Steve Howard on Transformational change

Monday, May 08, 2017

18:00 - 21:00

Steve Howard joined IKEA as Chief Sustainability Officer in 2011, since then IKEA has undergone one of the fastest sustainability transformations of recent years. His announcement that he will leave IKEA in June 2017 created a moment to digest the process of transformational change, and we were delighted to give Steve our stage on the 8th May.

Steve’s story is remarkable. In 2003, he founded the Climate Group, a 100-person team that helped shape global climate policy. He joined IKEA in January 2011, turning a solid foundation for sustainability into no. 3 globally according to the latest Globescan survey. Investing €1.5bn in renewable energy and increasing sustainable product revenues to €1.8bn are just some of the standout achievements. 

Steve’s mantra is “going all in”. He believes in risking failure whilst being obsessive about success, and consigning incrementalism to the history books. It’s a story of being ruthlessly committed to a mission whilst understanding of what matters to stakeholders, and building a world-class team. And somehow finding time to co-found We Mean Business along the way.

In his last public engagement for IKEA, Steve gave a TED-style keynote on what has - and hasn’t - worked during his time at IKEA, followed by an interview with Axel Threlfall. We discussed why;

  • The expectation for change must be set in the interview process
  • Total change can be easier than incremental change
  • 100% renewable energy has a robust business case
  • The focus must be on the top line, as well at the bottom line
  • Sustainability needs to be easy, affordable and attractive
  • Change is a team sport.
Speakers

Axel Threlfall Reuters

See bio

Steve Howard IKEA Group

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Round Tables

The art of transformation

Drawing on the experiences of Steve Howard at IKEA, what are the top 5 things an individual or team should consider to transform an organisation from a social or environmental perspective? From winning over key people to setting targets to the merits of business cases v’s values cases. Which people and companies are getting this right?

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TABLE 1A

TOP 5 DRIVERS OF TRANSFORMATION
- Being commercial – if you have no targets then going to 100% is a massive challenge, so if I can link sustainability ambition with the customers’ needs then that will help tremendously. There should be a strategic fit to the Organisational DNA.
- There is also a case for building the foundations first. We have a target of 100% renewable and it is not a big impact as we are an advertising agency, but it is who we are and is a good way in to other meaningful conversations.
- What is helpful is how you monetise these things and explain the business case.
- Speaking the language of your business. We need to translate the strategy to what resonates with all levels of employees.
- Internal competition can be healthy with big ambitious targets. Internal senior champions help accelerate the change and uptake by the business, and galvanise the business around the ambition.
- Critical masses or big disaster events (i.e. new horizon) can spark transformational movement as leadership realises the need to change.
- Investigating which parts of the business are considering the future, can be useful to identify allies in bringing innovation about or de-risking.
- Competitors taking on a big, ambitious challenge and setting an example for the industry can lead the whole sector ahead and make change mainstream.
- Being able to scale up and bringing your value chain partners on the journey is key to transformation.
- Humility is important.


OBSTACLES/CHALLENGES
- Setting bold goals and being very ambitious. How do you manage the conversations internally, when people want to see an achievable plan?
- Lack of buy-in/appetite in the C-suite can be a big hurdle. (A C-suite head map can be useful). Also, shared vision helps get other departments on board.
- Customers need to know more about what we do.

TABLE 1B
The group began with a discussion about Steve’s successes, identifying where buy-in was coming from and where he created allies across the business and externally.
It was clear that Steve’s initial success was built through his ability to capitalise on and drive forward an agenda at leadership level that already existed to some degree. The group agreed that building on existing momentum was a sure way to create initial buy-in for sustainability.

