Saving the World Through Values-Driven Leadership | Rajeev Peshawaria | 609

Here's a question that many thought leaders ask: Why haven't more people adopted my idea? And maybe you've asked this question before. Let's assume as a thought leader, you have a really good idea. You've made it easy to understand and you advocate for it relentlessly. Yet momentum seems slow. Like you're pushing the idea uphill. My guest today is Rajiv Peshwaria, CEO of Stewardship Asia Center, and we'll explore how he came into thought leadership by asking a difficult question: why are we not making more progress on climate and social responsibility? The answer to his question was he uncovered misalignments and twisted incentives that created gaps in regulation and behavior. Through this episode, you should be able to look at your own work and evaluate the uptake rate for the idea in a new way. Thought leadership often requires us to look at the structures that support and reinforce existing ideas. I'm Bill Sherman, and you're listening to Leveraging Thought Leadership. Ready? Let's begin. Welcome to the show, Rajiv.

Very nice to be here, Bill. Thank you.

So I wanna talk about the work that you've been doing in thought leadership around, um, climate, social responsibility, and steward leadership, right? So let's begin with a quick question. You started in financial services and then in CPG. How did you get to topics such as climate and social responsibility?

Well, you know, I started out as a banker and after a few years in mainline banking, I was a currency trader back in the mid-18th century.

So in the mid-18th century, it was clearly with quill and ink.

Yeah, so with American Express. And I realized that I'm not having as much fun as I want to. So, I moved to human resources and got into talent development. And then for the better part of my corporate career, I looked at leadership and talent development. More recently, I realized that, you know, despite huge amounts of money, huge amounts of regulation, and huge amounts of incentive, we were not making as much progress on environmental or social sustainability. I mean, that's a fact. We are not making as much progress as we should. Everybody knows that. And I started asking myself why. And my conclusion was that we are trying to solve a leadership issue with money, incentives, and regulations. And that's why it's not working. A big link in the whole equation is missing, and that is a certain kind of leadership.

So let me be the voice of conventional wisdom here and say, well, why wouldn't money and incentives and regulation be the right way to go about this?

Well, let's start with regulation, okay? Regulation is needed for society to function. For sure, we need laws, we need rules. But here's what regulation does and here's what it doesn't do. What regulation does is it ensures a basic minimum standard of good behavior. If you do worse than this, we will put you to jail. All right? So that's what regulation does. It allows society to function because most people don't want to go to jail. They don't want to be in trouble with the law. So they will do as much as is required by law to remain trouble-free. The challenges that we are facing today Socioeconomic inequality and climate change and cyber vulnerability are so existential in nature, they're so huge that we need massive amounts of innovation to solve them. And regulation does not promote innovation. There can be no laws that says thou shall innovate more. And that's the problem. That's the shortcoming of regulation. So yeah, regulation will perhaps at best, prevent people from doing more harm to the environment or society, although even that doesn't seem to be the case. But it's certainly not going to bring out the best behavior, the maximum good behavior that we are looking for in terms of innovation. So that's the issue with regulation. Incentives. You mentioned earlier Steve Kerr's Academy Classic article from 1975 on the folly of rewarding A while hoping for B. Well, that's still prevalent today. What's happening is you overemphasize incentivization and measurement and you will get bad behavior. And that's what Steve's amazing article was all about. And if you read it today, it feels like it was written yesterday.

It's incredibly fresh and evergreen.

Exactly. So that, you know, look at the 2008 financial crisis. What was that the result of? It was a result of overemphasizing incentives and measurements and the wrong incentives and the wrong measurements. Same thing, fast forward to today, we are trying to get businesses to behave more responsibly towards the environment and society, and we are incentivizing them with cheaper capital, with all kinds of tax incentives. We are linking CEO compensation with ESG markers. What are we getting? A huge amount of greenwashing. So again, just like regulations, incentives are needed, but there are many limitations to incentives as well. You gotta be cognizant of that and then move forward. Now talking about your third part, which is money, well, guess what? There's $43 trillion in ESG funds all over the, globally right now. I wanna ask you, how much of that do you think is actually going towards climate or social action? The answer is almost nothing.

