The challenge for CEOs today is to balance the immediate needs of their company against the requirements of long-term sustainability. This means not just turning profits but ensuring that, in an ever-changing environment, their organizations can prosper as well. The rise of the business sector provides such a challenge, making it pertinent for any leader to understand how to negotiate these pressures.
Pressure for Short-Term Results
For the most part, the pressure for short-term results usually comes from stakeholders who are short-term-oriented and include investors, employees, or customers. It has recently been reported that 78% of investors ranked quarterly earnings above long-term growth strategies. Concerned about short-term results gives the CEOs a propensity to make decisions that might continue to increase short-term gains but hurt the organization long-term.
For example, by cutting research and development spending, the firm would cut costs immediately at least in its books of quarterly accounts but, however, dampen innovation and competition prospects in the future.
However, in today’s age of social media and instant communication a company is under the scrutiny of critical eyes all day and night. One careless tweet or post can turn into overnight disastrous damage to the reputation of a company and its stock prices. CEOs then may feel pressed to act quickly to a shift in the marketplace or to the pulse of society; otherwise their vision for sustainability may become wiped out.
Sustainability: The Future
However, on the other hand, there is long-term sustainability, which becomes very important for businesses to follow. McKinsey conducted a study; they discovered that companies focusing more on sustainability perform far better than others regarding profits and shareholder value over time.
Thus, according to this, investment in sustainable practices- such as making contributions, for instance, by lowering carbon emissions or through a more transparent supply chain- benefits the earth but improves its overall performance financially.
Innovative Strategies: Investing in innovation is the need of the hour from the CEOs.
Ensuring employee development and nurturing customer relationships are other key requirements. For example, Unilever promised to source sustainably and to reduce waste in its supply chains. This pledge touches the sensibility of any environmentally conscious consumer but also reaches a broader group of consumers who are becoming more and more judgmental about where they put their money.
Finding the Right Balance
So, how might CEOs better balance these short-term imperatives with their longer term objectives? A two-pronged approach would prove effective: clearly defined short-term goals in concert with the creation of a sound long-term strategy ensure that short-term actions are aligned with the company’s overall vision.
Clear communication on a long-term vision and plan with the stakeholders can help the CEOs make them realize what can be done over the short term. Assuming that a CEO has chosen to invest heavily in various initiatives related to renewable energy, which currently offer no short-term benefit, then the communication of such intentions will keep the investors from running away from such an investment.
The other important thing to be taken into consideration is building up a company culture that has a concern for sustainability. Staff usually contribute their better plus to not only the short-term but also long-term goals if they are made aware of and believe in the long-term vision of the company. Companies like Patagonia, where sustainability is part of core values and resonates with employees and customers, are such examples.
Conclusion
CEOs have the pressure of producing short-term results while keeping organisations viable for the long run. Leaders can create sustainable organizations by using the dual-focus strategy, being effective in communication with stakeholders, and creating a culture which is sustainability-based. Sustainability thus does not represent a denial or postponement of meeting short-term pressures but actually calls for balancing these short-term pressures with sustainability demands.
Herein lies the key to success in the inevitable future ahead. In summary, by perfecting the art of balancing these two competing factors, those who succeed will not only add to the bottom line of their company but also positively contribute to society and the environment in general.
