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ESG Case Study: How corporate purpose strengthens Kellogg’s ESG communications with stakeholders

Natalie Runyon   Director / ESG content & Advisory Services / Thomson Reuters Institute

9 Jan 2023 · 5 minute read

The Kellogg Company aims to advance sustainable and equitable access to food through a new initiative that leverages its communications around its ESG activities

The attention of boards of directors are increasingly more “attuned to the importance of talent, culture, and connecting business strategy to purpose,” according to a recent Deloitte report . That means that board members continue to focus on environmental, social, and governance (ESG) issues, as well as concerns around talent retention and development, employee well-being, hybrid work environments, and the future of work.

While talent issues remain high on the board agenda for many companies, organizations need to do more to explicitly tie the well-being of their people and corporate purpose directly to corporate ESG activities on a consistent basis. Indeed, measuring social impact — the S in ESG — through the lens of people’s well-being is not yet mainstream, although it is gaining traction.

Multinational food manufacturing giant the Kellogg Company (Kellogg’s) is among those companies that consistently link their global purpose platform to their sustainability agenda and ensures their purpose is centered on the well-being of their employees and other stakeholders. More specifically, the company, through its Kellogg’s™ Better Days Promise , aims to advance sustainable and equitable access to food by addressing the intersection of well-being, hunger, sustainability, and equity, diversity & inclusion to create better days for 3 billion people by the end of 2030.

Enacting a multi-pronged stakeholder engagement strategy

Kellogg’s also embeds its corporate purpose into its growth strategy. This definitive integration of purpose and growth dates back a century to its founder and is well entrenched within the organization’s business and culture today, says Stephanie Slingerland , Senior Director of Philanthropy and Social Impact at the Kellogg Company.

The Better Days Promise is a key element of Kellogg’s Deploy for Balanced Growth strategy, which includes consideration of the varying sustainability-related preferences, needs, and desires of the company’s multiple stakeholder groups — employees, customers, consumers, investors, and the communities in which the company is based and operates.

With the recognition that the “company should and can do well by doing good,” Kellogg’s has taken a proactive approach to engaging with stakeholders to communicate how its corporate ESG strategy remains central to its operations and growth strategy through a people well-being lens, Slingerland explains.

Kellogg’s has seen positive implications by intentionally collaborating with stakeholders to integrate the organization’s corporate purpose and social impact into its ESG strategy in a variety of ways, including:

• Cross-stakeholder ESG initiatives — Honoring World Food Day is a month-long event at Kellogg’s. It is an opportunity for the company to engage with many of its stakeholders, including food banks, retail partners, and employees, through workplace and community volunteering opportunities, donation drives, communications, and events.
• Employees — Kellogg’s employees regularly engage with ESG initiatives over the course of the year. Indeed, cultivating employees as ambassadors through the promotion of the Better Days Promise to employees’ networks, customers, and partners enables a multiplier effect on the company’s ESG communications and social impact.
• Consumers & community — Kellogg’s has a long history of involving consumers in its philanthropic activities. In the summer of 2022, for example, the company’s launch of the Build for Better program and competition, executed in partnership with Minecraft and the nonprofit KABOOM!, allowed consumers to design a virtual playground on Minecraft and submit it for the chance to see it built in real life. The winning design was built at a Boys and Girl Club of America in Marietta, Georgia in November 2022.
• Customers — Likewise, the company’s retail customers recognize the importance of ESG initiatives and are eager to partner on Better Days Promise. For example, Kellogg’s collaborated with a retailer to launch Kellogg’s InGrained ™, a program that helps rice farmers reduce climate impact. Another retail partner, recognized Kellogg’s commitment, investment, and partnership on philanthropic, sustainability, and well-being initiatives, named the company the first-ever ESG Supplier of the Year.

Storytelling & data are essential

Data and storytelling are key to executing holistic, multi-pronged communications to a wide variety of stakeholders. While it is sometimes tricky to address all audiences’ preferences and expectations, “sharing stories about the people behind our strategy who have such a passion for their work, or the people that the initiative impacts, resonates the most,” Slingerland says. “Data helps to contextualize the impact of the stories.”

One of the most common challenges in implementing an ESG engagement strategy is how to influence late-comers or those who question the validity of the widespread attention that ESG is receiving. To make progress, companies should stay focused and highlight the positive impact company initiatives can have on the surrounding communities, and how these initiatives help drive company’s growth, Slingerland advises.