So let's stay for a moment on this. You started asking yourself the question, Why isn't this changing? Talk to me about the aha moment that you had when you said, okay, it's not any of those three. It's not regulation, Senate, or money. It's leadership. How did you flip the question on its head?

So I don't know exactly, but I mean, I've been studying leadership for 25 years. That's what I do for a living. Initially, I developed a hunch because I looked at some companies that were actually doing well by doing good. This idea of doing well by doing good, making money by addressing the very challenges that are threatening society today. And I looked at 3, 4, 5 companies and said, "Sounds like these guys are doing it. They've always been doing the right thing." They do it because they want to, not because of regulation, not because of incentives, and not because of cheaper capital. So I said, "Could this be just anecdotally 3 or 4 companies or could this be the norm?" So then we went out and made a list of 100 companies who were actually doing good by the environment or society and said, "Let's find out." And it turned out that in all those 100 cases, we did a pretty deep, deep research project. They were doing it because they wanted to, not because of money, not because of incentives, and not because of captive. They were doing it because of a different kind of leadership intent, which then we codified into the steward leadership model.

So you've mentioned we a couple times. Let's pause there for a moment and talk about the organization which you lead and how that's involved in this work.

So one of my two hats is CEO of Stewardship Asia Center based in Singapore. This is a nonprofit funded by Singapore's global investor Temasek. And we look at organizational and social, I mean, sorry, environmental and social sustainability. We look at when it works and when it doesn't work. And we do research, we do executive education, we do a lot of in-person engagement, a lot of online engagement just to create more awareness about what the challenges are and what might be some ways to address them. So that's what we do at the center. And so it was my team and I at the center that we did this research project. And not only did that culminate into the steward leadership model, we also then wrote a book called Sustainable Sustainability: Why ESG Is Not Enough to sort of put it all together in one place.

So let's stay on that study for a moment. You said you basically did deep dives on 100 companies and had access to those 100 companies. Were they based around Asia? Were they global? What size were they? Let's talk about the research for a little bit.

So they were all over. They were in the United States, they were, I mean, in the Americas, in Europe, in Asia. They came from everywhere and they were different sizes. Some were, public— large, big-cap publicly listed companies. Some were family-owned businesses, pretty large ones for that matter. Mars was one of them, which is, you know, family-owned still. And some were small, smaller companies. So they were— they came from everywhere.

And were you looking primarily at the choices made at the CEO level and the C-suite level, or were you looking down through the organization.

So yeah, the first filter was, are they doing well by doing good? Are they creating profitable solutions to environmental or social issues? And if there was a track record of the company doing that, then we would go deeper and ask, so why are you doing it and how are you doing it?

And it sounds like the answer was, Well, it's the right thing to do. And it was almost a value-based answer. It was, well, you have done the interview, so I don't want to put words in your mouth, but that's what it sounds like.

You're absolutely right. It was a values-based, it was values-driven and purpose-driven. So, well, it's the right thing to do. We've always done it. It's part of our DNA. We believe in values that care for the environment and society. And our purpose is to create a better future, not just for our shareholder, but for society at large.

And so what I find fascinating about that is when you find a preponderance of companies doing the same thing and research, that is usually exceptional. When you get to the majority or even a unanimous list, that, that's enough to stop and go, what's going on here, right? So how did you build the model on steward leadership?