Guests then discussed how to identify business case for sustainability; a few key observations were;
- Enabling and empowering the sharing of information across stakeholders creates engagement – we can’t do it alone!
- Consumer demand isn’t the driver, so how can we build sustainability into the core brand if it isn’t already?
- Identify what’s in it for them to create shared value across teams

Next, the group discussed where buy-in is needed for transformational change;
- Most of the team believed c-suite were needed to drive transformational change across the organisation, although a couple of guests disagreed, identifying other stakeholders possessing the necessary gravitas to drive change
- In many cases, the sustainability agenda is driven by shareholder interest – how can we influence them?
Interestingly, a hot discussion took place around whether if there is no buy-in for sustainability at board level, should we be withdrawing our energy from that organisation?
The group’s top considerations for transformational change were:
- Context; determining whether it’s worth trying
- Vision/boldness
- Senior buy-in
- Measurable impact (KPIs)
- Internal engagement and an emotional connection (Hearts and Minds)
- External collaboration within and across sectors
- Communication: how and why? – Having a good story to tell
- Openness and ability to adapt!
The group’s top transformational organisations were:
- IKEA
- Unilever
- Tesla
- Interface
- Google
- M&S
- Patagonia
- Nike
The ‘one to watch’ was What3Words…

Activating customers

As more companies look to engage their customers in their core purpose, we look at IKEAs LiveLAGOM project and asking how these types of initiatives can be taken to scale. How can an organisation go beyond influencing better purchasing to turning employees and customers into a community working together? How does one make the business case?

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TABLE 2A

READINESS
Much of the sustainability work that companies do is largely not openly visible and communicated to customers. Even when the core purpose is defined companies are still grappling with ‘the how’ of directly engaging with them. In retail, for example, reaching customers and creating campaigns can be done quickly.

Solution
For long-lasting impact, however the key is to bring meaningful, local initiatives to customers, make these attractive so that customer are engaged and excited, and most importantly communicating messages that resonate with them.

Example
Ikea with the LiveLAGOM project has forged a very close collaboration with an unusual partner. Using their customer voice for communicating impactful messages
and adopting a light touch approach to engagement and involvement has resulted into authentic shifts in customers behaviour. This strategy has also sparked peers-to-peer relations via Facebook to inspire each other, share experiences and find solutions to common issues.

BUSINESS IN GOVERNMENT SHOES
As government are mostly disengaged on educating the population on issues of waste, sustainable behaviours of consumption and better management of energy and resources, companies have fell into the shoes of social responsibility and sensed an opportunity to connect more deeply with their customers through educational project and initiatives.
When crossing social lines, a company needs to be mindful of the risk of being labeled as authoritarian or paternalistic.

PERMISSION
Asking for customer’s permission to influence their choices and change their behaviour is the vital ingredient for shifting that perception. Furthermore, adopting system thinking for systemic change requires acting locally with local stakeholders and key influences to address local issues. This approach adds authenticity to the company’s intentions. The type of conversations and behavioural changes are more tangible, more meaningful, hence more impactful when operating at local level that when one tries to do everything at national level. Acting locally establishes long-lasting engagement and a relationship of trust with customers.

BUSINESS CASE
The sticky issue for companies remains making the business case when a business is large. There are variances determined by the nature of each business unit which affects what one can or cannot measure and how. The drive and passion of people within it also determines the willingness to identify, qualify and measure key indicators.

In publishing, for example, how do you link a sales driven performance to quantify initiatives of social and environmental nature? If you sell LED lights demonstrating impact through data is more straightforward.

Example
Ikea has adopted the concept ‘Trust in meaningful brand’ and has set two parameters ‘bigger’ and ‘better’ to identify the customer sweet spot. It then links and drives the business case from this spot and assesses its performance against it.

TABLE 2B

Climate leadership

How do we define corporate climate leadership post-Paris? If setting a science based target is the new norm, then is the next step to commit to net zero by 2050? What are the implications for heavy emitters? From a policy perspective, does leadership mean business going beyond managing its footprint to using its 'handprint', and if so, to what degree is business ready and willing to do so?