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Over 70% of Companies Have Abandoned Acquisitions Over ESG Concerns: Deloitte Survey

Sustainability considerations are becoming increasingly central in the mergers and acquisitions dealmaking process, with more than 70% of M&A leaders reporting abandoning potential acquisitions over ESG concerns, and a vast majority saying they would be willing to pay more for targets with strong ESG attributes, according to a new survey released by global professional services firm Deloitte.

For the report, Deloitte surveyed 500 M&A leaders from corporations with at least $500 million in revenue and private equity firms with at least $1 billion in assets under management, across North America, Europe & Middle East and Asia Pacific regions.

The survey found that ESG factors were becoming increasingly integrated into the M&A process, with a growing impact on target considerations, due diligence, final decision making and valuation, particularly as sustainability-related data becomes more readily available, and as companies evolve their understanding of ESG issues.

For example, while 99% of respondents reported that their organizations measure the potential impact of an M&A transaction on their ESG profile, up from 92% in a prior survey 2 years ago, 57% reported that they do so with clearly defined metrics, up from only 39% in the earlier survey. Similarly, more than 90% said that they have a high or very high level of confidence in accurately evaluating a potential acquisition target’s ESG profile, compared to less than 75% in the 2022 survey.

Tanay Shah, M&A ESG Leader at Deloitte, said:

“Advancements in the strategies and tactics used to improve ESG footprints have enabled significant progress in the frequency in which ESG is considered as part of a standard pre-close process for both corporates and PEs.”

The study found that ESG issues were already having a significant, and growing, impact on dealmaking decisions with 72% of respondents reporting that they have decided not to proceed with a potential acquisition due to concerns about the target’s ESG profile, up from less than half of respondents who said this in the prior survey. These results were mirrored by respondents on the sell-side of transactions, with 66% reporting that they have been forced to abandon a divestiture for ESG-related reasons, compared with 33% in the prior survey.

Brooke Thiessen, Partner, Infrastructure M&A, Financial Advisory at Deloitte Canada, said:

“Abandoning a deal is certainly not an easy decision. While commercial or operational concerns are often the main reasons for walking away from a deal, ESG red flags are increasingly being considered with the same level of seriousness to either pause or end deal activity.”

Similarly, the survey found an increasing influence of ESG factors on M&A valuation. 83% of respondents said that they would be willing to pay a premium of at least 3% for an asset with a high ESG profile, or one that improves their organization’s ESG profile, compared to only 62% in the 2022 survey, and only 1% said that they would not pay any premium for a high ESG profile, compared to 8% who reported this in the prior survey. Additionally, 67% said that they would seek a discount of at least 3% due to a negative ESG profile, up significantly from only 27% in the prior survey.

In the report, authors Deloitte Partner Briann Lightle, Managing Director Sarah Corrigan, and Senior Manager Ketiwe Zipperer wrote:

“Overall, ESG appears to be more deeply embedded in the M&A process than ever before, with a greater recognition among leaders that it is a lever for measuring, protecting, and creating value. One reason for this trend is that ESG data is now better defined, captured, and measured, thus, allowing metrics to be more precise and better understood than they were only a few years ago. Understanding ESG data starts with determining material ESG issues, which is another aspect of organizations’ enhanced maturity and sophistication over recent years.”

Click here to access the survey.

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Deloitte’s Pixel: A Case Study on How to Innovate from Within

If you’re an intrapreneur — or aspire to be one — this episode is for you.

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In 2014, Deloitte launched Pixel to facilitate open talent and crowdsourcing for client engagements that need specific expertise — like machine learning or digital production. But uptake across the organization was slow, and some internal stakeholders resisted outsourcing consulting work to freelance talent.

In this episode, Harvard Business School professor Mike Tushman discusses his case, “Deloitte’s Pixel (A): Consulting with Open Talent,” which breaks down the challenges the firm’s leadership faced in growing Pixel within the firm — and how they overcame them.

He explains how the firm selected a leader for Pixel who already had credibility and strong social networks within Deloitte. He also shares how Pixel established credibility by collaborating with early adopters within the firm to generate positive client results.

Key episode topics include: leadership, disruptive innovation, innovation, organizational change, talent management, business consulting services, crowdsourcing, freelance talent, intrapreneurship.  

HBR On Leadership curates the best case studies and conversations with the world’s top business and management experts, to help you unlock the best in those around you. New episodes every week.