So like I said, the first filter was that they were actually doing well by doing good. So then we asked them those two questions, why are you doing it and how are you doing it? The why was very clear, because we want to, because that's who we are. The how, it turned out, and they described it in different ways and then we gave them some words in the model. They said that, you know, we believe in a bunch of values. And interview after interview, case after case, we heard 4 things. They believed in interdependence, first of all. Interdependence is the idea that the more I give, the more I receive. The more I help society or the more I solve human problems, the more my business is going to succeed. My success is intertwined with that of others. That's the idea of interdependence. Yeah, so it's a, it's call it abundance, call it whatever. It's not like, you know, I'm trying to be the, the more I give, the more I receive. That's interdependence. Second, we found these people taking a long-term view. They thought in generations, not in quarters or years. Third, they took ownership for today's challenges. Yes, we wanna make money. That's why we are in business. But we take ownership to solve human problems and that's how we will make money. We will not make money unjustly. We will make money by adding value to society. We will solve for existential challenges like climate change and socioeconomic inequality. They proactively took ownership for that because they strongly, again, coming back from the belief of interdependence, that the more we do that, the more we will succeed. And finally, they were innovative. And we found that, you know, they were creative and innovative from day one. They realizing that making money this way is harder They knew they had to come up with new and novel ways. So the fourth value that we found in common with these sorts of companies, we called it creative resilience. Why creative resilience? Creativity for the innovation, resilience because they never gave up. Because 8 out of 10 innovation attempts fail, but that's where the resilience comes in. They will not give up until they succeed. So to sum up, interdependence, long-term view, ownership mentality, and creative resilience. We found those 4 values in common with these 100 companies, and we found that they were not just posters on the wall. They actually worked hard to make it part of the DNA. So that's sort of the first part. And then finally, based on those values, they gave themselves a purpose, which created a collective better future for stakeholders, for society, future generations, and the environment. So that was the model, basically.

I love how it comes to be in terms of you can clearly articulate 4 dimensions, the, from interdependence to this creative resilience, the pieces fit together. So in terms of pieces fitting together, you did the research, you and your team, talk to me about some of the partnerships and relationships. You've mentioned the government, the Singapore Sovereign Wealth Fund. You've also built other partnerships as well, which sounds to me like a lot of belief and embracing on your part of interdependence.

For sure. You know, I mean, this is the existential challenges we are dealing with today. No one entity can solve them on their own. We all know that. No one country can solve it alone, leave alone no single company or a single entity. These current existential times call for massive cross-border collaboration. So, what we are doing is once we had the model done, we've approached a bunch of business schools around the world and say, "Here's our research. This is what we think is the missing link. Despite trillions of dollars, despite so much regulation, despite incentives and all this goodwill in the world, it's still not working because we need a values-based revolution and we need to embed this in executive education, in college education, et cetera, et cetera. So partner with us. Good news is that nobody has said no to us. We partner with the World Economic Forum. We partner with several business schools and universities. We are partnering with youth councils. We are partnering with institutes of directors in many, many countries. We are partnering with the Climate Governance Initiative coming out of Cambridge in the UK. So far, the good news is that nobody, nobody has said no. Everybody has offered to partner and oftentimes without any financial consideration.

Let's expand on the partnership for a moment here. When you share this idea that it is fundamentally, because if I distill the idea down, the core of the idea is that it's a leadership problem, not the financial, not the regulatory and not the incentives, right? So when you present that to people, are you met initially with skepticism, or how do people respond whether they hear you in a meeting or one-on-one, or even if you're giving a speech? What does it take for the light bulb to turn on and for them to say, you're right?

So what we normally begin by saying that there is no competition or conflict between profit and purpose. Actually, what I'm about to tell you, if you implement it, you're going to make more money for longer periods of time. So now you have their interest. Oh really? I came here very skeptic. Oh, this is going to be another one of those ESG rants. So what's this going to be all about? And then we give them a whole lot of examples of companies that have actually done very well, but not yet not just 1 year or 10 years, but for decades and if not hundreds of years, and had above-market returns to shareholders over 100 years, 150 years by putting society first, by putting environment first. So now you get their attention. Okay, oh, so this is about making money. This is not about cursing capitalism and doing some, and coming up with a more socialistic form of capitalism and all, like a lot of people are bashing up capitalism these days. Ah, this is about practical making money. Then you have the, so you say, now the question is, these examples that I gave you just now, Patagonia in the US to the Tata Group in India, to the Ayala Group in the Philippines, to Faber-Castell in Germany, and I could go on and on and on. How did they make so much money over so many hundreds of years? Now you have their full attention and then you tell them, Well, this is, they built a culture based on those four values and they were always in the business of creating a collective better future for a variety of stakeholders and society at large. What it takes is a certain kind of leadership intentionality. So that's how we've been able to sort of penetrate, if you will. There will always be skeptics. People are, there is a lot of ESG fatigue. And when they realize that this is actually not about ESG, this is about This is about doing well, but by doing good. Ah, there is a way to do that. That's fantastic. So we are getting phenomenal reception around the world, actually very little skepticism. I must admit they come with skepticism in their minds, but so far we haven't had any major problems in convincing most people.

