In this roundup, we review recent Kellogg research on sustainability and green business practices. We also discuss the mindset experienced leaders will need to navigate a transforming planet (and economy).
1. Climate is not a “there, later” problem. US manufacturers are already feeling the impact.
Based on US Census data, Kellogg’s Jacopo Ponticelli and writers Qiping Xu and Stefano Zevmeboth of the University of Illinois Urbana Champaign, have studied manufacturing plants for four decades. They found that climate change is, in fact, already affecting the US manufacturing industry—and that small businesses bear the brunt of the costs of a warming climate. Over time, this disproportionate burden has led to concentration in the manufacturing industry, as workers from struggling smaller firms have been absorbed by larger ones.
“It’s important to know that even in developed economies like the US, the effects of climate change are present and significant,” says Ponticelli. “We have to understand that our economy is not immune to these impacts.”
2. Climate risk may be lurking in your supply chain.
Kellogg’s Aaron Yoon has long studied the relationship between a company’s environmental, social and governance performance and its financial performance. More recently, it has looked for economic impacts further down the supply chain. Specifically, it investigated whether the social responsibility of a company’s suppliers is related to the financial well-being of the company itself.
Yoon collaborated with Xuanpu Lin and Guoman She of the University of Hong Kong and Haoran Zhu of Southern University of Science and Technology to analyze news about negative ESG incidents—such as labor violations or disclosures of environmental harm—in the supply chains of publicly traded companies. They found a significant relationship between the level of ESG risk in a company’s supply chain and its future stock returns: negative ESG news reduced stock prices in the following year.
Investors (and companies looking to impress them) should take note. “Our findings highlight the importance of making supply chain-related information available to investors,” says Yoon. As a long-term value-creator, information has not been considered, he adds, and could boost portfolio returns.
3. Climate change makes for some strange bedfellows.
Companies don’t exactly welcome activism. Who wants to be boycotted or picketed? But these same activists can also be allies that help companies achieve their strategic goals.
This is the finding from a Kellogg’s survey Brayden King who with me Ion Bogdan Base of the University of Iowa, found that embattled energy companies and the activists who target them can create unlikely partnerships that are key to growing the market for green energy technologies.
Energy companies that activists labeled as the dirtiest polluters were the most likely to respond to that stigma by adopting green energy technologies, the researchers found. The companies then received the benefit of free promotion of their green programs by local environmental NGOs.
“When companies choose to partner with activists, it creates a viable path for marketing opportunities that you wouldn’t otherwise have,” says King.
4. Change is hard. So fight climate inaction with success stories.
New policies will be needed to address some of the biggest structural barriers to sustainability. But getting the public to buy into these policies? This can be a slog.
Thus, a trio of Kellogg researchers that included Prof Adam Waitz and his PhD students Matejas Mackin and Trevor Spelman decided to see if giving people some policy success stories from around the world might help.
“We hypothesized that if we could get people to think outside of their current here and now, they would be more receptive to different policies to promote sustainability,” says Waytz.
In four studies, researchers found that informing US residents about the successful implementation of sustainability policies abroad, such as policies that lead to new wind infrastructure and reduced car use, actually increased support for similar legislation at home. It also increased people’s intentions to change their behavior to align with the policies.
“We see this intervention as a potential tool that could collectively motivate citizens to take action to change their personal behaviors and, importantly, support these policies that challenge the status quo,” says Spelman.
5. Find (or train) leaders to have a “climate-capable mindset.”
Forget “growth mindsets” and “creative mindsets”. What future leaders will really need is a ‘climate-capable mindset’, says Kellogg’s Meghan Busse.
What does this mindset entail? Leaders will need not only to clearly perceive our new reality but also to mobilize a response that spans every function of their organization. Eventually, he says, climate-savvy leaders will stop understating their climate investments and instead have a long-term, big-picture view.
Many industries are already thinking in this direction. Pharmaceutical companies routinely make long-term decisions, fully aware that some investments will be abandoned and others expanded. Venture capitalists bet on startups, expecting many to fail, but few to pan out. Oil and gas companies are drilling exploratory wells in new fields. It’s time to start thinking about climate investing the same way.
“We’re going to need to build and buy and invent and install so many things as we make this transformation that there will be great opportunities for anyone who can provide parts of this solution,” says Busse.