• Listen to the original Cold Call episode: Transforming Deloitte’s Approach to Consulting (2022)
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• Discover 100 years of Harvard Business Review articles, case studies, podcasts, and more at HBR.org

HANNAH BATES: Welcome to HBR on Leadership , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock the best in those around you.

Deloitte is one of the largest consulting firms in the world.  But, like many established firms, innovation is a challenge.

In 2014, Deloitte launched “Pixel” to   – like machine learning or digital production. But uptake across the organization was slow, and some internal stakeholders resisted outsourcing consulting work to freelance talent.

In this episode, Harvard Business School professor Mike Tushman breaks down the challenges Deloitte’s leadership faced in growing Pixel within the firm – and how they overcame them. You’ll learn how the firm selected a leader for Pixel who had credibility and strong social networks within Deloitte. You’ll also learn how Pixel established its own credibility by collaborating with early adopters within the firm to generate positive client results. And you’ll learn how Deloitte’s senior leaders built a narrative of innovation and adaptation around Pixel.

If you’re an entrepreneur – or an aspiring one  – this episode is for you. It originally aired on Cold Call in April 2022. Here it is.

BRIAN KENNY: There are few topics in business media covered as widely and as deeply as innovation. A Google search on the term business innovation yields 672 million results. Harvard Business Review alone has close to 6,000 active articles on this topic. It’s the subject that never gets old because it’s inherently about change. Oh, and it’s really hard to do, especially if you’re in a place that is set in its ways. Management guru, Peter Drucker, famously said, “Innovate or die.” And there are far too many examples of firms that fail to follow that advice and pay the price. But in this episode, we’ll focus on a firm that’s trying to get it right. Today on Cold Call , we’ll discuss the case entitled, “Deloitte’s Pixel: Consulting with Open Talent” with Professor Mike Tushman. I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Presents Network. Mike Tushman’s work focuses on relations between technological change, executive leadership, and organization adaptation. And he has just published a new book called Corporate Explorers: How Corporations Beat Startups at the Innovation Game . That sounds exactly like the topic we’re going to discuss today, Mike. Thanks for joining me.

MICHAEL TUSHMAN: Hey, Brian, it’s so great to be with you.

BRIAN KENNY: Yeah. It’s fun to have you on the show. I want to talk about the case and I want to hear how those ideas relate to the ideas in Corporate Explorers , because there’s obviously a lot of crossover. We’ve had cases before that touch on this topic of how to innovate from within when you are in a well-established firm. And I think it’s so timely and relevant because many of our listeners are probably working in large established firms and they want to know how to innovate. They want to be the person who brings those energy and ideas to the surface. So, thanks for being here today to talk about it.

MICHAEL TUSHMAN: Hey great, Brian, looking forward to engaging you and hopefully your audience in our work on the corporate explorer.

BRIAN KENNY: Awesome, let’s just dive right in. Let me ask you to tell us what is the central theme of the case and what’s your cold call when you start the case discussion in the classroom.

MICHAEL TUSHMAN: The central theme of the case, and indeed the central theme of my course, is to help our students build organizations that don’t drop in the face of outside technical change. That’s the basic point of my course is to empower my students with the research in my field, so they don’t fall prey to the sickness that most incumbent organizations have when the world changes sharply, whether it’s because of technology or because of COVID. My cold call is a double barrel cold call, Brian. The cold call to Balaji, Balaji Bondili, everybody, is: it’s either go big or go home. What are you going to do? And why are you going to do it? That’s my Balaji cold call to the corporate explorer.

BRIAN KENNY: Yeah.

MICHAEL TUSHMAN: The other cold call I have is I ask the leaders of Deloitte Consulting, and by the way, this is a very, very successful organization, they’re at the top of the game, and I’m asking Matt David, who’s the head of Deloitte’s consulting business, why is he spending so much time on experimentation? You’ve got a great franchise. You’re doing super well in traditional consulting. Why so much time on experimentation? Those are my two cold calls, Brian.

BRIAN KENNY: All right. That’s a great way to start it off. And I love the idea of role playing. Maybe we should talk more about that as we get into the conversation and I know, you told me just before we started here, that you taught the course yesterday.

MICHAEL TUSHMAN: Yeah.

BRIAN KENNY: And Balaji was here, so you’ve got all these fresh ideas percolating. So, this is going to be great. This is like right in the moment. Tell us a little bit about how this course relates to your research and to the ideas in Corporate Explorers .