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TABLE 3

Obstacles
• Discussion around whether science-based targets are used as a minimum level to work upwards from in companies gave mixed responses. Some participants said that they should be, but aren’t always, for corporate businesses.
• Companies are driven by their stakeholders and stock market value, or by numbers rather than carbon and ethics, though these should drive actions.
• Public commitments to large targets can be challenging as companies may have difficulties if they do not reach their target and audiences may pick up on things that they are not doing.
• Companies may talk about opportunities but can be poor at producing evidence about how they will achieve them.
• Some companies are happy to set targets but they can be superficial and won’t necessarily do anything until a few years beforehand.

Red flags (warnings)
• Overall, science-based targets are not yet the norm.
• What are the consequences of not achieving the legal UK target of 80% greenhouse gas emissions by 2050? If there is no consequence, what does this say to businesses?
• There are problems with short-term leadership roles which do not align with long-term climate targets.
• There is a big challenge for fossil fuel companies and how they are able to reposition themselves with different, low carbon energies, and it is difficult to know what their future will look like. They must have a meaningful transition.

Solutions
• Science-based targets can be useful if they are fully explained and offer tangible figures for companies.
• Need to produce a strong business case for action on climate.
• Need to create clear plans and big change to achieve goals. Companies need to be bold. Agreement with Steve Howard that being bold and ambitious is the right path to take as big targets can be more effective and push companies to achieve.
• The more companies that demonstrate that action can be taken on climate change, the more will follow, though this may also be an obstacle if few take action.
• It is important to say that action on climate change is the right thing to do.
• If a CEO realises the benefits of acting on climate change, this can achieve change quickly.
• There is a need for businesses to share their achievements, be brave, transparent and share stories, both negative (so that others can learn from them) and positive.

Collaborative transformation?

An African proverb says if you want to go fast, go alone, if you want to go far, go together. What are the merits of a company showing great independent leadership versus one that works with other stakeholders to drive more systemic, sustainable change? Who are the critical actors in the collaborative approach, and does the table have a favoured solution?

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TABLE 4

What are the key principles of collaboration?
• In any collaboration there is always a shared problem and a value proposition.
• Collaboration is very effective in situations where a business lacks expertise.
• The case for collaboration must align well with strategic aims.

How can we identify who to form partnerships with?
• Think creatively and look to form unusual collaborations and partnerships with people outside the standard scope of our work.
• Ensure the partnership is tied to the company’s strategic aims and have a tangible connection to the brand.
• Consider life cycle assessments and where the biggest impact is.
• Widen your networks. Look for convenors, eg NGOs who bring organisations together from different sectors to see where there may be opportunities for collaboration.

What should the messaging and marketing look like in order to drive transformational change?
• Use emotive issues that your customers (eg millennials) care about and finding a story to tell for the brand.
• Authenticity is key – change must be credible to stakeholders.
• Harness the power of stories and be eye-catching. Celebrity endorsement can help.
• There is also a place for sustainability by stealth. Consumers don’t always need be aware.
• Bigger campaigns can be an effective way of driving change.

How can we drive transformation internally?
• Connect leaders with people who they wouldn’t normally engage with, through ideation sessions, seeking innovative ideas and giving permission to fail.
• Seek other people in the organisation who have similar beliefs. Gather a group of ‘creative disruptors’ and ‘intrapreneurs’.
• Create new platforms (such as a sustainability Facebook group) for all interested employees. Encourage people to communicate what they are passionate about.

Who are the critical actors and which ones are most important?
• Take a system-wide view of stakeholders – colleagues/NGOs/industry/government.
• Target stakeholders depend on the change you want to drive.
• Change can be transformative for individuals even if not on a big scale.
• Sometimes companies have more power than the government to influence change.

How can we collaborate on an intra-industry level?
• Create a non-competitive space
• Use the SDGs as a shared agenda to unite people and businesses.

Are there benefits to going it alone?
• Sometimes there is merit in going for it on your own as a disruptor. When you have made an impact, recruit others to join in and make transformative change.
• It can be powerful to see the gap between those who push forward and those who are left behind.

What is the favoured solution?
• The favoured solution is a mix of everything. It is context dependent. Keep an open mind!

