Contents
4. Leadership for a Sustainable Future
Overview
This section discusses the role of the CEO, including critical personality traits and identity archetypes. It highlights that leadership needs are changing. Instead of the “superhero” CEO figure, today’s challenges call for more self-aware, adaptive, and relational CEOs. Additionally, this chapter features two CEO Spotlight interviews with BHP CEO Mike Henry and Vale CEO Eduardo Bartolomeo.
Mining companies now face accelerated decision-making and change against a background of greater economic uncertainty. The disruptions of the past year have only accelerated this shift, highlighting the critical need for sound leadership.
At the same time, the CEO has moved into the center of louder, more diverse, and diverging voices – there has never been as much focus, scrutiny and reliance on CEOs as leaders. They are expected to be visionaries and nurturers, leading their companies during complex and rapid change. While leaders may do more and move even faster in these conditions, such a response is unlikely to be sustainable or the route to the wisest solutions. To succeed in this challenging landscape, CEOs will need to embrace change—in the world and in themselves—and rethink tried-and-tested approaches to leadership.
In this context, mining companies today have a unique opportunity to revise and reset their transformation agenda. With the world’s green energy transition gaining momentum, more minerals and metals will be needed to make this possible. There is now a new type of growth agenda firmly on the table, especially as many mining companies emerge from a decade of productivity improvements, cost control and limited investments. Looking ahead, many companies find themselves with less than 10-15 years of mineable reserves. Meanwhile, some traditional commodities may soon become obsolete (e.g., thermal coal), and others may need ‘reinventing’ as traditional applications no longer deliver viable growth prospects.
However, making a business case for large capital investments will be even more challenged as companies venture into “commodities of the future” (and uncharted territory) to capture the fast growth that decarbonization promises, whilst also grappling with the threat of substitution as breakthrough technologies rapidly emerge and advance. In addition, demand for future commodities, such as battery minerals, is becoming increasingly contingent on sustainably produced and responsibly sourced supply. This has led to a growing sense of urgency around determining future leadership skills, competencies and the potential needed to embrace foreseeable (and unforeseen) disruptions in the industry.
As companies start to rewire in promising ways for the future, reaching a “next normal” for an entire organization will require a unique blend of bold decisions and collective dynamics. CEOs will need to fundamentally evolve in order to lead, and that will require work beyond core leadership skills, such as strategic acumen and results-driven strategies. As a result, the focus is shifting to a new set of competencies required for transformation:
- Ability to envision the “next normal”
- Adaptive leadership skills, determination, and openness to learn
- Consistency between values and action
Photo courtesy of Anglo American
Envisioning the Next Normal
CEOs are increasingly realizing that they must transform themselves in order to transform their organizations. For their businesses to grow and evolve, they must grow and evolve as leaders. We call this the dual journey.
From a recent report published by Egon Zehnder, It Starts with the CEO, it is clear that this need has intensified over the past year. We find it remarkable, and highly encouraging, that nearly 100 percent of our 972 CEO respondents agree that they need the capacity to transform themselves, as well as their organizations.
Many CEOs and boards have yet to achieve clarity on the new destination they say they are trying to reach. Our It Starts with the CEO study revealed that CEOs still rank financial performance and shareholder value as their predominant decision-drivers, even though many of them do recognize the increasing urgency of addressing sustainability challenges. This perhaps lies in the original purpose of ESG as a tool or mechanism to measure non-financial risk, which is inherently hard to define and quantify. At the same time, CEOs are recognizing their moral authority and evolving their thinking about the role their company plays in creating shared value.
CEOs are increasingly shifting their mindset from “managing ESG” to “embracing sustainability” as a more encompassing, balanced, and purpose-led strategic vision. While an obvious reaction is that this will compromise financial performance (at least in the short term), it does not necessarily have to be a trade-off with financial performance. CEOs should think holistically and creatively about opportunities that emerge from managing risks well, adding resilience to operations and helping communities thrive.
This means being aware of the various perspectives surrounding your company. “Because of the different vantage points on certain issues, or information asymmetry, people’s beliefs around what is the right outcome can be very different,” Henry reflects, adding that it is paramount to solicit these diverging opinions in order to “come up with solutions that create the greatest possible value for the greatest possible number of stakeholders. Through holding this tension, you actually create something that you couldn’t have created if you saw it as being a trade-off.”
As our colleagues stated in the 2018 article, Architects of Prosperity, “A CEO must recognize the interconnectedness of seemingly conflicting objectives: Performance requires transformation, and value for the many is value for the business. Integrating broad prosperity into the business model presents novel situations beyond traditional stakeholder management. Maintaining financial performance while serving as a force for good requires not only growth and keeping an eye on the bottom line, but also sometimes elevating one’s sight toward the prospect of unexpected opportunities.”
Certain challenges in the mining sector cannot be solved by mining companies alone. The most effective CEOs, constantly seek to connect the dots, discovering patterns that tie together the challenges and opportunities facing the business, the industry, supply chains, and the broader market system. In doing so, they discern and create the most compelling choices for how the business can provide new sources of value—now and in the future.
For Nelson, CEOs add value by having a holistic outlook on the complexities they are faced with. “In today’s world, I don’t see how any board in any industry can undertake a CEO succession process without recognizing that CEOs are being asked to address increasingly diverse stakeholder expectations and ESG issues in pretty much every country,” she says. “It’s no longer just a question of how equipped is your CEO to deal with investors, understand the business and the wider competitive and market context? Today, it’s also, how effective have they been, and will they continue to be, in addressing complex sustainability or ESG issues and a wide variety of stakeholders? These questions are material now, and no longer side-line questions or nice-to-haves.”