MICHAEL TUSHMAN: My research has been from the get go on how incumbents deal with outside technical change. I went to Northeastern University as an undergraduate. I was an engineer co-op and I worked at a firm that was called General Radio, GenRad, and it was filled with these great, fantastic engineers going back and forth, talking about the celebration of how great General Radio was, outside technical change, all of a sudden my carpool friends don’t have a job. I was totally scarred by this. How could a firm filled with fantastic engineers fail so quickly? My model was you have great technical talent, wow, you can do anything. Well, it turns out that they were strangled by the arrogance of success. And I have been studying that for decades now with my students. So, the point of my course is to help students understand several things, Brian. One is this notion of dynamic capabilities are rooted in playing two games well, simultaneously. A game of executing your existing strategy better than anybody on the planet, that’s one game. The second game is exploring into unknown futures. To play this explore and exploit game simultaneously, and those strategies are inconsistent. So, all of my work has been helping senior leaders deal with paradox and inconsistency. General Radio couldn’t do it, all these engineers were laid off. Second theme of my work and my course is organizations don’t change through incremental change by itself. They change through both incremental and punctuated change and those punctuated changes occur at these discontinuities. The third observation is the way you play this game is you don’t spin out the explore option. You have these ambidextrous organizations that explore and exploit simultaneously and the ambidextrous leader is the one who hosts contradiction.

MICHAEL TUSHMAN: And finally, the core idea of my book with Andy Binns and Charles O’Reilly, Corporate Explorer , is that it’s both top down, it’s from the C-level or the general manager level, and the entrepreneurs below in creating a social movement, so that firms evolve in this punctuated way.

BRIAN KENNY: And Deloitte’s a really interesting one for you to look at with regard to these topics. What’s the problem that they’re trying to solve in the context of this case?

MICHAEL TUSHMAN: What’s so unique about Deloitte is they actually don’t have a problem to solve. They are doing rockingly well in the high-end strategic consulting business. They have an opportunity to destabilize the consulting industry, at least according to the senior leaders, if they can figure out a new way of doing consulting that complements their existing way, they have the opportunity to disrupt the industry to their favor. So, it’s not that they have a problem to solve. It’s one of these rare examples of an opportunistic move by a really enlightened senior team to both do old-fashioned consulting really well and to do pixelated consulting really well simultaneously. And that is the challenge I want my students to leave prepared for is to lead into these opportunistic moments, which by the way, is partly organization renewal, Brian.

MICHAEL TUSHMAN: But it’s also personal renewal. It’s the Matt Davids of the world personally renewing how they lead because now they’re hosting this contradiction: old fashioned consulting, new consulting simultaneously.

BRIAN KENNY: Can you put a finer line on that? What is the difference between sort of old fashioned consulting and pixelated consulting?

MICHAEL TUSHMAN: Old fashioned consulting, the edge of this case, old fashioned consulting, at least at Deloitte, is Deloitte would… They had an HR strategy of hiring from the best business schools and then they train and socialize these MBAs to be trusted advisors, to be really brilliant with expertise, and information, and synthesizing that information in front of a client.

BRIAN KENNY: Yep.

MICHAEL TUSHMAN: And they do really well. That’s a business model that works.

BRIAN KENNY: We know a little about that here at Harvard business school.

MICHAEL TUSHMAN: Right. We sure do. Pixelating is completely different, Brian. Pixelating, what Balaji brings to the party is go to a client and say, “Here’s your strategic problem,” and they break it into components. And then they send the components of the work to freelance talent, gig talent, talent who in 100 years wouldn’t work for Deloitte, machine learning people, digital people, AI people, who don’t want to work for Deloitte. Balaji promises these really profoundly powerful platforms that bring talent to a client fast and inexpensive. That’s the difference, rather than having a bunch of really powerful consultants work on a project at a very high rate, Balaji gets better, faster, and less expensive client service with freelance talent. And it turns out it works really well. And the edge of the case is: this is really an identity threat at Deloitte.

MICHAEL TUSHMAN: It’s an identity threat of the consultants who own problems and solve problems, and it’s an identity threat to the firm because after all we’re Deloitte and we have this brand, and can we retain this brand and can we retain the identity of our professionals even while we do this fundamentally different form of consulting.