If you're enjoying this episode of Leveraging Thought Leadership, please make sure to subscribe. If you'd like to help spread the word about our podcast, please leave a 5-star review at ratethispodcast.com/LTL and share it with your friends. We're available on Apple Podcasts and on all major listening apps, as well as thoughtleadershipleverage.com/podcast. Now you said that you started your career as a banker, and if I remember correctly, a currency trader, which is about as much of a quant and pure numbers as it gets, right? There is no squishy in currency trading, if I understand it correctly. Does that influence how people receive your message? Are they aware? Of that background and do you leverage that background in presentation? Go, look, I'm a business guy, I'm a financial guy, I understand.

I think it does. I mean, when I tell them or when they look at my background, I spent 22 years in the corporate world in the names like Morgan Stanley, Goldman Sachs, Coca-Cola, American Express. So that does help. The fact that, you know, I was a currency trader even though it was a long time ago and the fact that I'm also an entrepreneur, that does help. Because they feel like somebody here is talking their language. This is not an academic discourse, nor is it a socialistic sort of rant. So yeah, I think it does help.

And even if you were to come at it from a, hey, I've been focused on leadership and values-based leadership, that has a different framing. Than if you lean into the quantitative and the corporate, right? And so I think there's a balance there that you have framed your narrative with intention around specifically talking to your audience that may be executives, entrepreneurs, people who are able to make and implement decisions. And you seem to be working under the assumption that most people want to do well and do good, right? That they don't want just the financial lucrative reward. They're looking for an answer that gives them both.

You're absolutely right. I think there is a huge misconception going around, which is the narrative that we are trying to change. Most companies and most people see ESG or environmental and social issues as either a cost problem or a compliance headache or a risk management framework. So ESG is seen as a risk management framework or a cost problem or a compliance issue.

And that's on the wrong side of the line because it's on the expenses rather than tied to revenue.

Exactly. So that's how people think about it, that, you know, if I do any of this, it's gonna eat into my profitability.

It's a cost.

And the regulators are crazy. They keep adding more and more regulations. So I have to measure and report, measure and report more and more and more. I need an army of people just to keep the regulators off my back. So it's a huge cost and headache. What we are trying to do is help them understand that, well, look, death taxes and regulation is something you gotta live with. There's no way you can challenge that, okay? But the, we are trying to move their thinking to, it's a, to think about it as an opportunity rather than a cost. If the World Economic Forum data is to be believed, climate change will present $10.1 trillion a year of new business opportunities from 2030 on, if not already. And 395 million new jobs for the next 10 years. So $3.1 trillion of new business opportunities. Why aren't we looking at it as an opportunity as to, you know, how is the world changing because of climate change and what can I do to be in the right place at the right time? Rather than crying about it being a cost, it being a compliance headache, It's a, or a risk management framework only. You know, you choose how do you want to be? Which part of which side of the equation do you want to be?

That's, so I have an example of that. I was, uh, read into an example from The Economist where they said, okay, solar is driving energy costs in the afternoon to zero, if not negative in California and Germany. And so they said, you can either look at that of why would I install solar if it's a negative cost and it doesn't make financial sense? Or you can ask the question, if energy was free, what could I do with that in the afternoons? And they had a conversation with folks who were doing desalination and they said you could solve the Southwest water problem by taking water at zero cost and then putting water where it needs to be. And it's like, that's a different way of thinking.

It's the opportunity to create creative resilience. You just gave me a fantastic example of creative resilience. That's how steward leaders think. They do not allow, they don't see these things as threats. They see them as opportunities.

And it's the ability to turn the problem upside down and look at it as an opportunity, which I really like about the framework and the model. And the other piece of that being you have to think long term.

You absolutely have to. You know, we usually ask people, how long do you want to be profitable for? Are you going to measure in quarters and years? Are you going to measure in decades and hundreds of years? Chances are you want your company to be successful for the next 100 years, not for the next 10 quarters.

Right, right. And you can cheat your way to profitability and you can puff the data as you want and you can puff your balance sheet. But at the end of the day, you can't do that quarter after quarter, year after year.