CEOs do not require a “better plan” to operate amid the complexities that our new reality presents, but they do need a higher level of responsiveness, a “next normal” for the entire organization. They must possess the ability to embrace the journey toward a transformed organization and to integrate multiple factors of influence into a coherent, aligned and energizing mandate for the organization’s future. In other words, CEOs who want their organizations to succeed long-term need to move away from the status quo and change their approach to leading the inevitable transformation.
In CEO decision-making, financial metrics rank first.
1st
Financial
(e.g., profitability, TSR, share price, sales)
2nd
Growth
(e.g., market share, M&A, geographic expansion)
3rd
Talent Management
(e.g., considerations linked to diversity, leadership capability)
4th
Innovation
(e.g., new technologies, % profit from new products, R&D budget)
5th
Health and Safety
(e.g., incident rates, % improvement, stress-related absence)
6th
Environmental, Social, and Governance
(e.g., carbon footprint, diversity & inclusion, human rights concerns, social activism)
The End of the Superhero CEO
Against the backdrop of shifting geopolitical powers; technology transforming every industry; and individuals, groups and institutions becoming increasingly interconnected and interdependent, organizations are recognizing that while the experience and talents of a CEO are still essential, they are no longer enough to secure success. Why? Because most CEOs will have sharpened their skills in a previous era, modeling their leadership style on an earlier archetype, which was developed in different circumstances.
CEO leadership is, by its very nature, a collective and relational endeavor. There can be no CEO leaders without followers and vice versa. The tendency to focus on a “hero” figure, who stands alone as the head of a hierarchy rather than an ecosystem of leadership, is pivoting to a new style as the traditional management culture becomes obsolete. While essential experiences and sector expertise remain essential, they are less predictive of future success. CEOs need the humility to realize that they don’t have all the answers and therefore can ask for advice. The leaders who can stop, listen and understand will solve problems quicker and more effectively.
“There are tensions and growing complexity at every level of the individual, the institution, as well as the broader ecosystem. In order to effectively manage at these different levels, you need individual leadership, institutional leadership and interactive leadership or partnerships, and all three of these levels of leadership need to be agile and adaptive to change,” Nelson asserts.
To lead effectively in today’s fast-shifting world, leaders need to be equipped with certain characteristics that can be developed. As Egon Zehnder's It Starts with the CEO report explains, “These CEOs will be those who summon the imagination, courage and resolve to work on the system, rather than in it. Visionary CEOs embrace the role of architect rather than operator; in doing so, they can inspire their organizations, drive value-creating change, and find meaning in their evolving role.”
“If you believe that the future is one in which the industry works much more closely with its other partners, is much more open and much more collaborative, the rah-rah leader often may not be very collaborative or open because they may just want to charge on with what they know to be their strength,” says Dhawan.
CEO of the Future: Self-aware, Relational and Adaptive
In times of high uncertainty, the role of leadership is not simply about finding the right response. It is about upgrading the overall responsiveness of the entire organization to whatever might happen.
CEOs are being called upon to step up as architects of this new era, designing businesses that are innovative, resilient and responsive to their environments. This requires leaders to be self-aware, relational, and adaptive – a set of qualities that are not independent but stand strongly together in mutual support. Below, we dive into how leaders can build self-awareness and relational orientation into a leadership style that can adapt to current and future demands.
Self-awareness
Our research indicates that the consciousness of an organization’s leadership determines its performance. An organization cannot perform at a higher level than its leaders’ self-awareness: a rigorous and disciplined commitment to being conscious of one’s stage on the journey and committed to continued learning and personal growth. This involves constant attention to motives and behavior, as well as how it transforms teams and organizations. CEOs must maintain a balance between self-confidence and mindfulness, and always be aware of one’s own limitations.
Relational Orientation
Building a relational orientation requires learning new ways of listening and communicating with curiosity, humility, empathy and authenticity. These traits allow a CEO to cultivate a “first among equals” relationship with their board and teams, expanding both their self- and organizational awareness by inviting inspiration and insights from diverse perspectives.
But it is also one of the most challenging aspects for CEOs to get right. When we asked 972 CEOs to reflect on the Achilles’ heels their teams had alerted them to, by far the most common issue was their capacity to relate to others effectively and authentically.30 Which in turn makes it harder for them to inspire their people and lift the collective ambition of their organizations. Admittedly, 80 percent of CEOs reported that they face challenges in pacing change, focusing their teams, and bringing people along with them.31 Again, the key to unlocking this conundrum lies within: it requires honest self-examination of a CEO’s approach to leadership.
A relational approach must extend beyond a company’s conventional stakeholders. Mining CEOs should seek out new and uncommon alliances across organizations and sectors, seeing these entities as value creators and pillars of collective strength, offering new opportunities and unique points of view to enrich institutional judgement. Undeniably, commitment to a relational orientation is challenging. Relational CEOs must be perceptive enough to sense which relationships can benefit their business and broadly promote prosperity, and then astute enough to realize these advantages.