BRIAN KENNY: Yeah, and it’s a great example of disruption happening right from within, so that’s the tension for sure in the case. And I want to talk a little bit more about that. Deloitte founded an Office for Innovation to sort of drive this, talk a little bit about that office, and I’d love to hear more about Balaji, background, and why he decided to take this on. This seems like a really dicey move for somebody who’s trying to build a career within the firm.

MICHAEL TUSHMAN: Yeah. What’s interesting about Balaji Bondili is he is a professional interested in client services. And I don’t want to speak for Balaji, but my sense of Balaji is he’s not anchored to Deloitte. He’ll do this work wherever. And I think he has found a way to do great professional service work, great client service work, and has enough of an entrepreneurial flare to push this inside of Deloitte. What we’ve learned in our , book is there are a whole bunch of people like Balaji who tend to get ignored, is that they have the passion for entrepreneurialism. They have great change management skills and are able to help skeptical, in this case, partners change the coding of the work from a threat to an opportunity. And that is relatively rare. When a corporate explorer is able to help others who code that person as a threat to say, “Hey, wait a minute. Actually, I can do better client service work and I can do it too.” The beauty of Balaji is he had the entrepreneurial edge and he wasn’t in their face. He had a lot of respect for the partners at Deloitte and brought them a tool that could help them do their work better. So, partly it’s bottom up, Brian, and partly he could not have done this and he knows it, he could not have done it without really strong senior support with Matt David. What is,nice about the Deloitte case, Brian, is it starts with really senior level support, that is the head of U.S. Deloitte says we need an Office of Innovation, tax, audit, consulting. We need a view into the future and they create this Office of Innovation, which hosts roughly 60 experiments, Brian. And then Amy Feirn says in consulting, “I’m going to take some of those and bring them into consulting.” That was Balaji. There were maybe 20 experiments inside just consulting. So, the Office of Innovation was a corporate level hatchery, if you will. We talk about ideation and incubation going to scale, they incubate a bunch of things at corporate and then some of them are dropped down into the business units, tax, audit, in this case consulting. So, the corporate level Office of Innovation provides the overall senior support that permitted Matt David in consulting to experiment, which in turn permitted Balaji to be the corporate explorer.

BRIAN KENNY: What kind of a welcome did Balaji receive as he started to socialize this idea with the rank and file consultants, the people who were leading the client work?

MICHAEL TUSHMAN: It was a third of the partners said, “Hey, Balaji, this could be fantastic.” Two thirds said, “Please go away.” And it was either aggressive please go away or was passive aggressive, “Hey, we’ll study this Balaji.” And so, the nub of the case is if your Balaji, who knows he has something big, do you try to go big inside Deloitte or do you leave? Do you go home? And if you stay, what do you need from the leadership community to make this thing real?

BRIAN KENNY: You talked about some of the pilots that they launched and I imagine the pilots were a way to demonstrate the efficacy of this approach to people who were leading client teams and to get their buy-in,that they would think yeah, I can have it both ways. Right? Can you give some examples of what some of those pilots were? Because I’m curious again, about the pixelated approach and how different that sounds to me than what I’m familiar with having worked with consultancies over the years.

MICHAEL TUSHMAN: So, Balaji was pressed when Pixel was brought down into consulting to provide case and points, data points, will this thing work, will clients pay for this? What are client’s response to this? You’re not using Deloitte partners, you’re using freelance talent. Would clients buy this? They had projects with Richard Walker, who’s one of the individuals in the case, who was a partner in the banking piece of consulting, who actually loved it. And they would take strategy projects for one of their major clients, and it had a big AI machine learning piece to it, and they pixelated it and they got a great solution to this banking strategy. And the client thought it was better. Once Balaji had two or three of these examples, skeptical partners said, “Hey, wait a minute. What’s happening over here in banking with Richard Walker? And once credible leaders across the organization picked this up, Brian, then it took off like wildfire.

BRIAN KENNY: If you look at the tension that’s underlying this case, I have to admit, I probably would be in one of those two thirds, that group of two thirds consultants, who is like, wait a second, this is a threat to me and my role. If we’re going to have gig consultants coming in and doing all this client work, and it’s going to cost less, and they’re going to deliver a better product, that to me sounds like a real danger to my career. How did Balaji manage some of that tension that I’m sure he was hearing about from within the firm?