My world

Sustainability often fails to land effectively when it’s about big, global issues, which may explain the growing interest in “going local” and “my world”. How does a company go about identifying the issues that are relevant to a local community, and how can it engage them on issues that matter to them? Which companies are leading the way?

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TABLE 5

• Examples of other brands that do things like the tokens of Waitrose local charity coins people vote on which local charities get donations from Waitrose
o Simplicity is super key
o Pret homeless
o Make sure it is relevant to your business and community
o They need to be able to see the impact in a measurable amount of time gamification (coin at Waitrose is an example of this) feedback loop needs to be very tight
o The act of putting the coin in the box allows you to feel like you are making an impact, having a vote
• How do we get people more engaged right from the beginning? With the three choices, we are already predisposing the customers to what we have already chosen
• But how is this giving to charity really making a true difference? It’s not transformational change
o Changing over to LEDs at Ikea
o Mobile phones and how they have permeated through Africa many business models created based on this
• Isn’t much of the sustainability question really about increasing awareness?
o But everything feels so far removed, that they don’t
• Stakeholder consultations or community outreach
o Planning system (Prince’s Trust): Inquiry by Design. Get representatives from all the different stakeholders in development planning system what do they care about? History, sustainability, etc. then the building goes through the rest of the process after having stakeholders consulted and is quicker and cheaper, better appreciation of the architecture being built
o Business inspired and employee led model is an interesting one
o Building your brand and getting a license to operate within the community helps to create brand awareness (anaerobic digester)
o New York Cares: would love to volunteer but found it was actually hard to find places that you could get to outside of work hours, framework and platform to connect the volunteer agencies and the network of individuals and giving them the framework

Renewable transformation

IKEA has a radical renewables strategy, committing to generate more renewable energy than the energy it consumes globally by 2020, and has already invested €1.5bn. Does the table feel other companies should pursue this strategy, and what are the relative merits of other renewable solutions such as on- and off-site renewables, buying permits etc.?

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TABLE 6

Renewable Transformation:
• General agreement that renewable transformation is a good idea and one that should be adopted by more businesses.
• However the first question should really be to reduce consumption and increase energy efficiency and then concentrate on renewable transformation. This is also an easier change t measure in comparison.

Obstacles:
• Strategy; does a business set incremental goal and work towards them or place a definitive cap actively driving the optimization process in order to adhere to this stringent objective.
• Balancing analysis and action. Too much time spent on research and analysis could result in little being accomplished.
• How to entice the business to business consumer. Sustainability is more attractive to an end consumer while businesses are interested in proven economical gain.
• Value of any sustainable action must be commercially viable for a business while allowing them to maintain their sense of resiliency.
• How to finance such programs particularly in small and medium size businesses.
• Potential and current investors may be nervous of big change as it could mean bigger risk of failure.

Encouraging Change:
• Companies need to be willing to accept some amount of risk and allow themselves to be more agile in accepting new processes and technology in order to move renewable transformation forward.
• Every company is different therefore each company’s approach needs to be tailored to them.
• Consultants must speak the language of each individual business playing to their motives.
• Financing can be done through owners investments, investors contribution, subsidized by tax breaks and other types of incentives or a mixture.

Example (Nando’s) – The difficulties of implementing transformational change:
• The available space varies by location therefore not everything can be recreated at all locations, ex. Solar panels.
• Interior design needs to be a collaboration between the designer and available sustainable materials.
• Many branches spread across the world make brand wide implementation very difficult. For example changing behaviours by sharing energy consumption reports with however managers are always changing making it a continuous program.

The Social Board

If you can connect your board with the big issues in society, does purposeful transformation become easier? We’ll discuss the merits of the different emerging mechanisms – a CSO on the executive board (IKEA), youth advisory boards (Kingfisher), appointing worker reps (First Group), board immersions (BITC) and social Non-execs (PepsiCo). How should the customer be heard?

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TABLE 7

The Crowd: The Social Board The overarching consensus was that engaging the board is important because without its support nothing can be achieved. The table agreed that opening up avenues for enhanced communication and knowledge transfer through a dialect between board and business was central. Although the top down mechanisms are important, so too is the messaging which can transform upwards and sideways within organisations.

