a large portion of the workforce engaged with sustainability and significantly boost their innovation potential. And we do this without costly, time-consuming managerial supervision and input. The community is typically self-organized, offering employees ways to gain knowledge and share it within the organization, develop creative ideas, and work with others to improve processes. Across different departments, silos are broken down and knowledgeable people are brought to the table to identify new perspectives and solutions for sustainability-related issues. The culture of participation in the community really works wonders, especially at older, established companies.

Both methods can significantly enhance employees’ psychological empowerment. And that, in turn, has measurable positive effects on other factors including employee satisfaction, innovation behavior, and mental health.[8][9][10] These benefits, for their part, contribute directly to a company’s economic efficiency. This makes investing in the corporate culture, previously an abstract proposition, a clear business case. A sustainable corporate culture is a necessary condition of a successful, cost-effective transformation. It will not resolve the challenges companies are facing today from one day to the next. But it does enable true change that addresses issues not in isolation, but as part of a big picture. This is the only way companies can ensure that they remain competitive in the long term.

Are you are interested in the two methods discussed above or in organizational development in general?

We can work together to find measures tailored to your company that will make your sustainable transformation a success.

You are welcome to contact me

Author

Johannes Kraus

Senior Consultant

Sources

[1] Badura, B. (2017). Arbeit und Gesundheit im 21. Jahrhundert. Springer Berlin.

[2] Reino, A., Rõigas, K., & Müürsepp, M. (2020). Connections between organisational culture and financial performance in Estonian service and production companies. Baltic Journal of Management, 15(3), 375-393.

[3] Bertels, S., Papania, L., & Papania, D. (2010). Embedding sustainability in organizational culture. A systematic review of the body of knowledge. London, Canada: Network for Business Sustainability, 25.

[4] Laloux, F. (2014). Reinventing organizations (Vol. 58). Brussels: Nelson Parker.

[5] Baumgartner, R. J. (2009). Organizational culture and leadership: Preconditions for the development of a sustainable corporation. Sustainable development, 17(2), 102-113.

[6] https://www.zdf.de/nachrichten/wirtschaft/fachkraeftemangel-klimawandel-kuendigung-umweltschutz-100.html

[7] Spreitzer, G. M. (1995). Psychological empowerment in the workplace: Dimensions, measurement, and validation. Academy of management Journal, 38(5), 1442-1465.

[8] Schermuly, C. C., Schermuly, R. A., & Meyer, B. (2011). Effects of vice‐principals' psychological empowerment on job satisfaction and burnout. International Journal of educational management, 25(3), 252-264.

[9] Schermuly, C. C., Meyer, B., & Dämmer, L. (2013). Leader-member exchange and innovative behavior. Journal of Personnel Psychology.

[10] Schermuly, C. C., & Meyer, B. (2016). Good relationships at work: The effects of Leader–Member Exchange and Team–Member Exchange on psychological empowerment, emotional exhaustion, and depression. Journal of Organizational Behavior, 37(5), 673-691.