Adaptive Capacities
In an era of rapid transitions, CEOs need to be adaptive to never-before levels of complexity and scrutiny and deal with all the divergent views out there. These challenges underscore the need for a CEO to approach solutions creatively and with great wisdom. In doing so, they discern and create the most compelling choices for how the business can provide new sources of value, now and in the future. Truly adaptive CEOs understand that they no longer can display behaviors that are harmful to their – and the company’s – advancement. They take a stand to balance priorities that are skewed toward the short-term. They acknowledge the risk of fragmented focus, and they apply their energy into what matters most: building a future of prosperity for more of their stakeholders.
These CEOs, especially if relational and self-aware, will use their unique vantage, enriched by insight from their team and stakeholders, to grasp genuine opportunities, as well as to meet or bypass challenges. They will recognize that apparent polarities between people and profit, if synthesized creatively, can be engines of value instead of problems to be solved. And they will travel the tricky adaptive path from old to new models of operation, inspiring their organizations and navigating them through the transition.
Until now, most business leaders have invested too little attention and intention on this interlinked trio of capacities. Yet these capacities are fundamental elements of every human being’s ability to function effectively in challenging environments. By tapping into their self-aware, relational and adaptive capacities, CEOs unlock a higher level of leadership. They open the aperture to new possibilities, create new clarity of purpose and generate energy for change and renewal. In essence, these capacities buttress leaders to transform themselves to transform the business.
Distributing Leadership: Everyone’s a CEO
CEOs are navigating a tempestuous terrain with added layers of complexity, challenges, uncertainty and information influx. Solely relying on their own experience and the facts and analyses presented to them is no longer sufficient when it comes to being assertive. To build opinions and make sound decisions, today’s CEOs need new skills, including those that require them to come out from behind their desks.
We propose that CEOs to lean into a more distributed way of leadership to better operate in this state of ambiguity. One that demands less leading from the front, and more trust and relationship-building across hierarchical levels. Through distributing leadership, CEOs not only encourage adaptable, lateral relationships between people and teams, but also foster development among their teams.
To build a distributed leadership approach, CEOs should choose members of their executive team to create an ecosystem of leaders. These top executives, in turn, can tap into their unique strengths and skills to untangle complex problems, anticipate risk and innovate collectively, creating a much stronger, diverse and capable force. In this realm, appointing a Chief Sustainability Officer (CSO) will help focus the leadership team, but each executive committee member must nonetheless be accountable to the CEO for integrating the company’s sustainability strategy into the core business areas they respectively lead.
In our previous report released in 2020, From Risk to Reward, we discussed the merits of hiring a CSO and some of the broad responsibilities of the role to move organizations beyond compliance, focusing on performance, risk management and social acceptance. Since then, we have witnessed encouraging actions taken by mining companies to appoint a CSO, or an equivalent. Unfortunately, we have also noticed that many of these individuals are brought in with no clear mandate from the CEO, which could ultimately set them up for failure. In our experience, the CSOs that are most successful in their roles have the following elements in place:
A clear mandate set by the CEO and board on driving sustainability across all dimensions with clarity on how this role interfaces with operations, investor relations, and external communications and reporting.
Greater emphasis on doing good – A recent article by INSEAD Knowledge highlights a study on the importance of appointing a CSO to monitor and identify areas of concern and action. However, it also points out that “the CSO and other top executives as well as members of sustainability board committees (in our study) betrayed a negativity bias, that all-too-human tendency to fixate on negative experiences or factors rather than positive ones.”32
Support and buy-in from the entire executive leadership team, whose KPIs are linked to key sustainability measures for their area. The responsibility remains with each executive committee member to integrate and implement the sustainability strategy within their respective business areas.
Buy-in from the wider organization, which has committed emotionally to become more sustainable and is driving this transformation through the most effective actions at all levels.
For Newmont, appointing a CSO was the starting point for creating the business structures that allowed the company to fully develop its commitment to sustainability. Goldberg explains: “When I became CEO, the sustainability function was not formally structured, and it lacked clarity in terms of who it should report to and how important it was. So, we brought in Elaine Dorward-King, whom I had previously worked with at Rio Tinto, to lead Sustainability and External Relations as part of Newmont’s Executive Leadership Team. She was passionate and outspoken about sustainability, credibly representing Newmont externally, which was an essential piece of Newmont’s transition.”
Goldberg adds that training sessions to embed sustainability organization wide were led mostly by the executive team. “It really goes a long way when employees hear from the senior leaders about what's important. And when you have the CEO or CFO talking about what sustainable development means, lightbulbs start to go off that this isn't just something you can hand off to somebody else to do – it's important for the business, and it's important for everyone.”
Leading by Example
During the past 18 months, we have seen mining companies take more deliberate steps to embed sustainability into the fabric of their organizations. Some leading practices include:
The leadership team believing in and visibly leading by the company’s sustainability values. At BHP, Henry explains, “We are focused on understanding what are the opportunities for us to create more value in its broadest sense for our stakeholders. We are becoming more effective in how we incorporate that ‘sensing of our environment’ into the company’s direction-setting and decision-making activities. This has meant (1.) making it a priority for leaders, (2.) encouraging leaders to create the time to be out there doing it, and (3.) creating internal forums and processes for coming together as a team and synthesizing what we’re sensing and then building that into our key decisions.”
