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Sustainability and ESG in Family Enterprises

Let’s Talk Family Enterprise Podcast Episode #58

Host: Steve Legler
Guest: Pramodita Sharma

Host Steve Legler speaks with Professor Pramodita Sharma about sustainability and how family enterprises are uniquely placed to take advantage of business trends in this area. Pramodita shares inspiring stories based on her research, and points family businesses and their advisors into some promising directions.

Let’s talk family enterprise explores global ideas, concepts and models that help family enterprise advisors better serve their family clients, brought to you by family enterprise Canada. All views Information and opinions expressed during this podcast are solely those of the individuals involved and do not necessarily represent those family across Canada.

Hello, and welcome to another episode of the less talk family enterprise podcast. My name is Steve Legler. It’s great being your host once again. This month we’ll be discussing a topic that seems very much in vogue in the business world in general, sustainability and ESG. Will we’ll look at how family enterprises can be especially effective in this area. Our guest is Professor parameter Sharma, who’s the sleisenger Grossman Chair of family business at the Grossman School of Business at the University of Vermont, where she is also the founder and driving force behind their annual family enterprise Case Competition. Professor Sharma along with other colleagues from UVM has been a leader in the subject of sustainability for years now, and she’ll be heading up a plenary session on the subject at the upcoming family enterprise Canada symposium in Calgary in just a few weeks. I’ve known data for about a decade now through FFI in our case competition where I’ve often served as a judge, and we have lots to cover today. So let’s start by saying hello to our guest. Dr. Anita Sharma. Welcome to the let’s talk family enterprise podcast.

Hello, everyone. Thank you for joining and listening to this podcast. I’m looking forward to our conversation.

So I talked about the session you’ll be leading at symposium and I have it here in front of me sustainability and ESG and family businesses, driving impact and creating value. Can you just give a quick overview of of what that is going to be what you’re going to be sharing with the families and the advisors who will be there? Absolutely.

Steve, thanks. So my hope in that little time we have together at the session is to share the work, why and how of sustainability when it comes to family enterprises. So the word will be the term is used in multiple different ways, often with heavy emotional connotations. So I want to go back to where the word sustainability came from. It’s a Latin word that’s a state near and bring it to so what is it? And then why we as enterprising families, and advisors to such families should care about the sustainability and then give some examples because I’ve been working with families who are on their sustainability journey at different stages of it for last 10 years or so. I have to share a few examples of the practicalities of this journey. So that is what I’m hoping to share in that session and hopefully get folks thinking about how they can benefit themselves, their family and their enterprise by embarking on this journey. I

really liked that word journey that you use. I use that a couple of times now. So it seems particularly salient. And I’m guessing that you know, sustainability for any business is not just a box that you take. And in fact, it’s something that you sort of have to figure out what it is for you and why you should do it. But then the how is probably the longest part of that and is that something that typically evolves over weeks and months or months and years or years and decades or generations? Like you’ve talked about different families being at different parts, or different areas on the journey. Can you share a little bit more about how those journeys can progress? Absolutely,

yeah, it is. I like that journey analogy because it truly is a journey. It starts with awareness. Just understanding what this concept is, how it impacts us. Why should we care? So the first two segments of my talk will focus on the awareness part, which for some will be Yeah, we’ve known this for a while, and for others will be a little bit more informative. And once we are aware of the opportunities and challenges along the journey, we can then hold the mirror to ourselves and assess where we are all enterprising families because these are existing businesses are already on that journey. We just need to figure out where we stand right now. So that’s the assessment phase before we activate and take action for ourselves, and then we move into the advocacy phase, which is helping others helping those in our networks to along this journey. So I like that and that’s not coming from me that’s actually coming from the family business network and their Polaris segment which is focused on sustainable family enterprises. So that’s what I’m hoping because it’s never done. That’s what I’m hoping to communicate and share now with folks,

it is never done and so yeah, it’s it’s it’s a journey. It’s not a destination. Right. And so I wonder when you’re talking about this in a family business, is this more of a business circle question, or is it a family circle question and it’s clearly it’s not one or the other, but can you just talk about the interplay between the business elements of these questions and where the family comes in and plays a role?

