Anita began by asking Maurizio about his work at the Leonardo Center.   This center deals with the systemic challenges that companies, such as climate change and sustainability transitions.   You are working with companies to think through what works and doesn’t work.  What sustainability pathways tend to be fruitful, and what pathways tend to lead to dead ends?

Leonardo Center is a bold attempt to try to address Grand Challenges and the SDGs.  The work is organized in 2 parts:  first, to find a way to capture the evolution of corporate sustainability actions over the past two-three decades; then we use this dataset on 1 million by 16000 companies from all over the world to identify the type of actions that fall into 14 areas.  These range from philanthropy to innovation.   We tend to study company-level change, and to study social outcomes.  But what are the implications of individual action?  Where do we see synergy with financial outcomes?  These tend to be on the ‘high end’ of R&D and innovation.   Where are there tradeoffs?  They tend to be in advocacy and position-taking.  Almost half of actions are on the advocacy side.  You get mixed results overall.  My view is that we need to go down one level at least.

Second, we engage companies in doing field experiments to assess the change interventions that might be strong enough to move the needle in positive direction.   What are leadership innovations?  It’s harder to do this at the corporate level…   We are looking at the action level. 

The most important and fascinating is the finding on collective action across companies.  We need coordination and collective action among companies that are seeking competitive action.   How do we test ways to create coalitions among companies to come up with successful interventions.   We’re looking at this in several sectors.

We’re also working at the country level with the World Bank in countries that they are funding.  This involves capacity building at the industry level.

Is it reasonable to think that companies can successfully pursue sustainability without profitability?   What have you learned about the relationships between financial performance of companies and their sustainability initiatives?

The advocacy that corporations do may be very important – they write a check to support a school or hospital – even though they are not profitable.  If you want to go this way, managers have to be ready to explain why this is worthwhile.

What Maurizio means by advocacy includes philanthropy.  We could separate out advocacy from philanthropy…  We’re about to study this more.  We haven’t yet studied this but we will.  These could be preparatory steps.

There is a progression of the conditions toward the highly strategic, consequential actions like innovation and strategic change.  These are most potential when they are part of collective action.

Anita asked Maurizio about what he means by collective action by referring to the revitalization of a city core through coordinated financial investment among banks.

The goal is to create a group of companies in a value chain in a sector to coordinate on specific challenges, for example in IT or manufacturing or supply chain.  Financial institutions are somewhat unique.  There can be internal transformation of organizations through an injection of capital.   There are examples of doing this such as the Ecuador Principles.   This type of action may or may not lead to results.

What we’re trying to do is design micro tests, i.e., experiments, to identify conditions under this can work all the way through measuring impact.  There are some experiments through Systemiq, comprised of former McKinsey consultants, that has created coalitions of companies to create value at scale.

This might mean that 10 banks come together to create a new kind of loan that is available in a city, for example.  We can measure impact.  We’re looking into finance, chemicals, and textile fashion.  In textiles, we’re looking at recyclability and emissions reduction.  There’s not a lot that’s know about this problem, but the companies want to invest together.  Collaboration among competitors in this sector has not been common.

Your scholarly work has centered on organizational learning, including particularly what you have called “deliberate learning.”  How does this relate to experimentation of this kind.

You are deliberate learning by designing experiments to solve problems.  You are trying to lower causal ambiguity.   RCTs are OK at lower levels of analysis.  But at the org level, there’s less applicability.  The challenge is at the sector/country level.  Our cousins in economics have designed experiments in other areas of the SDGs through state-level RCTs.  Why are we not able to this companies?

What do you see as the frontier of sustainability practices in companies, particularly around experimentation?   How can companies conduct experiments to make their sustainability initiatives more effective?

Why Maurizio thinks we need to do more on improving practices (without denying in any way the need for RCTs):  We need more mature global initiatives.   This needs to be aligned with purpose and with integration of stakeholder voices into governance, strategic decision-making, and functional areas.   If you put it all together, this is different from the kind of business that we’re used to.  It’s the defining question of our field.  Are we willing and able to work with businesses to co-develop and test alternative ways to define and align all the key elements of an organization with the outcomes we need globally on environmental and social criteria.  Its our responsibility to be part of the solution.

We need to step up collaborative work – accumulative work.  There is so much that we don’t know!