Broadening executive pay links beyond health and safety performance to business sustainability objectives and measurable criteria, incorporating these into both short- and long-term incentives. To strengthen governance and increase accountability, Vale has adjusted Executive Board compensation to include a greater proportion of variable long-term compensation (~68%) and non-financial metrics (~55%). In this regard, Vale has also adopted clawback and malus clauses based on feedback from its engagement program with investors and society. Malus and clawback provisions allow the Board to reduce or cancel a senior executive's bonus or share award before it has been paid out, under certain conditions.33
Working with Human Resources to determine the benchmark competencies and behaviors needed to drive a sustainability-centric transformation organization wide and hiring and rewarding employees accordingly. “During the past year, leaders for each of our assets have had to devise a social value plan as an integral part of BHP’s annual planning process. This means engaging broadly and systematically with stakeholders, determining their interests, and the opportunities for us to be more effective in how we incorporate that into decision-making. This has meant creating internal forums and processes for coming together as a team and synthesizing what we’re sensing in our environment and then building that into our key decisions,” Henry shares.
Leadership teams stepping up as change agents, driving cultural transformation that embeds sustainability values into the fabric of the organization. (More on culture in the next chapter.)
Leading by example is critical according to Sandström. “I think it is absolutely essential to show that you are accelerating purpose – making sure everyone walks in the same direction and ensuring that your purpose visibly permeates just about everything that your leadership does. This will build trust among key stakeholders, create stability and support, as companies pivot to meet future challenges. In a fast-changing stakeholder landscape the industry must re-think and re-visit the way it operates and engages with for example, investors and regulators, and enhances decarbonization, responsible sourcing, circularity, workforce responsibility, local community impact and sustainable finance.”
Seeing this empowers employees to bring change within their own area, enabling the organization to identify, validate and implement truly innovative ideas for current and future sustainable business models.
Photo courtesy of Anglo American
Unlocking Sustainable Impact through Collaboration
There is no denying that mining companies are part of a much broader sphere of stakeholders and external forces.
Linkages among these various market actors can impact the performance of the organization, requiring the CEO to fundamentally understand all the dynamics at play, such as the formality of relationships, market power and influence, as well as levels of trust within the community. “You really need to challenge this through a multi-stakeholder prism and through collaboration and co-creating solutions with your key stakeholders, communities, policy makers and investors. Embracing stakeholder leadership is something that the industry must really do right away and in the right way. Looking ahead, you cannot afford to drive a transformation or transition strategy without, for example, applying a proper community perspective,” Sandström argues.
CEOs are in the pilot’s seat of their companies, and they need a bird’s eye view on this multi-stakeholder terrain. To lead effectively toward their sustainability goals, they need to understand human-centered design and engage key stakeholders with empathy. They need to embrace an iterative process while also committing to granting the most-affected parties a seat at the table as co-creators. They must be able to address critical power dynamics, ensuring that all stakeholders engage with and buy into the co-designed solution.
Ultimately, achieving success demands a forward-looking mindset. Egon Zehnder’s report It Starts with the CEO sheds light on this concept, explaining that these leaders are the ones “looking beyond traditional markers of performance and putting increasing focus on game-changing innovation, longer-term growth, and broader stakeholder interests.” The CEOs who display curiosity and explore potential answers in creative places will be better equipped to succeed. Only leaders with an extraordinary appetite and capacity to keep learning and expanding their capabilities will keep pace with evolving demands.
Meaningful Participation to Scale Impact
So how can the participatory process be truly meaningful? It starts with transparency, commitment and accountability. Inclusiveness and representation are also paramount: Every voice must be equally represented in the room. A good example of multi-stakeholder governance is the Initiative for Responsible Mining Assurance (IRMA). The IRMA standard offers the only independent third-party certification of industrial-scale mine sites, covers all mined materials, and unlike trade associations it is not industry-owned. Boulanger explains, “IRMA is the only voluntary initiative related to industrial-scale mining, which is equitably led by NGOs, labor unions, and mining-affected communities working alongside the mining industry and purchasers.” She adds that “there will now be a sixth house – the first time a house of leadership has been added since IRMA’s founding 14 years ago – for the finance and investment sector.”
Another important model is public-private partnerships. Mining companies are increasingly taking a more holistic approach to their role in fostering large-scale impact alongside other businesses, and local and national governments in less developed regions. Keeping alignment throughout the process requires a clear strategy and sustained action toward a joint vision. Achieving that sense of unity in these collaborations, which are not sectorally bound, warrants a high degree of agency and compassion. That means focusing on the needs of others with empathy and curiosity for fair plan of action that everyone agrees to. These cross-sector collaborations leverage differences (in resources, experience, demographics, industry, and sector) as an asset rather than a disadvantage. Diverse perspectives on key areas, such as risk assessment, time, and scale also add tremendous value to the process. CEOs must recognize that the most sustainable solutions will come from designing with (and not just for) the most affected communities.34
In short, cross-collaboration, multi-stakeholder participation and multilevel cooperation are invaluable tools for mining CEOs who recognize the strategic importance of convening all relevant actors that live beyond a company’s gates. “It takes that CEO leadership and involvement in some of these groups that aren't just focused internally. This has been helpful for me and for the businesses I've been involved in because you get connected with others,” Goldberg says.
Connecting the Dots to Deliver Systemic Change
For effective and transformative collaboration, companies should develop contacts, connections and feelers outside of the organization and beyond its immediate network. Below, we outline four key actions that CEOs and their leadership teams can take to connect different sectors, organizations and people in a market system:
Be a connector
Identify collaborative opportunities for creating shared value; bring the right actors and talent to those opportunities; and guide the process decisively without trying to overpower collective action efforts.