That’s a great question. The I believe, and that’s based on my research and that of others. It’s the interface of business and family that gives family enterprises a unique advantage on the sustainability journey. For example, when we speak with families who are on their longevity when we ask leaders of family enterprises owner you work for, in some variation, the answer always is for my children, or grandchildren. So essentially for the next generations of our family. And when we look at what sustainability is or what sustainable development is, and this comes from our common future definition, which was given in 1987. It’s the development that meets the needs of the present without compromising the ability of future generations to meet their needs. So the aspirations of sustainable development and diet of enterprising families is the same. And it is that which gives us family enterprises a unique advantage on this journey. Because we work for next generation, and this is a long journey that we are on. So we work together across generations as we make changes to our enterprise. It’s that one factor that that probably the most unique and important advantage of the overlap between family and business. And that’s why I think sustainability is an opportunity of a generation of a lifetime for Business Enterprises for family enterprises.

So it’s really about the longer term time horizon which people working in the family business space have long been talking about. Our family businesses think in terms of the next quarterly report like public companies, they’re thinking along 10 years and a generation and so that marries well with the whole sustainability idea that you talked about how it’s an advantage for family businesses and and I guess it makes sense to me, but I’m wondering, are there family businesses that are taking advantage of this advantage where we hear about how impact investing you don’t have to sacrifice return you can actually make more return and how ESG and sustainability in the long run pay off are there in fact, family businesses who are way ahead of the curve here, and are using this as a competitive advantage? Absolutely. And

that’s what drew me to the field is just the urgency of the matter. The alignment of the overarching mission. And meeting these I work at University of Vermont, which is focused on sustainability, and not just now since the 80s. Since this has become sort of fashionable 200 years ago when this university was founded. But I’ve met these incredible family businesses through my own research and we have 15 case studies in our book called pioneering family firms, sustainable development strategies, and these range from first generation firms to as as old as ninth generation firms, from small kind of owner or owner operated companies to those are operated through foundations and Europe and in all different industries and across different parts of the world. So these are what was interesting for us to understand is we need multiple members of a family to be working together. Because this is it’s like foreign for an existing company. It’s like turning a titanic turning the picture. So there are some members of the family who need to continue to work on our current strategy. Because we need to do make our payrolls we need to continue with our current customers. And then there are others who work on tomorrow’s strategies and working in parallel on the two is where we find family businesses have a unique distinctive advantage over non family businesses. So the multiple jet and it also takes care of the perennial question of transitioning from one generation to another. What we’ve found is that I did my dissertation out of University of Calgary, on succession and Canadian family firms. And at that point of someone and this was in the 90s. And at that time, someone asked me how much time does it take to properly transition going into the current entity from one generation to the next that my guest get? My best guess was five to 10 years, right? So it’s not a quick process. It’s gonna take a while so be patient about it. But what we are finding as we are learning about those on there, those are quite advanced in their sustainability journey. It’s between 20 to 40 years that family members are working together.

Right, the overlap of the generations is a lot longer. And often when we for those of us who work with family business clients we see that there are sometimes tensions between our one generation has been doing something and another generation the younger generation comes in and wants to do things differently. This is a perfect case in point where they can learn from each other to actually keep the business going to make payroll, as you said, and at the same time have different people with different strengths and different longer term horizons, looking at other parts and learning to dance together for a decade or two over the transition period. So the sustainability can actually be something that brings them together in some way.

That’s an antidote to the pressure, of succession. Because when we think about succession, it’s the temporal pressure the time pressure that we put on ourselves saying, Oh, you’re not the current generation, by the way, but they are 60 years or 70 years or 80 years away. They should be retiring soon, and they’re going around feeling ready to retire. Right? And then there are next generation says this is the unique time in our human history when six to seven generations, which is you know, people born in different decades, or in the workplace at the same time. And thanks to medical science, we’re doing pretty well in terms of health issues. So there is a lot more bandwidth available to family enterprises to embark and accelerate themselves on their sustainability journey as they go from from now or whenever they start. And what we’ve also found is above industry returns, really every single case. They’re not only doing good, they’re doing well, economically. They’re doing good for the planet and the people. And here is a curious thing, and I hope we can meet some of these people. I met them that’s like this unique glow about them. There’s like their face and their eyes have a unique glow and glitter from knowing that they are excited about their journey. They’re excited about a Purpose Driven Life is very exciting. So when we whether we think in terms of individual level in terms of family level, in terms of organizational level, community level, country level, this is a win all strategy. Okay.

