In this interview we had the chance to speak with Jeroen Smit, a journalist, author, and chair of the jury panel of the CVO of the Year Award, renowned for his expertise in leadership and challenging conventional business norms. In this interview, Jeroen’s shares his insights on the essence of transformative leadership and the challenges leaders face in driving change. From embracing diversity to fostering sustainability, Jeroen shares his perspectives on the crucial qualities that set true leaders apart.
For your book, you’ve studied multiple executives. What do you think makes it so hard for executives to adopt new concepts such as impact and integrate them into the core of their decision making?
Jeroen: “There are several reasons why it’s challenging for executives to embrace these new concepts. Firstly, if you’re an executive who’s been making the same calculations for 20-25 years and your success is based on those old spreadsheets, it’s incredibly difficult to break away from what you know. Human nature resists learning something new when your success is tied to the old ways.
Secondly, without laws and regulations that create a level playing field, there’s a fear of taking the lead in making these changes. If your competitors don’t follow suit, you risk incurring certain costs and losing market share. It becomes a balancing act.
Thirdly, there’s still a lot of ambiguity around what truly constitutes “green” or sustainable. The discussions and multitude of standards can be overwhelming. We need clear standards to be adopted, hopefully starting in Europe with initiatives like the Corporate Sustainability Reporting Directive (CSRD).
And let’s not forget the inherent human nature to prioritize short-term gains. When faced with the choice of making money tomorrow versus focusing on long-term impact, it’s a difficult decision to make. We all struggle with this.
Lastly, and perhaps a bit cynically, when we think about the year 2035, it seems far away. It becomes challenging to prioritize actions that may have long-term benefits when immediate gains are within reach. We saw how swiftly we responded to the COVID crisis because it was a clear and immediate threat to our health. Climate change, on the other hand, is not as tangibly felt in certain regions. It’s a sad reality, but sometimes we need more crisis-like events to truly realize the urgent need for new approaches and business practices.”
"When faced with the choice of making money tomorrow versus focusing on long-term impact, it's a difficult decision to make. We all struggle with this"
Jeroen Smit is a distinguished journalist, author and currently the chair of the jury panel of the CVO of the Year Award. He has written best-selling books on business and economics, such as Het Drama Ahold and De Prooi which help shed light on the social and environmental consequences of prioritizing short-term profits over long-term sustainability and stakeholder interests.
You mentioned the Corporate Sustainability Reporting Directive (CSRD). What are your thoughts on its potential to accelerate sustainable and societal value creation?
Jeroen: “Well, when it comes to government regulations, I understand that people can be critical. However, in this particular context, I believe that we need it. The corporate sustainability reporting directive plays an important role in providing businesses with clear rules and regulations, which is exactly what they need.
Let me give you an example. For many years, we’ve been discussing the lack of female leadership in businesses. Despite more women studying and achieving better results than men in fields like business, economics, and law, the leadership positions remained largely male-dominated. After years of deliberation, countries like Germany, Norway, and France decided to introduce quotas. It may sound drastic, but it was necessary to move the needle and create change. When it became a rule that companies had to comply with, we witnessed rapid progress. Entrepreneurs often think, “If it’s a rule, we’ll do it because we have to.” And once everyone has to do it, it becomes a collective effort. Similarly, I believe that clear standards and regulations, such as CSRD, can drive change in tackling climate change and adopting new approaches to calculations, pricing, and value creation.
The directive may result in increased paperwork and criticism, but when everyone has to comply with the same standards, there’s no competitive advantage in not doing so. It creates a new level of awareness and understanding. I recall a somewhat unrelated example from 10 years ago when smoking was banned in restaurants and cafes. Initially, people were upset because it was a change from what they were used to. However, over time, it became the norm, and now if someone smokes in a restaurant, everyone reacts negatively. It shows that a change in mindset can be facilitated by implementing rules that everyone must obey.
People tend to focus on what they already know, and businesses, in particular, can be conservative in their practices. That’s why it’s crucial to provide them with the necessary guidance and support to explore new ways of operating.”