Engage the periphery
Include different market actors and diversity representation for breadth of perspectives and to limit the concentration of power. This balances systemic biases – such as group loyalty, authority and cultural norms – that influence behavior by sending signals, which either reinforce or push back on certain actions.
Manage the politics
Very often ideas may not get valued due to “turf wars”; decision-making may also be hampered by information asymmetries, creating or deepening the lack of trust between different entities and leading to a gridlock.
Show a strong hand
Collaboration doesn’t mean consensus on everything, which is detrimental to an innovative, collaborative process. As a leader, you must know when to step back and when to intervene. It is also essential that people are clear about their respective areas of focus and on who has the final decision-making rights.35
Collaborative leadership skills are essential for learning, trust-building and empowered action among stakeholders who share a common goal. This is essential to catalyze, enable and support the process of systemic change, particularly for CEOs who genuinely wish to tackle the multi-dimensional challenges underlying the SDGs.36
Take for instance, how swiftly the industry responded to COVID-19, Nelson says, “Many parts of the system have actually come together really effectively. It’s an interesting example of systems leadership in action right now because state and local governments, national governments, healthcare providers and mining companies have been working together to try and contain the pandemic.” Adding that, “health systems are particularly weak in many countries where mining companies operate. And I’ve heard a lot of mining companies talking about how they can work with others to strengthen the local health system. This includes partnerships with local hospitals to provide medical supplies and community donation programs. Looking ahead, we also need to be thinking about what lessons can we learn from this public health crisis and what more could be done to strengthen health systems.”
Source: Egon Zehnder analysis; Adapted from: Systems Leadership for Sustainable Development: Strategies for Achieving Systemic Change, Harvard Kennedy School, September 2019
Photo courtesy of Anglo American
The Power of Listening and Uncompromising Transparency
With sustainability transformations happening now, CEOs are dealing with multilevel systems that are nonlinear, dynamic, interconnected and influence larger wholes. Building trust among investors, communities, NGOs, governments and competing businesses is challenging, but highly rewarding.
While there are no formal, written rules to do so, CEOs and their leadership teams must engage with external actors in a frequent and structured manner to create an atmosphere of trust and coordinate mutual objectives. Constant communication, transparency to the greatest extent possible, and consistent follow-through on commitments can even overcome long-standing suspicions. Communication and transparency also foster legitimacy, momentum and learning.37
According to Boulanger, transparency will inevitably become the norm in the mining sector. “Right now, mining companies can offer a more realistic assessment of impacts, rather than claiming that all mines are 5-star or AAA performers. It’s time for more accurate communications with the world, acknowledging that these are materials much of the world uses every day; the extraction comes with significant impacts; and each of us using these materials is complicit. Mining companies can share their commitment to reduce harm and be transparent about impacts. They can set up systems to receive feedback from civil society and labor—and make it safe for honest input to be given—and reward innovation to better protect environmental and social values. They can be specific about the ways they will make improvements to protect regional communities, landscapes and actively plan for post mining use. They can address the range of critical issues that impact a climate-stressed world—because it’s not only about carbon emissions or child labor, but also fragile water resources, long term impacts of mine waste, health and safety. The world already knows that mining comes with significant impacts—what they want to see is greater honesty about the types of impacts, and what a company is doing to reduce harm in legacy mines; prevent new harm in expansions and new construction; and better share value with workers and surrounding communities.”
From an investor standpoint, Foster adds, “Mining companies are getting more and more information out to the public because they have to, but that’s a good thing. The more they communicate publicly—not just inside our industry but more broadly—the better it will reflect on the industry and maybe start to change perceptions.”
Additionally, Woods believes that transparency is essential to ensure that the entire organization performs consistently around sustainability. “Transparency is incredibly important not only for external stakeholders, but also for your company internally. People in companies should know about what is actually happening, because that’s where a major blockage lies. Often people just simply don’t know—and we forget that these are very large companies operating across many different jurisdictions. So, transparency isn’t only about the outside world. By letting the outside world know, you make it more likely that someone in your own company, in a different jurisdiction, will find out. This highlights the importance of companies publishing—whether it’s about how much water they’re using, or their carbon emissions—things that the world can verify, because it helps their own people to do a better job.”
Moreover, incorporating sustainability into the company's DNA requires change at scale, and there needs to be buy-in across the company. This is where organizations can rely on collaboration across traditional siloes to leverage systems thinking – understanding how interrelated parts of a system intersect can result in holistic solutions. These solutions can serve both the company and its broader external context. Internally, they can help meet both business-wide goals and department-specific needs. Externally, they can contribute to global SDGs and meet local, place-based needs.
In addition, because market forces are ever-changing, companies should adapt their course of action based on learnings from data and feedback collected both internally and externally.
Source: Egon Zehnder analysis
Action That Truly Reflects Core Values
Investors, employees and customers have high expectations from mining companies to play a more visible role in addressing systemic sustainability challenges – and doing so with transparency, compassion and authenticity.
“The industry should be changing the narrative by showing that it is deeply committed to compliance and risk management, and to improving its impact on people and the planet, while also being really intentional about creating shared value and helping address broader systems challenges,” Nelson outlines.
Correspondingly, CEOs are increasingly assuming the mantle of public leadership by driving purpose-led company strategies and taking overt stands on important, sometimes divisive social issues. This signals a decisive shift toward tying corporate strategy to social ends and, importantly, enhancing financial performance at the same time.38 A change that is both humane and economically sound; profit and purpose are no longer believed to be at odds.