MICHAEL TUSHMAN: Yeah, that is the exact nub of my work on structural ambidexterity, Brian. It’s up to the corporate explorer to help these powerful partners recode this from a threat to an opportunity. Partly Balaji can do that by making it easy by not being in their faces, by being very solicitous of the partners need to do great client service work. The edge for your question is with Matt David, who was the leader of the consulting business, who had to create a narrative in his organization of we’re going to do the old kind of work, traditional consulting work better than anybody in the planet, and we’re going to go do this new work because the future is not the past and we’re going to experiment into the future. That’s the challenge of my ambidextrous leader, who is Matt David, who is pushing the organization that can celebrate the past, and can own the future, and they’re contradictory. That’s what the Matt Davids of the world have to bring to the party. And one of the things we’ve learned, and it’s a big part of my work with Charles O’Reilly and with Andy Binns, is one of the roles of the Matt Davids is to help create an identity for their firm or my friend, Ranjay Gulati, talks about purpose, as we aspire to be the world’s greatest consulting firm. This is my words, not theirs.

MICHAEL TUSHMAN: And if you’re Matt David with that kind of aspiration, or Srikant at HBS, we’re here to create leaders who make a difference in the world. Well, we can do that through Advanced Management Program (AMP) on campus and we can do that through AMP online.

MICHAEL TUSHMAN: And yeah, they’re completely different architectures, and structures, and cultures, but that’s what we’re all about, creating leaders who make a difference in the world. That kind of overarching purpose or identity helped Matt David at Deloitte with a narrative to his powerful partners to say, “Hey everybody, we’re going to embrace the future, and we’re going to embrace the past, and yes, it’s contradictory. We’re going to do it together to be the world’s greatest consulting firm.”

BRIAN KENNY: Yeah. And that takes leadership that is not just visionary, but also really client centric so that they’re not going to let the politics, the internal politics of the firm prevent them from pushing this forward because they know it’s the right thing in the end for client service.

MICHAEL TUSHMAN: When you have that kind of aspiration, world class client service, or the work I did with one of my doctoral students, Hila Lifshitz, on NASA. One of the things they found is that the scientists at NASA rejected open innovation, open research. And as soon as the leader said, “Hey, we’re here not to do great research, we’re here to keep astronauts safe in space,” that new coding permitted these scientists to do research the old fashioned way and the new way.

MICHAEL TUSHMAN: So, that passion, that identity, that strategic intent is a real important piece of my research of structural ambidexterity and how to make that work and is a big part of this Deloitte Pixel case.

BRIAN KENNY: Do you think… This is probably a question with no singular answer, but I’m going to ask it anyway. Do you think it’s harder to be an entrepreneur within a firm or to be an entrepreneur who’s starting your own thing and kind of putting it all together on your own?

MICHAEL TUSHMAN: I think it’s both really difficult, Brian. The challenge for the corporate explorer is less the capital markets, because the reason he’s going to do it at Deloitte is because Deloitte has the cash to fund it. But the risk is much more, can you get an organization to change?

BRIAN KENNY: Mm-hmm (affirmative).

MICHAEL TUSHMAN: Can you create a social movement? And the research is really clear, exploit kills explore. The better you are at doing what you’re currently doing, the worse you are at exploring. And the challenge for the corporate explorer is to create a social movement, when the powerful actors don’t want to do it. So, you can’t do it on your own, you have to do it both top down and bottom up. And the big aha for me in this research over the past 10 years, it’s not just top down, because we have many examples of top down leaders that get stuck because they’re no corporate explorers. So, it’s a combination of top down and bottom up that creates this social movement around change.

BRIAN KENNY: Let’s say we’ve got some senior executives that are listening to this podcast right now and they’re thinking, wow, I better get on this, how do they identify a corporate explorer within their midst? Do you advertise that as a new job? Or how do you think about that?

MICHAEL TUSHMAN: Wow. Great question. Our most successful corporate explorers are those individuals who have legitimacy and credibility inside your firm.

MICHAEL TUSHMAN: The combination of credibility, this individual has the technical capability, has the social networks in the firm, and they have an edge about them, an entrepreneurial edge around the future, those are the corporate explorers that work. What we know from our research, Brian, is the extent to which you go out and hire someone like that and bring them in, they’ll almost always fail.

BRIAN KENNY: Why is that?

MICHAEL TUSHMAN: Because they don’t have the social networks, they don’t have the credibility, they don’t have the legitimacy inside the firm. The beauty of Balaji at Deloitte is he was known quantity. People knew him and trusted him and he had the degrees of freedom to play this exploration game and then build these networks.