"I believe that clear standards and regulations, such as CSRD, can drive change in tackling climate change and adopting new approaches to calculations, pricing, and value creation."
What do you think is necessary to accelerate the shift and implementation of the Corporate Sustainability Reporting Directive?
Jeroen: “Well, on this topic, I believe it’s crucial to embrace diversity. In many organizations, there is a natural tendency to hire people who are similar to oneself. It feels comfortable to have someone who shares the same background, studies, hobbies, and even appearance. It’s like swimming alongside another dolphin—easy and safe. However, if we truly want to transition and embrace new ways, we need to be courageous and hire individuals who are different, the “other.”
It’s a sad reality, but one of the most challenging things to do. When faced with two applicants—one who resembles you and another who brings diversity—it’s tempting to choose the familiar, the one you can bond with and have a good time together. But we must recognize that the other person, although different, brings new perspectives and ideas. This is essential for driving change.
Taking a more concrete example, let’s consider the role of the Chief Value Officer. In many companies, you have the controlling department led by the CFO, and then a separate sustainability department located on a different floor or a different building. This setup results in two separate annual reports: one focused on profit and loss and another on sustainability. To truly move forward, these departments need to integrate. The controllers and the sustainability experts must sit together, work side by side, and build a common language. Initially, they may not like each other because of their differences—like one wearing a tie and the other wearing gray socks—but as they open up and discover their shared concerns about the world and climate change, trust can be established. This trust will allow them to develop a new language that integrates the demands of sustainability for a sustainable future with the requirements of building a profitable business.
So, if I were to evaluate the effectiveness of a Chief Value Officer, I would focus on their ability to genuinely integrate the other—the new knowledge and perspectives. It’s important to acknowledge that the field is still evolving and uncertain, but we must be open to embracing change.”
I love what you said there about combining forces with the other and, breaking the status quo, which I think you also explored a bit in your article “The Excellent Sheep.” My question in regard to this article is: What differentiates a true leader from simply just a manager?
Jeroen: “In my article “The Excellent Sheep,” I touched upon the differentiation between a true leader and a manager. A manager tends to stick to what they know, while a true leader embraces imagination and has the courage to explore the unknown. A leader, in a sense, is an artist who dares to step outside their comfort zone.
There’s a concept called the “street lamp effect,” which has been scientifically proven. It refers to our tendency to search for something in places where we know the light is shining. It’s challenging for us to venture into unfamiliar territories. However, a true leader is willing to take risks and explore uncharted waters, even though it may be difficult.
In my analysis of Unilever and Paul Polman, it became evident that he was a pioneer. Being a courageous pioneer is commendable, but pioneers often face challenges and may even fail because they are pushing boundaries. It’s the followers and the next generation who can build upon the pioneer’s legacy and achieve more success. Vincent van Gogh, for example, was a pioneer, but he never lived to see his success fully realized.”
"It's the followers and the next generation who can build upon the pioneer's legacy and achieve more success."
What do you think is then the biggest resistance for these pioneers, for the CEOs who are wanting to create change?
Jeroen: “The biggest resistance for pioneers, such as CEOs who aim to create change, often comes from the sense of responsibility they feel towards the organization’s growth and continuity. They have employees who depend on them and financial obligations to fulfill. This responsibility to maintain short-term profitability and operational health can be addictive and difficult to break away from, especially when competition focuses on short-term growth.
There’s an interesting survey conducted by Aegon Zhander, an executive search firm, which I find quite insightful. They surveyed nearly 1,000 CEOs, predominantly men. More than half of these CEOs reported feeling stressed because they realize they must meet the traditional KPIs (Key Performance Indicators) from the past, while also taking responsibility for addressing climate change. This dual challenge becomes overwhelming, leading many CEOs to default to what they know best.
It’s a complex situation where CEOs find themselves torn between the expectations of the past and the urgent need for change.”
And how can how can they deal with that? How can they overcome that?
Jeroen: “Overcoming the challenge of being trapped in their own success and belief in their own truth is crucial for CEOs who want to create change. The ability to listen is a key factor in overcoming this hurdle. However, many successful leaders, defined by their past achievements and surrounded by applause, often stop listening. They become entrenched in their own beliefs and consider themselves special. Once they believe they have all the answers, it becomes difficult for them to open up and learn new things.