Purpose-driven leadership is the ability to connect the organization’s direction, purpose and values to a long-term mandate of creating shared value. This implies recognizing common humanity and essential connectedness. CEOs who espouse these principles need to truly live up to this and back it with real and lasting actions.
From an investor standpoint, Matthews gives the example of Anglo American’s approach to better understanding their local engagements. “The CEO of Anglo American actively understands that they have a very important relationship with society and knows how to connect with this. There’s still a long way to go, but they have a good perspective. For instance, recognising that the communities they operate in have a presence of the church – be that Catholic, or be that Anglican – or other faiths. That lends them to an openness to dialogue, which is very different from their standard operation that we see in other places.”
Establishing a deep partnership with the broader community is similarly paramount for Goldberg. “I look at it as a community member might by putting myself in their shoes and reflecting on whether they are being treated fairly – are we being sensitive to their needs? How you leave things at the end ultimately goes back to mine reclamation and rehabilitation– are we leaving people better than they were when we started? That is important.”
Community work is a critical piece of the sustainability puzzle and requires long-term commitment. Dorward-King underscores the importance of implementing it through a strategic lens. “Let’s go after it in the same way that we would go after building a new plant,” she says. “Let’s be deliberate about what we intend to do here. Let’s have a five-year plan – because you can’t create change in a day – but in three to five years you can create a strong sustainability-led organization. You can start to report on material sustainability matters, measure related goals and objectives, adjust course if needed, and improve your transparency and reputation around that.”
A Personal Journey – Self Growth for Effective Leadership
An organization cannot develop beyond its leader’s stage of development. When CEOs ask for transformation toward sustainability, the work must begin with them.
It is often necessary that they do transformative work on themselves, developing their own identity and purpose. Leading a transformation toward a sustainable future requires a strong personal conviction that it is the right thing to do.
This means that CEOs must leave their comfort zone, step out of the status quo and conditioning of many years, and understand that no one – not even the Chief Executive – has all the answers. This may entail working against old habits that fail to serve their new role and discovering the courage to embrace their vulnerability, look within, and ask for help.
According to Dhawan, “The top behavior that determines whether a company will be a leader on sustainability is humility. The leaders who understand and recognize that they don’t have all the answers—that others might have the answers, and we need to listen carefully and take issues on board—are the ones who are leading the thinking and practice in this area. And only through that can you start building trust with society and the investing public.”
Many CEOs are highly focused on action – doing the right thing, at the right time, for the right people. But what comes first is their state of mind: of knowing how to be the CEO, not just doing the tasks expected of a CEO. From this strong foundation of self-awareness, self-assurance and personal conviction, a CEO can step forward to take his or her place as a meaning-maker and future-builder.
Goldberg shares his own personal journey, “Growing up and living in the outdoors, I enjoyed camping, hunting, fishing and all those sorts of things. It really matters to me that we do what's right for the environment.” He recalls, “the term sustainable development first showed up on my radar back when I was working at Rio Tinto in the mid-to-late 90s. I didn't know what that meant, but I had an interesting position in London where I interacted externally with people in the UK who were just starting on this whole concept. This got me thinking about what it might mean for mining.” He adds that “Safety has always been the foundation for me personally. When you're out working on the front line, and someone gets injured in your work group, that's a very personal thing. Working to eliminate injuries is one of the things I've been involved in right from the start of my career. During my 40 years in the mining industry, I've seen the approach to safety change dramatically. It’s great to see that mining is much safer now than it used to be, and this continues to improve.”
Reflecting on community engagement, he shares, “I've been involved with Mark Cutifani in the faith-based efforts, which was a different perspective for me personally. These are both people that we employ in operating regions and work with as part of our communities. They are also powerful investors. Faith-based groups have been very active and influential in terms of trying to raise the bar in mining. For instance, how the Church of England has weighed in on tailings issues. So, having that dialogue is important.”
Goldberg relates, “after 30 years at Rio Tinto, a key decision criterion for me to join Newmont was their approach to safety and sustainability. Newmont had been involved with Rio Tinto in setting up the ICMM, so my predecessors at Newmont saw that this was the right direction to go. And the company already had a culture that was sensitive to safety and the environment.”
On becoming Newmont’s CEO in March 2013, Goldberg recognized that he would need to ‘set the tone’ for prioritizing sustainability, so that others in the company could follow. “It’s about being clear on your purpose, mission and the strategy. I like to maintain a clear statement of what I am talking about. That makes a difference, and people pay attention to that.” He acknowledges that tracking results and setting metrics assertively is a challenge, but this can be overcome with the right systems in place. “As part of our corporate goal setting, we were conscious of the challenges around measuring sustainability efforts: some are easier and others harder to quantify, and that is always evolving. It is important to go down to what's actionable by individuals throughout the organization” he states, adding that the company’s culture was anchored by Newmont’s commitment to sustainability, and accountability was instilled through annual performance assessments. “We held ourselves accountable not just on the outcomes, but also on how we achieved them. And that was all part of the performance review process – are you living the values and how does what you’re doing fit?” By 2015, Newmont had emerged as the mining industry leader in overall sustainability according to the Dow Jones Sustainability World Index (DJSI).39 Since then, Newmont has remained the top gold miner on the DJSI World Index for six consecutive years.40
CEO SPOTLIGHT: Mike Henry – BHP
How Mining Companies Can Create a Better World
When most people think about sustainability, they likely don’t picture a mining site. But as the largest mining company in the world, BHP has a longstanding commitment to sustainability. The company focuses on environmental, social and governance (ESG) matters both internally and externally, enabling it to stand out as a company that wants to create value for all of the stakeholders it serves—from investors to local communities. We spoke with BHP CEO Mike Henry to learn how he’s translated an internal focus on ESG into external value for BHP and what the future of ESG looks like in the mining industry.