So I was gonna ask you a question about, about your research, and if there’s been anything surprising, and this to me, feels like it’s something that was partially surprising. But then after you really think about it and you meet the people, it sort of becomes easier to understand. Am I reading that?

Right? Absolutely. I mean, these are, you know, where we find. Now we talk about the top 1% of the economic bandwidth folks there. They have time they have money, but what they don’t necessarily have and they’re pining they’re looking for that is a purpose driven life, something that truly energizes them. That part is hard to find. But thanks to the sustainability journey, the clarity of sustainable development goals there is now ways to understand what multiple members of family you know are excited about and find a way to integrate that into the business models of a family enterprise.

I want to go back to something you said very early on about how you know it takes more than one person in a family business to sort of get them, you know, to the awareness and get them moving and recognizing what they have here. It seems like it’s something that the more different generations that you can find people in the family from the more likely it is to succeed. And then it’s sort of if you orient your discussions towards the sustainability, you’re automatically forced to think of, you know, the way you’re doing things now and the way you have to adapt them for the future, which sort of takes off the table that old argument, are we going to keep doing things the same way? Or is the next generation going to come and change everything? It’s sort of the happy medium in between it forces the conversation, right? Getting that Right? Absolutely.

And that’s where I find the power of case studies. Somewhat continue to keep working on case studies. And we actually use that in our driving for changing world program. We use smaller case studies in the class where most people members so it’s a safe space because it’s not your own business we’re talking about, but it is another business that we’re discussing. Multiple generations come to the same case with different ideas, and my favorite time because I do these educational programs around the world. My favorite continent to do these executive programs for business families is Latin America, because it is incredible. First of all, multiple generations will come to the table to study together patterns, the patterns that children that are already there, big families, so I might have 10 People 15 People from the same family coming together. They kind of come with their family had up to the time they move they cross the border of the classroom, once they saw grandpa, his Grandpa, Grandpa, grandpa, but once they cross that door and they’re in the classroom, their students and the way they debate the issues in a case is like the student in any other classroom. So that that hierarchy is all kind of disappeared. And that’s where truly innovative ideas and the truly deep understanding about not just sustainability about each other about our family, that’s where it happens. So we’re seeing more and more families coming together. And I know I worked at Kellogg Executive Programs at Babson executive program. It’s not the same when I’m the only family member representing my family at an educational program. And I will go home and tell my family what I learn. Nothing happens in those cases.

No, they are all they’re learning it together. And then they’re talking about a case that doesn’t have the personal attachment of talking about their own family, but it allows them to learn together, hear each other express themselves. ideas that are important to them in a much less charged environment. And you’re using the case study as an example of a model of what somebody else has done, which I guess the hope is there some inspiration for the family to find their own version, where someday they will be the case study for another family.

Absolutely. And you know, we haven’t quite done this. We haven’t quite gone that far. But in Canada My hope is we can have the striving for changing world in changing world programs where multiple members of family come and then maybe six months after or three months after we can have them come back and present the changes they have made in their organization. These could be even more troubling presentations. And that’s how because the challenge of sustainability or sustainable development is immediate. I know in different countries and including Canada. We are going through the process of figuring out what dosage to own is the right one when it comes to the carrot and stick approach of the legislation. And that’s a debate we have to go through. However, I have to share a story of why I got into this whole sustainability issue. I’m a family business scholar and educator. So I was always quite distant from the sustainability even though I work at University of Vermont, which is kind of you know, that environment, Green Mountain State and all but I did go to an exhibition which is at the Museum of Science and Industry in Chicago. It is called Extreme Ice exhibit and then spike James below that what he has done he and his team have done I have they’ve put time lapse videos on words melting glaciers around around all continents and in that one room. We can actually hear the drops of melting glaciers. Wow. It is a while it is an absolute Wow. Where I remember standing there and I remember a room full of people standing there there was Pin drop silence. And it literally feels like planet Earth is crying.