For CEOs who have been doing this for over 20 years, it can be especially challenging to accept that they still have things to learn because they have achieved success and have a large organization under their leadership. They may think, “Why should I learn? Do you know who I am? Look at my track record, the size of my business, the number of people I manage,” and they list all their achievements and accolades. This mindset becomes a significant barrier.
Surprisingly, in the Aegon Zhander survey, many CEOs mentioned that their biggest hurdle is their inability to listen. Recognizing this barrier and actively seeking opportunities to listen, learn, and remain open to new ideas and perspectives is essential for CEOs to break free from their own success and drive meaningful change.” It’s the followers and the next generation who can build upon the pioneer’s legacy and achieve more succes
"actively seeking opportunities to listen, learn, and remain open to new ideas and perspectives is essential for CEOs to break free from their own success and drive meaningful change."
You also wrote in your article “The Excellent Sheep: We are not inheriting the planet from our parents, but rather we’re borrowing it from our children.”
Jeroen: “Yes, the concept of “We are not inheriting the planet from our parents, but rather we’re borrowing it from our children” is a powerful reminder of our responsibility towards future generations. During an interview with the CEO of a carmaker, I asked him whether he feared the shareholders of tomorrow or his own two sons in 2035 more.
His response reflected the paradoxical nature of the situation and the difficult decisions leaders face. Managing these paradoxes is part of their role. However, deep down, leaders are aware that they have a responsibility towards their children and future generations. In the coming years, their children will ask them, as leaders, what actions they took to address the challenges facing our planet.
Simply focusing on increasing margins and profitability will not be a satisfactory answer. Leaders must consider the long-term impact of their decisions and prioritize the well-being of future generations. It’s a call for leaders to act responsibly and make choices that contribute to a sustainable and prosperous future for our children.”
What do you think defines a good CVO?
First and foremost, a CVO needs to be an excellent CFO. A CVO is not an additional executive in the team, it is a CFO who focuses on both financial and societal value.. In our research, we identified five key elements that define a sustainable leader, which can be applied to a CVO or other executives. These elements are based on interviews with 55 executives around the world who were recognized as pioneers in sustainability by the UN Global Compact.
The first element is a sustainable mindset, which represents a deep intrinsic motivation to run a company in both a profitable and a sustainable manner. It involves embracing the idea that financial and sustainable goals are not mutually exclusive, but rather complementary. A good CVO has this mindset and inspires others within the organization to adopt it as well.
The second element is multi-level systems thinking. A good CVO understands the interconnectedness of factors such as climate action, biodiversity, technological and societal trends, and regulation. He or she recognizes that sustainability challenges are complex and require holistic solutions. They can analyze the impact of decisions and actions across multiple dimensions and consider long-term implications.
The third element is stakeholder inclusion. A good CVO understands the importance of engaging with diverse stakeholders, including employees, investors, communities, NGOs, and governments. They build strong relationships, listen to different perspectives, and seek collaboration to drive win-win solutions and sustainable change.
The fourth element is disruptive innovation. A good CVO is forward-thinking and embraces innovation to find new ways of creating value. They encourage experimentation, adaptability, and the ability to navigate uncertainty and change. They are open to disruptive technologies and initiate business models that can drive sustainable transformation.
The fifth element is long-term activation. A good CVO recognizes that the transition to a sustainable business model is a long-term journey with substantial obstacles along the way. They demonstrate resilience, perseverance, and the ability to learn from failures and setbacks. They inspire others to stay committed to sustainability despite challenges, and provide the required strategic insights, key performance indicators, reporting and incentives.
Overall, a good CVO combines these five elements to lead by example, drive sustainable strategies, and embed sustainability into the organization’s culture.
The Chief Value Officer of the Year Award is an initiative of the Impact Economy Foundation in collaboration with de Baak and SeederDeBoer. Nominating an impact-driven CFO for this award was possible until 30 June 2023.