Changing Perceptions: Mining’s Impact Is Misunderstood
At first blush, many would write off the mining industry as bad for the environment and as an industry that doesn’t care about ESG, but Henry says this is a misconception. “I actually believe that mining companies have led many other sectors when it comes to ESG because of the nature of our industry,” Henry says. “I don’t think there has been full recognition of that externally.”
While mining impacts land, water, biodiversity, communities and more, not every impact is negative, and some of the positive aspects go unnoticed. “We can be doing some fantastic work in stimulating the wellbeing of communities that are located around our mine sites, but 99 percent of the world’s population doesn’t have the opportunity to see it or experience it,” Henry explains.
A reason mining’s positive contributions are often misunderstood is that there is not yet a set standard for objectively measuring ESG performance. Many mining companies strive to minimize their impact—reducing water usage or carbon emissions, and more. However, there are some that view any level of environmental disruption as harm. There are plenty of financial reporting metrics, but not yet an easily translatable method of tracking real impact.
Without standards to measure ESG performance, it is difficult for an objective assessment.
Embedding ESG at the Core
BHP embeds social value in the DNA of the business, which informs all decision-making. Henry emphasizes that the key is mutually beneficial outcomes for all stakeholders. “To create value for one stakeholder group, we shouldn’t have to sacrifice value for another,” he explains. “That joint prioritization creates tension that gives rise to creative and higher order solutions that allows us to grow value for a broader range of stakeholders in parallel.”
Purpose and values are important. About two years ago, BHP shifted its purpose to “bringing people and resources together to create a better world.” In addition to purpose, BHP’s charter also focuses on sustainability, integrity, respect, performance, simplicity and accountability. All six of these values are critical to how the company executes on ESG matters. The company also relies on external perspectives. “We have a group, established 20 years ago, called Forum on Corporate Responsibility, which advises and challenges management on the direction of the company and some of the key decisions that we take.” Henry explains. “It’s comprised of people who are independent pre-eminent experts in different fields be it ethics, water stewardship, climate, indigenous affairs.”
Having these external leaders is helpful in enabling BHP to be challenged on how it makes decisions or to consider different perspectives. “Even if we’re known to be thinking very deeply and logically about things, there is always a different take,” Henry shares. The other point Henry underscores is that there is often no single “right” way of doing things. “Because of the different vantage points on certain issues, or information asymmetry, people’s beliefs around what is the right outcome can be very different,” he says. “We have to be hearing how they see things if we’re going to come up with solutions that create the greatest possible value for the greatest possible number of stakeholders.”
There is also responsibility for ESG across BHP. “One of the big shifts that has occurred for us is that ESG in its broadest sense has gone from being the domain of experts and specialist departments to being the accountability of every single individual across the company,” Henry shares. This goes from employees on site, to managers of our assets, all the way up to the boardroom, with BHP’s board members playing a major role in sustainability. While management is developing and driving the processes to support ESG, the board helps to ensure BHP is being thoughtful about shifting stakeholders’ expectations and that management is doing what needs to be done to ensure that the company mitigates risk and also seeks to create opportunities for long-term value growth.
Translating an Internal Focus Externally
BHP has excelled at internally embracing ESG, and Henry has strived to take this focus externally as well. “When you’re running a big business, it is very easy for leaders to become insular and inwardly focused,” he says. “It’s more important than ever that we be able to sense what’s going on around us and incorporate that into our direction setting and decision making in the company.”
This external orientation is especially important, as there is ESG-related pressure is being felt “everywhere”—banks and investors, local communities and governments, the media and activists. “What we’re seeing in the mining industry is reflective of what we see playing out with broader society, where an undercurrent or concern can quickly become a movement that mobilizes,” he explains. “We have seen that play through in the MeToo movement, the Black Lives Matter movement and recently on indigenous cultural heritage and climate change.” The pace and reach of social movements are creating more expectations on companies.
These pressures are being felt across companies in the mining industry and have led to some cross collaboration—even with competitors. “You could be the best performing company, but if you’re the best company in what is perceived to be a bad bunch, because of the underperformance of a few, that’s going to hold you back,” Henry says. “We have a shared interest in lifting standards of performance for the whole of the sector.”
CEO SPOTLIGHT: Eduardo Bartolomeo – Vale
Out of Tragedy Springs a New ESG Focus
Eduardo Salles Bartolomeo became CEO of Vale S.A. in a tumultuous time. On the heels of the Brumadinho Dam collapse that killed 270 people, he stepped in as CEO. Two years later, Bartolomeo has been able to draw on lessons learned from that tragedy to redefine Vale’s purpose and infuse leading environmental, social and governance (ESG) practices into the heart of the company. “Everything we do from here on out begins with the tragedy,” Bartolomeo says. “It forced us to look at things in a totally different way, inside and out. It was obvious that we had to do two resets—safety and sustainability.”
