The sustainability of businesses, people and the planet are top of mind across the world. Every organization is being challenged by their customers and their governments to address the impact they’re having on the world around them. Contributing to the sustainability of people and the planet is quickly becoming a social license to operate. Fortunately, for many family businesses, the drive for sustainability is already a road well-traveled. And the potential benefits of being a sustainable business have been clear for a long time. We believe their experiences and the progress they’re making on the road to sustainability can be instructive and an inspiration for other leaders to follow. With this in mind, KPMG Private Enterprise and the STEP Project Global Consortium came together to take a closer look at the routes to sustainability that family businesses are taking. We listened to their stories and learned from their experiences in a series of interviews and group discussions with family business leaders across the world. Then we added to their practical insights with a detailed analysis of the sustainability performance data from our previous global survey of 2,439 family business leaders who were represented in the global family business report “The regenerative power of family businesses."
Sustainability is a business imperative
Stakeholder capitalism is on the rise
It’s becoming clear that no company can thrive – or even survive – without paying attention to the well-being of people and the planet.
Sustainability is about creating shared value. And it’s that strong foundation that many family businesses are built on. Creating shared value for all their stakeholders is part of their DNA. And they’re bringing the concept of stakeholder value into the mainstream – for their customers, employees, communities, the environment and society as a whole.
Sustainability is also now a business imperative for long-term growth and prosperity. And for gaining a competitive advantage. Companies that fail to adapt may struggle to compete in a new, low-carbon world.
For many family businesses, the drive to sustainability is already a road well-traveled. It’s embedded in the families’ values and in their business models, and an important part of the family’s legacy because each generation is expected to pass on more than what it receives. It’s also why we believe that family businesses have the opportunity to guide the path to sustainability for others to follow.
Eight keys for unlocking the sustainability of your business
The family business leaders who contributed to this report revealed eight keys that business families use to unlock their sustainability performance.
Click below to explore the eight keys.
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Active involvement of non-family members
Research has shown1 that there are proven benefits to having a good balance of family and external experiences and views represented on the board, having both family and non-family members directly involved in the business makes a positive contribution to both the sustainability of the business and the digital agenda.
The survey responses showed that boards comprised of 25 percent or more non-family members rated higher on the sustainability index.
This suggests that many family businesses that are dominated by family members on the Board and top management team may benefit from an external perspective to help drive improved sustainability performance and objective measurement.
[1] "Internal corporate sustainability drivers: What evidence from family firms?" Laura Broccardo, Elisa Truant, Adrian Zucari, 2018. https://doi.org/10.1002/csr.1672
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Dispersed family ownership
In the survey responses, companies with highly concentrated family ownership (between 76 percent and 100 percent) reported low ratings on the sustainability index.
Keeping it all in the family might not be the best option in terms of sustainability actions. This is especially the case if the business requires substantial restructuring and reconversion processes in order to update its current business model to meet new industry standards and stakeholders’ demands.
In such cases, cooperating with external capital providers may help to revise the trajectory and set the stage for reorganizing the business model based on the highest sustainability standards.
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Gender diversity on the board
Diversity is a notable contributing factor to sustainability performance, particularly in terms of the number of female board members. Those family businesses in the survey that had at least three female board members reported positive economic, environmental, and social performance.
The gender diversity factor has been identified in previous research and has shown that women directors have more diverse backgrounds and education and can add ‘new thinking’ to the board. Having at least three women directors (which constitutes a “critical mass”) changes the boardroom dynamics substantially and increases the likelihood that women’s voices and ideas are heard.
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Digitalization as a sustainability enabler
Digitalization is increasingly seen as an important sustainability enabler, especially in environmental areas where adopting the right technologies can help in reducing pollution and waste.
For some family businesses, digital transformation is a means of putting the world’s economy on a sustainable footing by streamlining and modernizing the companies’ operations to help fight climate change. For others, digital transformation has been the basis for fundamental shifts in the business. Digital product and service innovations, for example, have helped some companies to make the transition from legacy “carbon era” businesses to “future-oriented” enterprises utilizing advances in technology that offer ground-breaking opportunities to monitor and protect the environment.
Digital transformation has also become a key component of the business sustainability efforts of companies that have struggled with global supply chain issues, leading some to create product and process innovations.
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A charismatic or transformational leadership style
Leadership style is often an important factor in business performance. Family businesses that are led by CEOs who have charismatic and transformational leadership styles rated higher on the sustainability index than companies with more authoritarian-style leaders.
Charismatic and transformational leaders also have a positive influence on digitalization levels.
Sustainability strategies should be driven from the top, and held, or owned by someone on the top leadership team. The person who owns it has to have the background and skills to support it has and they also have to be seen throughout the organization as the obvious person to be in that role.
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A strong entrepreneurial mindset
Families that have maintained a strong entrepreneurial mindset are also inclined to have a holistic view of performance that includes economic goals as well as their environmental and societal impact objectives.
The entrepreneurial mindset of families in business is often one of their core competitive advantages because it enables them to identify and make the most of new opportunities, overcome challenges and act as an engine for innovation and transformational change.
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x A forward-looking orientation
The world is faced with increasingly scarce resources, and family businesses that are forward looking in terms of their business and are highly structured in terms of their governance (such as having a formal board and family council) are able to apply their patient capital to long-term investments for the sustainability of their businesses as well as to the world.
The future is a consideration in all of their actions, not the least of which is the importance of handing over a strong, healthy, and sustainable business to the next generation. This commitment motivates many families in business to take a long-term, forward-looking approach to their day-to-day decision making.
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Highly structured governance
Choosing the right governance practices in a family business is a critical ingredient for the company’s long-term sustainability.
The presence of boards and family councils, for example, generally reflects a strong governance mindset, and companies with good governance structures and practices have typically made better progress in defining their sustainability goals and implementing their strategies.
Next-generation and independent board members are often the key initiators of a formal sustainability strategy. The board is typically accountable for the strategy, but implementation is the role of all the key players within the family governance structure.
Family business leaders highlight three interconnected goals
Download the KPMG Private Enterprise and STEP Project Global Consortium report exploring the sustainability journeys of family businesses
Explore unique stories from family business leaders
Learn more about some of the family business leaders who contributed to this report and their companies’ sustainability journeys.
Family business interviews
Doing what’s right for generations to come
The sustainability journey is not an easy or a quick one. It takes time and the right people to support, explain and promote the initiatives and potential changes, as well as the support of the owning family, the board and the leadership team.
For many, the starting point has been to engage family members from every generation – as well as independent board members – to map out the practical steps that can be taken to weave sustainability throughout the business strategy and to do so in a way that will have a meaningful and lasting impact
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Robyn Langsford
Global Lead, KPMG Private Enterprise Family Business, KPMG International and Partner in Charge, Family Business & Private Clients, KPMG
KPMG Australia
