INTERVIEW: Matt Guthridge works for a company that usually flies a little under the radar. That’s because it specialises in executive and board searches and advisory for top listed companies. Often the searches are global – looking for the world’s best and, clearly, ultra sensitive.
Therefore, there will be no spilling the beans on the latest placements from Russell Reynolds. What is easy to gauge though is the result of leadership failure. It’s been a steady stream of news these days, especially in the energy field in which he specialises.
Guthridge points out that in this sector there’s been an almost complete change of leadership – Snowy Hydro, SA Power Networks, Energy Australia, TransGrid, the Queensland government owned Stanwell Corporation, to name a few, with “only Frank Calabria [at Origin] the last man standing.”
Why?
Because energy is epicentre of disruptions, Guthridge says, along with a few other sectors. And in energy, Australia is right out in front in terms of absorbing the global impact of the energy transition thanks to its huge reliance on coal and the need to transition to renewables and most recently the war in Ukraine.
So energy companies are smack bang in the middle of disruptive change.
According to Guthridge leaders in this tricky field face what he says as the biggest challenges to future leaders: they need to not just understand the dynamics at play in their industry but to predict them and take evasive action.
There claims to be energy source agnostic ought to help but this means in our view that you ignore the deep political ideology that seems to dominate the fossil fuel side of energy provision.
The leadership changes the top end of the energy industry is what happens when the transition is not well-handled.
We began the chat with Guthridge though, not about the energy industry, but about the growing challenges of the drama of ESG (environmental social and governance). We say drama because for some companies their tentative steps into this arena have ended badly – mired in accusations of greenwash and worse.
Guthridge says there can be a fundamental misunderstanding of ESG with frequent focus on the E but not the S.
Rio Tinto’s catastrophic blowing up of the Juukan Gorge caves is one example of a mining company that a few handshakes were enough to tick the S in the ESG framework.
The trouble Guthridge says, is that quite a few companies don’t quite know what they’re doing when it comes to ESG.
A survey his company undertook in recent times of about 50 non-executive directors in the top 100 of the Australian Stock Exchange found that 70 per cent of respondents estimated they were tracking “pretty well” along the sustainability journey.
“Which sounds pretty good, right?” Guthridge says.
“This is probably where the biggest, the most interesting story is – when you push them a little bit on how well they are executing against the specific sort of objectives of becoming a more sustainable company, there’s only about 16 per cent of those non-executive directors who would say that they have overcome the most serious execution challenges.”
It’s a complicated story to understand what’s going on.
“While sustainable, profitable growth is an ambition for most of the ASX-listed companies, many of them are still struggling to actually execute against that kind of ambition,” he says.
“It’s actually quite difficult to do this.”
Guthridge at this point in our interview shares that prior to roles with Boston Consulting Group and McKinsey & Co, he was a chief strategy officer at AusNet, so he understands the complex arena these companies are working in.
What needs to happen, he says, is alignment between the purpose of the business and what it’s trying to do from a sustainability perspective.
“When that doesn’t happen, the risk is that you sort of adopt sustainability goals without actually truly working towards that in a methodical way, as part of an orderly plan.”
Another issue is the perception, still, that “sustainability is about risk management – not opportunity”.
And when that happens it’s a missed opportunity – when it’s lumped into the risk committee or another audit and risk type group “and taken as a series of risks to value creation, rather than, if we get this right, what’s the premium for our organisation?”
Another gap in understanding is the focus falling too heavily on the environmental part of ESG and not enough on the social.
“There’s a whole range of stumbling blocks that haven’t been overcome. So greenwashing is one accusation. But I think really what we’re talking about is, is an incomplete commitment to the outcome from an organisational perspective.”
What makes a good leader in the face of these multiple challenges?
Guthridge says his company did some work a few years ago with the UN Global Compact to distil that. Essentially what resulted was the need for systems thinking.
“It’s this ability to sort of join the dots, and recognise that our relationship with, for example, our external environment, our suppliers, our communities that we touch upon the investor community, all of these things are connected.”
A longer-term perspective is clearly important here too – and it’s one of the biggest challenges for some publicly listed businesses, he says.
A final piece, he says, is around what he calls “disruptive innovation” which is about how things could play out with the advent of new technologies.
Good leaders need to be able to use systems thinking – to “join the dots”.
Boards are looking for people who can “chart a course through very choppy waters” as well as do very well with their people. “Almost without exception, all of these organisations are looking for individuals that can lead people and build the culture that’s required to be sustainable.”
Guthridge sees disruption will continue.
This includes in agriculture, “because the next wave here is going to be about sustainable agriculture.
“We’re going to see disruption in terms of the usage of water in this country over the next decade.”
Melbourne, where almost certainly the city will depend on recycled water “within the decade”.
“And so there will be disruption around freshwater supplies. We’re seeing, weather patterns feed into this.” And the impacts will be felt on anything that depends on fresh water with agriculture and agricultural exports clearly impacted.
Another is the automotive industry, where the rise of electric vehicles will drive a major restructuring of the energy supply system.
Guthridge predicts it will be huge and that it will be expensive.
But then again, we’d say, this the kind of disruption we absolutely need to have. And what we need are the leaders who can make this happen the fastest and most efficient way possible.
Bring on the connectors of dots for a more sustainable future.