Safety was the immediate concern, and Vale created a new position—Safety & Operational Excellence Executive Officer—and introduced two new pillars into its strategy—Safety & Operational Excellence and Pact with Society. “Our aim is to be the world-class benchmark for safety—we have measures of that that are not only in my long-term compensation but in my short-term compensation—to be safer, to be reliable, to be more people driven, and to be focused on the climate commitments we have,” Bartolomeo says.
From here, company leaders had a candid discussion about what the vision should be for Vale. “We asked ourselves, ‘what do we want to achieve, what are the business imperatives, what do we need to change in our culture and behaviors and what should be the outcome,’” Bartolomeo explains. This is how the vision for Vale was created, and Bartolomeo notes that it’s a shared vision driven by a single key point: the legacy we want to leave. Bartolomeo says that it’s about “how safe we are, how predictable we are, how we treat our people, how we treat the environment and how we share value.”
Culture Change: Bringing the Vision to Life
To deliver on this vision, Vale was going to need a major culture shift. The company was hyper-focused on execution and didn’t allow people to make mistakes. In addition, there was a company-wide sense that Vale was performing well (though the reality was there was room for improvement), which engendered a sense of egotism. “That culture of arrogance, of not being able to fail, creates all these other problems, such as a culture of fear, you can’t speak freely and you don’t collaborate,” Bartolomeo says.
To change the culture, the first issue to tackle was redefining performance, and this started with top leadership’s compensation. An example that Bartolomeo shares is when Vale was working to comply with the Paris Agreement, an international treaty on climate change. To do that, the company needed to reduce 33 percent of scope 1 and 2 emissions. “We created a Low Carbon Forum with everyone in the company and we said, ‘We have no idea how we are going to do this,’ which made leadership a little humbler and more inspired to collaborate,” Bartolomeo explains. And they were successful. “We were the first company to tie our long-term compensation with our ESG goals,” Bartolomeo says. “Almost 60 percent of my remuneration is long-term, and 20 percent of that is related to ESG.”
Secondly, Vale needed to create an environment where people were willing to learn and collaborate. Bartolomeo stresses the importance of this, noting: “We find that people don’t want to understand that they are a part of the culture. That they were groomed there, and that I am part of the culture. If I don’t transform myself, I won’t transform Vale. So, we need to push people to change, and really make it possible to have a culture of learning together.”
The company also broke down some of the hierarchy internally to encourage more collaboration. “We changed what we call ourselves – it used to be Executive Officers, now we call ourselves the Executive Committee,” Bartolomeo shares. “We changed our titles as part of becoming more approachable.”
Rebuilding Reputation
Mining companies, by the nature of their work, are often not held in high public regard when it comes to ESG, and the dam collapse further heightened negative perceptions about Vale. Bartolomeo contends that because of these negative views, it’s even more critical for mining companies to focus on ESG. “We are intrinsically an ESG company—we are not invited to go where we go, we go because that’s where the ore is,” he says. “We are an extractive activity and we have to do that environmentally like an ace, be extremely involved in our communities and we have to have a high level of governance to not allow tragedies like Brumadinho to happen.”
He adds that Brumadinho made Vale even more conscious about its ESG impact. “When you have loss of value, loss of faith, loss of trust, you know you have to be even better than the others because it’s the only way out of Brumadinho,” Bartolomeo says.
This has led to a greater effort to develop its territories, creating programs to foster local supply and local economic activities. “We need to create independence in the surrounding communities by generating local capacity that can attract and be applied to other businesses as well,” Bartolomeo notes.
COVID-19 also gave Vale an unexpected opportunity to help repair its reputation. Vale built numerous field hospitals and invested about R$500 million in COVID-related efforts across Brazil, Indonesia and Mozambique after asking the government how it could best help. “This wouldn’t have happened if Vale wasn’t aware of the need to help, thanks to our New Pact With Society pillar,” explains Bartolomeo.
Reshaping Vale’s Future
Vale has made progress over the last few years as it embedded ESG into its culture and strategy, though there are likely still some challenges ahead. But the company’s continued focus on collaboration, culture change and safety put it on the path to creating a better world. “I really want to look at back five to six years from now and see this top-notch company that delivers and that protects people, it’s well-respected and it’s admired for the good reasons,” Bartolomeo says.
Footnotes
30. It Starts with the CEO, Egon Zehnder, September 2021
31. Ibid
32. “How to Make the Most of a Chief Sustainability Officer,” INSEAD Knowledge, 18 August 2020
33. “Governance Webinar: AGM 2021”, Vale, 26 March 2021
34. “Cross Sector Leadership: Approaches to Solve Problems at the Scale at Which They Exist,” Stanford Social Innovation Review, Winter 2018
35. “Leadership: Are you connecting and collaborating?” INSEAD Knowledge, 27 July 2011
36. Systems Leadership for Sustainable Development: Strategies for Achieving Systemic Change, Harvard Kennedy School, September 2019
37. “The Ecosystem of Shared Value,” Harvard Business Review, October 2016 Issue
38. “New Captains of Consciousness: Infusing CEO Leadership with Social Responsibility and Accountability,” Egon Zehnder, July 2019
39. “Newmont Ranked Mining Industry Leader by Dow Jones Sustainability World Index,” Newmont Press Release, 10 September 2015
40. “Newmont Ranked as Top Gold Miner in the DJSI World Index for the Sixth Consecutive Year,” Newmont Press Release, 19 November 2020