Oh my god. I’d love that museum. I’ve been I remember seeing eggs, checks at that museum. It’s amazing, but I didn’t know about that. So you’re saying that this exhibit drove home the urgency of this question for you. Absolutely.

For me, it was like if I am at all smart. The podium that God has placed me on is that of an educator and scholar and I want to do my own for this planet and leave a better world for my children and grandchildren. I have no option but to understand how family enterprises can and can move can move along and benefit from this opportunity of sustainability. And the bigger the challenge, the bigger the opportunity. And this is the challenge for our generation. So

once again, you’ve you’ve said something that lines up with a question I was going to ask and so that and now I’m questioning whether whether my expected answer is the right one I had. Is it the rising generation that typically takes the lead in a family when it comes to these questions, and I’m guessing that it can come from anywhere and because because it seems like people who are baby boomers can still have these aha moments and maybe have more potential to act on them from iron Odium. Yeah,

you know, there’s two questions that I get asked one is about the generation or the age at which you know, that is kind of leading this charge, and the other is about gender. Or younger people leading this charge and our females leading this charge and those are both mates. Because you’re saying Steve, that moment of activation can be found anywhere. For me it was that exhibit of James below. For some it is a book that a student in college or an article that a student a college will send to a parent or a grandparent. For others it is a customer asking for something. I’ve worked with a company called State garden and they are in in fresh vegetables pad fresh vegetable salad business, and in their case it was the customer. The customer wants organic salads. They were not thinking about it but their mission for since 1937, when they when they were founded was to exceed customer expectations. They felt they didn’t have a choice but to move on this journey. In other cases, it’s the suppliers asking but there is a big movement around circular economy. And companies like Ikea Walmart h&m, Unilever, like these are the Patagonian large companies. asking their suppliers, where are they getting their material from? How are they treating their people? So it could come from employers supply? Sorry, suppliers competitors, my mobile is doing this but we are in Vermont Ben and Jerry’s won’t buy any supplies from companies that are not on this journey. quite advanced on this journey. Employees. Our students won’t work for non big car companies. When they’re 8000 benefit corporate you were asking earlier about companies or family enterprises that are doing really well. But that would be a group to look at. These are companies these are benefit corporations. I’m delighted that our new CEO for family enterprise Canada has been a co founder of one of these benefit corporations, right? So already on that journey. So once we start walking in this direction, we will find a lot of family enterprises and they are inspiring stories.

And that’s what I think we need to keep doing more of as there are more inspiring stories to share. More models that people can point to more ways to start the conversation is more even. You know I think a lot of going back to your first your first answer was we’re going to talk about the what the why and the how I think the what is starting to become everyone sort of understands the what they’re more and more starting to understand the why because there are so many signals that the planet is giving. But it’s the how that remains the part that families sort of might be sort of grasping at well how does this apply to us? And the more good ideas they can see from others, the better they have models and inspirations that they might borrow from

absolutely once stated. So, one

last thing I did want to touch on is I mentioned your family enterprise case competition, which a lot of people in business schools understand case competitions and there’s no other family business case competition out there and you started this it was over a decade ago. And every year you’re attracting about 20 schools from all around the world. Just if you want to just share something with the audience about how that experience has been. I know as having been a judge there many years. I always walk out of there inspired with what the young people have in store and that’s it gives me hope for the planet. What are your reflections on that?