Board strengths:
• Boards which remain open to dialogue can see where improvements can be made which fosters the cross fertilisation of ideas and incentives to carry messages
• Potential for greater board engagement within small organisations – greater accessibility to board and/or CEO
• If you gain agreement from the board you can achieve greater buy-in
• Board can accelerate pace of change and implementation needed for transformation to take place
• Boards are effective when they review their decision, consider impacts and host engagement sessions

Board weaknesses/challenges:
• There are often internal challenges which stunt the succinct transfer of bottom up messages
• Often weak engagement of the boards in messages from below within large multinational organisations – tools required for engagement
• Engaging the board can be perceived by some as an unpleasant experience – e.g. gearing up for a fight
• Board can't transform a business on its own – collaboration required
• Geographic variables re: global strategies – can be cutting edge in one country and not another so need to consider geographic dimensions to driving change while linking ideas and strategies to purpose

Areas for improvement:
• The board needs to maintain focus on what it gives back to staff
• The value of sustainability needs to be harnessed as being an integral part of the business – sustainability needs to be linked to core commercial business and not seen as a tick box exercise
• Sustainability as a word turns a lot of people off – reframe objectives to highlight its role in society and this becomes an easier message to engage with
• There needs to be focus on communication platform, in particular – how to communicate the company’s overarching message alongside the key themes opening up from what is discussed and agreed
• Board should focus on its core purpose, it's duties and ask questions with its responsibilities to all stakeholders at its heart
• To make change happen need to understand current culture and how best to work with it - don't be tempted to copy competitors to get ahead of the curve – build on the strong foundations you already have e.g. Founder values which hold longevity and contain meaning for all stakeholders
• Worker representatives on boards provide different perspectives which can benefit dynamic but does raise questions over who you would choose and how representative they would be
• All board members should consider their impact on all stakeholders – either by gathering views beyond the boardroom or allowing these voices to be heard within the board meetings

Measures to facilitate transformation:
• Remain dynamic and be ready to act – we have collective and individual responsibilities and this should be at the core of how we do business
• Engaging with society is key but so is engaging the board – so need to find ways to inspire and excite entire organisation
• Be aware of impactful risks and legal implications to strengthen case to board
• Look to expand and add value through new opportunities
• Be aware of board member backgrounds especially if not from sustainability arena – greater need to inform and clarify key environmental terms/processes
• Purpose and values of the business need to be aligned to ensure unified interpretation
• Anchor the transformation within business contribution to society – need to articulate business central purpose in terms of the ways in which society is fundamentally benefitted by its very existence
• Brand managers and company culture need to be aware and aligned if they are to be led by the board

Transforming energy

What are the game-changing ideas that could transform the way we use energy? From global market mechanisms to nudge theory to company initiatives such as choice editing of products. Out of the box thinking is welcomed. Is there one stand out solution, and how could a small group of progressive businesses make it happen?

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TABLE 8

Ideas for transformational change
• Buildings:
o Energy use disclosure for all buildings – driving the market to increased energy efficient buildings (eg. Australia)
o On site renewables and energy storage
o Analytics and understanding how buildings are performing
• Energy storage generally
• Smart grids and energy networks; Distributed Energy Systems
• Electric vehicles as storage - moving energy around on demand to different parts of the grid
• The tipping point for fossil fuels is approaching
• Nudge theory - nudge the conversation and build enthusiasm
• Financing the energy transition – green bonds
• Block chain and power selling through micro-grids and community grids – huge potential especially in developing companies