No, you can't. No, you can't. I mean, the Enrons of the world found out that, you know, you could only— deceit would only take you this far.

So Where does this go with the work of steward leadership? Imagine it's 3, 5, 10 years from now. What is your vision for the concept and how are you defining success?

We are defining success by a simple metric, and that is if we can convince 2 out of every 10 people that we touch to consider steward leadership, we would be hugely successful. We only need— we are well aware of the fact that, you know, 80% of the people will not buy a word of what we are saying because that is not a sort of— it's not intuitive. But all we need is 20%. Now, why is 20% the magic number? And why is 20% going to be enough to save the world? Because we definitely need what we are offering to save the world. Right? We are going through an existential crisis.

So I will ask the question that you have set up. Why 20%?

Because there was a genius called Vilfredo Pareto who found out in 1906 that the rule of 80/20 prevails in every walk of life. And till today, 80/20 or the Pareto principle has not been debunked. In every walk of life. So if 2 out of 10 people embrace steward leadership and not just put posters on the wall with their values and purpose, but actually embedded into the DNA and culture, we will save the world. Today, 69 of the top 100 largest economies are not countries, they're companies. So we need business to take ownership. And if 2 out of 10 take ownership, we'll be through.

So you've set a high goal, not only from 20%, but then also do you have to adopt it individually at a team level and an organization level? How do you drive that transformation? Because even your team at stewardship Asia, can't drive that all on your own.

Yeah. So, cultures are created from the top. Humans are, humans by design are hierarchical. When we are little kids, we look towards our parents as authority and see what will please them so we can get the candy. And that never changes throughout our lives. We are always looking up to authority for clues on how to behave. So the only way to create that culture is walk the talk, walk the talk, walk the talk. And those companies where the leaders actually walk the talk, where they decide for themselves that they personally wanna be steward leaders, they breed steward leaders. They attract other steward leaders to come and work in their organizations. And those who don't, don't.

Fantastic. One last question for you, Rajiv. I want you to go back to the transition that you started making between banking and leadership, and at some point you stumbled into thought leadership, right? My question for you is, now that you've been on this journey, what insights would you give a younger self or to people who are just starting their own journey?

Question conventional wisdom. So for me, the light bulb went on when I was in human resources and in charge of talent development and leadership development. I had an epiphany and I said, you know what, it sounds like we are spending $80 billion a year collectively all over the world on leadership development. Then why does every company have only a few handful of good leaders? So much education, so much advice, so much coaching, mentoring, you name it, psychometrics galore. And yet, and leadership is nothing new. We know everything there is to know about good leadership and bad leadership. It's not something like it's an evolving science or anything like that. Good leadership was the same in the times of Alexander the Great as it is now. What we need, what he needed to motivate his soldiers to go to the frontline is what corporate bosses need to motivate their people in the corporate world today. So, when it's not an evolving science, when it's not a mystery, we've been studying it for hundreds of years, why are we not making progress? And that's when I realized that, you know, that the models were too transactional. We were teaching people how to have conversations of high-impact conversations, how to resolve conflict, how to collaborate, how to, you know, help somebody, situational leadership, and this kind of leadership and that kind of— everything was kind of on the surface skills, how to do strategy, how to do execution, et cetera, et cetera. Whereas actually to be a real leader, you need to go inside. And so that sort of questioning, if you will, sort of helped me. So what I tell my younger self is that, you know, you should have started questioning convention much earlier than you actually did.

Rajiv, that's a fantastic place to end because I love that that questioning leads to the idea, which leads to something that you're now working on scaling around the world to solve a much needed problem. Thank you for joining us today.

Thank you very much for having me.

Okay, you've made it to the end of the episode, and that means you're probably someone deeply interested in thought leadership. Want to learn even more? Here are 3 recommendations. First, check out the back catalog of our podcast episodes. There are a lot of great conversations with people at the top of their game in thought leadership, as well as just starting out. Second, subscribe to our newsletter that talks about the business of thought leadership. And finally, feel free to reach out to me. My day job is helping people with big insights take them to scale through the practice of thought leadership. Maybe you're looking for strategy, or maybe you want to polish up your ideas, or even create new products and offerings. I'd love to chat with you. Thanks for listening.