BRIAN KENNY: Okay. Let me ask the same question in the inverse. If I feel like I am that person that you just described and I’m listening to this podcast, how do I create that sense of urgency, create that burning platform to my leadership team so that they know we got to do this?

MICHAEL TUSHMAN: Yeah. Yeah, really great.

BRIAN KENNY: This is what I call a cold call, Mike. I’m putting you on the hot seat.

MICHAEL TUSHMAN: Yeah. Yeah, no, this is a great, great question. For those explorers who have a potentially great idea, and again, ideation and incubation circa 2022, I think is relatively easy to do. It’s relatively easy to get ideas, it’s relatively easy to incubate either inside a firm or outside a firm. It’s really hard to pivot to scale whether you’re an entrepreneur on your own or an entrepreneur inside the firm.

MICHAEL TUSHMAN: So, to me, it’s the, of the Balajis of the world, the possible set of corporate explorers, can you find an organization that has the cash, the willingness, and has the identity of playing multiple games well simultaneously? They’re comfortable with today, but they’re really, really uncomfortable with the uncertainty of tomorrow and therefore they want to create it. If I can find those kinds of leaders in incumbent firms, those are the ones I want to work with if I’m a corporate explorer. If I can’t find them, I’ll stick on my own.

BRIAN KENNY: Mike, this has been a great conversation. I can’t let you go without asking one more question, which is, if you want our listeners to remember one thing about the “Deloitte” case and about Corporate Explorers, what would that be?

MICHAEL TUSHMAN: You cannot get to the future by doing what you have done in the past. It’s imperative that you excel in what you’re currently doing and create the future and that’s what the role of corporate explorers are. They help you create the future and to do that, it’s the structural ambidexterity, which is pretty straightforward, structure is structure, but that link to a purpose and identity that permits contradiction to exist in your organizations. That’s my sort of long-winded answer to your short question, Brian.

BRIAN KENNY: Mike Tushman, thanks so much for being here today to talk about the case.

That was Harvard Business School professor Mike Tushman – in conversation with Brian Kenny on Cold Call . Tushman is coauthor of the book Corporate Explorer: How Corporations Beat Startups at the Innovation Game.

We’ll be back next Wednesday with another hand-picked conversation about leadership from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. When you’re ready for more podcasts, articles, case studies, books, and videos with the world’s top business and management experts, you’ll find it all at HBR.org.

This episode was produced by Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Music by Coma Media. Special thanks to Maureen Hoch, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.

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Gabriela Salinas and Jeeva Somasundaram

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

In April this year, Hein Schumacher, chief executive of Unilever, announced that the company was entering a “new era for sustainability leadership”, and signalled a shift from the central priority promoted under his predecessor , Alan Jope.

While Jope saw lack of social purpose or environmental sustainability as the way to prune brands from the portfolio, Schumacher has adopted a more balanced approach between purpose and profit. He stresses that Unilever should deliver on both sustainability commitments and financial goals. This approach, which we dub “realistic sustainability”, aims to balance long- and short-term environmental goals, ambition, and delivery.

As a result, Unilever’s refreshed sustainability agenda focuses harder on fewer commitments that the company says remain “very stretching”. In practice, this entails extending deadlines for taking action as well as reducing the scale of its targets for environmental, social and governance measures.

Such backpedalling is becoming widespread — with many companies retracting their commitments to climate targets , for example. According to FactSet, a US financial data and software provider, the number of US companies in the S&P 500 index mentioning “ESG” on their earnings calls has declined sharply : from a peak of 155 in the fourth quarter 2021 to just 29 two years later. This trend towards playing down a company’s ESG efforts, from fear of greater scrutiny or of accusations of empty claims, even has a name: “greenhushing”.

Test yourself

This is the fourth in a series of monthly business school-style teaching case studies devoted to the responsible business dilemmas faced by organisations. Read the piece and FT articles suggested at the end before considering the questions raised.

About the authors: Gabriela Salinas is an adjunct professor of marketing at IE University; Jeeva Somasundaram is an assistant professor of decision sciences in operations and technology at IE University.

The series forms part of a wider collection of FT ‘instant teaching case studies ’, featured across our Business Education publications, that explore management challenges.

The change in approach is not limited to regulatory compliance and corporate reporting; it also affects consumer communications. While Jope believed that brands sold more when “guided by a purpose”, Schumacher argues that “we don’t want to force fit [purpose] on brands unnecessarily”.