Barriers
• New business ideas: scale up issues – ideas and operations
• Legacy business: deconstruct business models to see whether they can generate the same growth and value
• Unknowns eg. new tech
• Challenge in competition for capital (especially in large corporates): building business case for sustainability isn’t hard, but winning the money to do it against the competition is – need a seat at the right table
• Multiple stake holders – difficult and time consuming to get people around the table, let alone come to a consensus
• Huge amount of red tape slows progress within a big company
• Immature science/credibility around products to convince consumers to spend more around a green product – ie to change their spending pattern on green ways needs government regulation (eg. encouraging buying unleaded petrol or diesel) EVs are more compelling for the consumer
• IKEA’s move on LEDs was brave if only because the product lacks built-in obsolescence.
• Large retailers generally reluctant to choice edit
• Sustainability in the context of responsible drinking could pose similar challenge for an alcohol company
• Not having full control eg. for retailers - over the space retailers need a partnership between all the interested people in a building / community
• Shifting from selling a product to selling a service – and therefore closing the loop / circular economy eg Interface carpet tile service
• Societal habits
• Finding the right place to get new first step projects going

Lessons
• Must be win-win – financials must stack
• Need alignment with the business strategy
• Regulatory frameworks required
• Failure of carbon trading
• Shouldn’t be a “bolt on” – needs to be a fundamental part of the business and driven by the CEO
• E-commerce supporting recycling / reusable packaging (combining delivery & collection)
• Support of the executives is key
• Timing is important in changing business model, but also need to act quickly enough for the business to evolve and remain relevant
• Need to future proof businesses and move from legacy business

What sustainability does:

...not what it is. If you had 10 minutes with a FTSE100 CEO, how would plant a seed that would grow? Is sustainability going mainstream? What does this mean for the future of sustainability? Is the sustainability agenda leading the way for transforming business models?

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TABLE 9

What are the key factors for success when selling a sustainability project internally?
• Messaging – delivering the right message, to the right audience, at the right time. This includes the use of collateral which is familiar within the organisation, for example, existing PowerPoint templates and key brand language. It was discussed that some organisations don’t include sustainability as part of their procurement criteria and as such, a reframing of sustainability pilots is required to drive projects through.
• Establish the business case – ensuring commercial and sustainability objectives are tightly aligned was one of the most frequently mentioned factors for success. The example of installation of solar energy as a means of backing up data centres in order to achieve operational resilience was cited.
• Scale - the reality for many senior leaders is the short to medium term is extremely important, particularly from a financial perspective. If pilot schemes are financially viable over this time period, they are much more likely to prove successful.
• Leveraging other company functions – linking similar objectives in differing departments and back and front offices allows for more effective collaboration, and helps build the business case for projects which are more likely to succeed in the longer term. These levers need to be pulled at the right time to ensure project success.
• Understanding the personal goals of senior leaders – understanding the core strategic priorities for leaders and aligning and laddering sustainability projects into these. For example, a CTO is interested in innovation, while a CFO will look at revenue maximisation and cost saving.
• Underpinning projects with materiality – including stakeholders from across the business in a materiality analysis ensures there is a strategic direction behind new sustainability initiatives and pilots. It was agreed that getting stakeholders involved early in a process will ensure a smoother transition from project inception to delivery.

What are some of the other factors to be aware of?
• Striking a balance - Setting out goals as part of a strategy highlights the ‘bad’ things as well as the good, and most leaders only want to highlight the good. In juxtaposition, there is also pressure from NGOs and the press, who are likely to focus on the bad. A balance needs to be struck between the two positions.
• Understanding the needs of the final consumer – the best product in a market will win and sustainability needs to be a part of that as opposed to a reason for being in itself.
• Challenging existing paradigms and mindsets is key. Amazon was cited as an example of this – one of its business objectives is to ‘agree to disagree and commit’ in order to continue momentum in driving projects forward.

Where is sustainability going?
• Sustainability is increasingly being seen as an innovation pitch as opposed to a hygiene factor. The group agreed that this will only accelerate as scale and business value of initiatives grow.
• Steve Howard’s insight that ‘it is better to be fired for doing too much, than keep your job and do too little’, resonated with the group. This was cited as an example of the mindset change required by sustainability professionals in order to continue driving progress.

Venue Detail

The Institute of Chartered Accountants in England and Wales

EC2R 6EA

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