Thank you, Steve. Well, Canadian business schools have a big tradition of case competitions. So I was at Donaldson School of Business. Wilfrid Laurier great, great institutions with a with a robust program on case competitions and that that goes across all Canadian schools, I believe. But we did not have a case competition focused specifically specifically on family enterprises. So what we’ve done at the University of Vermont is have a case competition where every single case so here’s competition is where a case is presented to a bunch of students and a team of students usually three to four students. They have a limited time to read through the case and then they have a limited time and prepare their analysis and presentations and then present it to a panel of judges who will ask questions and then rank order the teams that we judge the judging panel watches, three to four to five presentations and then rank orders the team then the next day or new cases given new dilemma, and so on so forth, and ours is a four day competition. We so we have had since 2013. We’ve had over 1200 students either compete or organize this event. And they’ve come from 70 institutions across 25 countries. We’ve also had over 600 judges on the judging panel as Steve you know, we have at least one family business owner or manager, a family business advisor, and an educator. And we try to have a mix of gender and generation on the judging panel, which we have three to five judges on a panel. We’ve had over 600 judges come to this event since its start. Now the 12th edition, which is going to happen eight to 11 January, in Vermont in Burlington, Vermont. We already have eight out of 24 is our max capacity for teams already registered for the event. And there was a team from Australia there was a couple of teams from Europe, North American teams, both Canadian and American teams, and we just started open registration. So it is shaping up to be a great competition. And we look forward to having you as a judge and if there are others listening to this interested in judging, send me a note and or send Steve a note and we’ll certainly engage you in that way. And if there is a team that wants to come many Canadian schools are represented but not all. We’d welcome Canadian teams are amongst the best teams that we get. So let’s fight it out here in this global event. That’s our case competition. And I’m beyond proud of our students who organize it. Judges who come out of schools who compete it’s just a unique network that’s developing and many times not always we do have cases on sustainable development and sustainability journey for family enterprises and then we have our traditional topics of transgenerational continuity, or core conflict, destructive conflict and a family business or issues of trust on how people are using the Bitcoin technology in their enterprises. So there’s this kind of contemporary issues as well as as well as traditional issues that are featured in these cases.

Okay, I’m always fascinated when I when I go and judge that there are actually family business cases because when I did my MBA at a well known Canadian business school that uses exclusively case method, I don’t think we had one family business case during the two years I was there, but I was gonna say, I’m guessing that we will see more case cases in your competition that are around the theme of sustainability, because it is an up and coming and very interesting area for for students. To look at data. This has been fascinating. And unfortunately, we do need to wrap this up now. But as usual, we always end with a couple of final requests that we have for each of these. And so I want to ask you for a book recommendation, something that you’ve read that you’d like others about and then the last thing is one piece of advice from one experienced advisor who works with families to others who are also working with family. So can we start pleased with a book recommendation?

Absolutely. Steve, as you know, for last many years I’ve been focused on learning about sustainability. So my favorite book as of today, is the circular economy handle. Realizing the circular advantage, and this is by Peter Lacey Jessica land and Wesley Spindler. These are three strategies from Accenture company and they talk about opportunities in different industries using this system, the concept of circular economy, which is an important concept in sustainable development that would be my book recommendation. And as far as advice to peers Sticking with the theme of sustainability, before I got on this journey, I was sort of thinking about how many more years to retire. I was in my 50s, early 50s And I was trying to think maybe 60s and good time. And once I got on this journey learning about a learning from scratch, I didn’t know much about it. It has been an inspirational, energizing, fun journey for me to learn about and from companies family enterprises that are leading the sustainability journey. So it is a step at a time opportunities for advisors for educators for business enterprises, enterprise leaders are endless. So I welcome you to join the journey. Maybe the circular economy handbook is your first stop. And if you’re not in the mode of learning from internet resources, I highly recommend the Ellen MacArthur Foundation website. Just listening to Dame Ellen MacArthur is a life changing experience. Or if you like the museums, I already said go to that museum of natural history and science, a Science and Industry in Chicago and visit that James Bullock Extreme Ice exhibit. So I hope there’s something for everyone and thank you so much.

Like there’s you have given us a lot I gotta try and put links to all of these things in the show notes. This flew by as usual and was very inspiring. Criminy to Sharma. Thanks again for joining us and sharing your expertise with our audience.

Thank you for having me.

listeners. If you have not already subscribed, please do so make sure that you never miss any of these monthly episodes. Thanks again for joining us. I’m Steve Legler. Until next time

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