Wharton@Work

December 2011 | Senior Leadership

Learning the Business of Sustainability

In 1995, Nespresso was one of the fastest-growing business units of the Nestlé organization. Its individual-portion coffee machines, and the coffee capsules they required, had created a new market with international appeal. But Nespresso faced a critical barrier to growth: as consumer demand grew, sourcing high-quality coffee became increasingly difficult.

Their supply-chain woes developed at the same time that NGOs such as Oxfam and Heifer International were working to educate the public about the plight of coffee farmers. Nespresso needed a new, reliable supply chain that would improve conditions for growers. In 2003, it created the AAA Sustainable Quality Program with three partners: two coffee suppliers and Rainforest Alliance, an NGO. Four years later, the program included 14 partners in five countries, and Nespresso sales had nearly quadrupled.

Nespresso learned that to remain sustainable as a business, they had to embrace sustainability. It’s not an uncommon lesson, but remains one that seems antithetical to many business leaders. While the challenges vary, the reality is that most organizations will face sustainability issues. “These issues are now part of the fabric of doing business,” says Peter Fader, Faculty Director of Wharton's Executive Development Program (EDP). “You can’t ignore it.”

Fader continues, “It’s not enough to throw money at it or hire someone to deal with it so you can sleep at night. Today’s leaders must be well versed in and equipped to handle sustainability. Some of these issues could threaten an entire organization if they’re not handled with a blend of IQ and EQ.” For that reason, EDP participants work through a strategic simulation in which they must think about their commitment to sustainability, and make choices about how much they are willing to pay to go green. The simulation addresses many of the complexities and tough tradeoff decisions that senior leaders face every day, but, as Fader notes, participants deal with the challenges in a very safe environment. “You can make mistakes and learn from them here in the program, rather than in an actual business situation.”

The Environmental Health and Sustainability Director of a multinational aerospace company recently attended EDP. “The simulation was a great experience,” she notes. “You’re in a group of dedicated people who all want to learn together. We were able to share our knowledge and experience with team members who took on roles in our usual areas of expertise. On our team, the sustainability director position was taken by someone who had never worked in this area, and I was able to help him go confidently into meetings with the NGO. I took the role of operations/production manager, and was surprised at how quickly and confidently I could make decisions given the time pressure.”

She continues, “We had some financial whizzes in our group who happily walked me through the decisions they were making and the data they were based on. That exposure to financial statements and balance sheets was not something I would have in my current position. We learned first-hand, very quickly, how to form a high-functioning team. The simulation condenses a normal work period into an intense few hours, and decisions must be made and acted upon very quickly. There was no room for ‘maybes.’ It mirrored the complexity of sustainability and the tradeoffs you have to consider.”

The issue of sustainability extends throughout many aspects of EDP. Fader explains, “It’s woven into other decisions and other considerations. There’s no one session about sustainability — we don’t frame it as an issue on its own — because it runs across many parts of business acumen. It is part of the discussion in marketing, finance, ethics, and leadership.” And that discussion is initiated not only by Wharton faculty, but by participants as well. The aerospace executive says, “Because my position as Environmental Health and Sustainability Director is relatively new in my company (and many others), it was great sharing what I've learned over the past two years in shaping the position. Ultimately, sustainability can and should be integrated into the business and add value.”