His more nuanced view aligns with evidence that consumers’ responses to the sustainability and purpose communication attached to brand names depend on two key variables: the type of industry in which the brand operates; and the specific aspect of sustainability being communicated.

In terms of the sustainability message, research in the Journal of Business Ethics found consumers can be less interested when product functionality is key. Furthermore, a UK survey in 2022 found that about 15 per cent of consumers believed brands should support social causes, but nearly 60 per cent said they would rather see brand owners pay taxes and treat people fairly.

Among investors, too, “anti-purpose” and “anti-ESG” sentiment is growing. One (unnamed) leading bond fund manager even suggested to the FT that “ESG will be dead in five years”.

Media reports on the adverse impact of ESG controversies on investment are certainly now more frequent. For example, while Jope was still at the helm, the FT reported criticism of Unilever by influential fund manager Terry Smith for displaying sustainability credentials at the expense of managing the business.

Yet some executives feel under pressure to take a stand on environmental and social issues — in many cases believing they are morally obliged to do so or through a desire to improve their own reputations. This pressure may lead to a conflict with shareholders if sustainability becomes a promotional tool for managers, or for their personal social responsibility agenda, rather than creating business value .

Such opportunistic behaviours may lead to a perception that corporate sustainability policies are pursued only because of public image concerns.

Alison Taylor, at NYU Stern School of Business, recently described Unilever’s old materiality map — a visual representation of how companies assess which social and environmental factors matter most to them — to Sustainability magazine. She depicted it as an example of “baggy, vague, overambitious goals and self-aggrandising commitments that make little sense and falsely suggest a mayonnaise and soap company can solve intractable societal problems”.

In contrast, the “realism” approach of Schumacher is being promulgated as both more honest and more feasible. Former investment banker Alex Edmans, at London Business School, has coined the term “rational sustainability” to describe an approach that integrates financial principles into decision-making, and avoids using sustainability primarily for enhancing social image and reputation.

Such “rational sustainability” encompasses any business activity that creates long-term value — including product innovation, productivity enhancements, or corporate culture initiatives, regardless of whether they fall under the traditional ESG framework.

Similarly, Schumacher’s approach aims for fewer targets with greater impact, all while keeping financial objectives in sight.

Complex objectives, such as having a positive impact on the world, may be best achieved indirectly, as expounded by economist John Kay in his book, Obliquity . Schumacher’s “realistic sustainability” approach means focusing on long-term value creation, placing customers and investors to the fore. Saving the planet begins with meaningfully helping a company’s consumers and investors. Without their support, broader sustainability efforts risk failure.

Questions for discussion

Read: Unilever has ‘lost the plot’ by fixating on sustainability, says Terry Smith

Companies take step back from making climate target promises

The real impact of the ESG backlash

Unilever’s new chief says corporate purpose can be ‘unwelcome distraction ’

Unilever says new laxer environmental targets aim for ‘realism’

How should business executives incorporate ESG criteria in their commercial, investor, internal, and external communications? How can they strike a balance between purpose and profits?

How does purpose affect business and brand value? Under what circumstances or conditions can the impact of purpose be positive, neutral, or negative?

Are brands vehicles by which to drive social or environmental change? Is this the primary role of brands in the 21st century or do profits and clients’ needs come first?

Which categories or sectors might benefit most from strongly articulating and communicating a corporate purpose? Are there instances in which it might backfire?

In your opinion, is it necessary for brands to take a stance on social issues? Why or why not, and when?

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Digital transformation, absorptive capacity and enterprise esg performance: a case study of strategic emerging industries.

Share and Cite

Li, W.; Zhang, M. Digital Transformation, Absorptive Capacity and Enterprise ESG Performance: A Case Study of Strategic Emerging Industries. Sustainability 2024 , 16 , 5018. https://doi.org/10.3390/su16125018

Li W, Zhang M. Digital Transformation, Absorptive Capacity and Enterprise ESG Performance: A Case Study of Strategic Emerging Industries. Sustainability . 2024; 16(12):5018. https://doi.org/10.3390/su16125018

Li, Wenjun, and Mu Zhang. 2024. "Digital Transformation, Absorptive Capacity and Enterprise ESG Performance: A Case Study of Strategic Emerging Industries" Sustainability 16, no. 12: 5018. https://doi.org/10.3390/su16125018

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