The Business Of...Ethical Leadership

About the Episode

In business, the practice of doing well and doing good can sometimes seem like a paradox. However, as the notion that a primary purpose of business should be to contribute to a better society gains momentum, leaders have a fresh mandate to balance social, economic and environmental objectives with bottom line results.

In this episode of the AGSM 'Business Of ...' leadership podcast, we explore the intricacies of ethical leadership and the challenges and opportunities leaders face when combining profit with purpose.

Host Emma Lo Russo is joined by Dr. Simon Longstaff, Author and Executive Director of the Ethics Centre. Simon shares his wisdom on how leaders can take account of their influential role in society, and tailor it to the way they go about pursuing business objectives free of hypocrisy and inaction.

We also hear from Emma Weston, CEO and Co-Founder of Agri-Digital, an organisation founded on the principles of driving trust and transparency in agricultural supply chains. Emma explains how a clear sense of purpose has laid a foundation for the AgriDigital team to build a culture of growth and innovation around.

Finally, Dr. Kristy Muir, Director at the UNSW Centre for Social Impact, shares key findings from her research on the intersection of business and social impact. Kristy provides actionable advice for leaders looking to strengthen their commitment to doing well and doing good.

Speakers:

  • Emma Lo Russo, (AGSM MBA Executive 2013), CEO and Co-founder of Digivizer
  • Dr. Simon Longstaff, Executive Director of the Ethics Centre
  • Emma Weston, (AGSM MBA 2006), CEO and Co-Founder of AgriDigital,
  • Professor Kristy Muir, Director at the UNSW Centre for Social Impact and Professor of Social Policy, UNSW Business School

Emma Lo Russo:
Welcome to The Business Of…

I’m your host Emma Lo Russo, and this leadership podcast is brought to you by the Australian Graduate School of Management at UNSW Business School.

Business leaders, consumers, and those entering the workforce are becoming increasingly motivated by the idea that successful businesses can ‘do well’ and ‘do good’. It’s commonly referred to as ‘corporate social responsibility’ or the triple bottom line. Although often well-intentioned, it’s a practice that can be marred by ambiguous or misaligned goals in the organisation.

In this episode, we explore the intricacies of ethical leadership and the challenges of balancing social, economic, and environmental objectives in order to achieve your bottom line results.

Joining me is Doctor Simon Longstaff, Author and Executive Director of the Ethics Centre. Emma Weston, Co-Founder and CEO of AgriDigital and Doctor Kristy Muir Director at the UNSW for Social Impact.

First, let’s hear from Doctor Simon Longstaff.

Yep. Dr. Simon Longstaff. Welcome to the Business Of

Simon Longstaff:
Emma, thanks for having me.

Emma Lo Russo:
How would you define socially responsible leadership?

Simon Longstaff:
Well, it's a leadership which I think recognises that businesses and other organisations exist in a relationship with society, which is not merely a symbiotic parasitic relationship, where one feeds the other. But in fact, it's an organic part of the whole. You sometimes have to be reminded of that, because so often when we talk in society about business, there's this tendency to say, "Well, it's not actually part of society, but it's a separate part." You'll hear people talk about civil society, the market, and government and things of that kind, as if somehow other business sits separately to that. I think that's a mistake. I think a socially responsible leader in business will actually take account of the role that they're playing in society in that organic sense, and then tailor the way they go about pursuing perfectly legitimate ends, such as the pursuit of profit, to make sure that the means they employ are not to the disadvantage of the organism of which they are a part.

Emma Lo Russo:
I'm glad you touched on that because I think leadership accountability is a quality or characteristic that is looked for. This doesn't have to be separate from or adjunct to it, it can be incorporated. What's your view?

Simon Longstaff:
Yeah. Look, I think there are many different dimensions of leadership, all of which have to be present at the same time, which is why I think leadership is a challenge and why people, when they volunteer for it, are sometimes not fully aware of what they're doing. They are serving a number of competing interests sometimes. You'd like to imagine that there's a world where everything always lines up, but of course, it doesn't. Sometimes the priority of the organisation will be at the expense, say of employees. I think we're going through a period now with the COVID-19 pandemic and the recession that's emerging from that, where people are seriously wrestling with how they protect the organisation even though they know it will have adverse impacts on a number of their colleagues.

Simon Longstaff:
But always, the leader is ultimately responsible for the choices they make, even in cases where they're not accountable. There is an important difference here. You're usually accountable to someone, and you might be in a position where there is no one holding you to account. But that doesn't mean your responsibility disappears. Responsibility, it carries with you even when no one is looking, even when there is no one to hold you to account.

Emma Lo Russo:
So that ethical leadership needs to underpin everything that they do, what are characteristics when you look to an ethical leader? What are some of the key attributes?

Simon Longstaff:
Well I think the first thing for me is to be a little bit suspicious in some senses about the notion of ethical leadership, because it does occasionally give the impression that there is leadership and then there are some ethics that you bolt onto it as an optional extra. Whereas I think of leadership itself as intrinsically an ethical practise. Now, there are some leaders who bring about some terribly bad results. The historical figures, the great bad leaders, and there are a few great good leaders. But there's always a kind of an ethical question embedded in what they do. The attributes that I look for and I think are most important are first of all, moral imagination. And that's the ability to project yourself into the shoes of other people and other times, in order to consider what might be the implications of the choices you make for a range of different stakeholders. Some of them, potentially your competitors, and I think this is also a practically useful skill to get into the skin of others.

The second thing though, and I think this is the more demanding part really, is the need for moral courage. Because moral courage is an essential attribute of all good leadership. Once you understand that leadership has to be distinguished from management in a few important ways. The simplest way I come to this is to understand the manager is playing an absolutely essential role, but a different role. And so I imagine, for example, a cork in a stream and it's been carried along and no one wants to fall off the cork and into the water. So there's a group of people there making sure that the cork is balanced and that everybody stays dry. But for them, wherever the stream takes them, the cork happens to go, just as long as everyone's dry.

Whereas there are leaders, and they impart direction to this vessel. They pick a point, they inspire people to strive, not just to stay dry, but to reach that point. And the only way you can really do that is by challenging the two, if you like, fundamental enemies of ethics. The first of which is hypocrisy, which often is a product, not of deliberate choice, but of the second major problem, which is unthinking, custom and practise. It's really common that you'll go into an organisation and you'll ask people, "Why do you do this?" It doesn't necessarily have to be problematic, and people say, "Well, what do you mean? Everybody does it like that. Well, that's just the way it's always been done." When you get that response, that is the cue for the leader to challenge that. Because leaders don't go where the stream is taking them, they don't go where things just happen to be flowing or because everybody does it.

What they do is, they challenge that unthinking custom and practise and they demand that the choices that are being made attach to the purpose and the values and the principles of the organisation. The trouble is, almost no one wants you to do that. So we talk a lot about leadership as if it's something which is widely valued, but there are many places where people just want to be left alone. They don't want that quintessential activity of leadership, what I call constructive subversion, where you subvert the unthinking custom and practise. Not to destroy things, but to make it more like the thing that says it wants to be. We'd say, "Doesn't that sound wonderful?" Well, not really for lots of people who say, "Well, I was quite happy just doing what everybody does. I was quite happy just doing what everyone," sort of in the flow of things and you come along with your leadership story and you want to question things, you want to challenge it. And so, that's where I think you have to have that particular moral courage to ask that penetrating question.

Emma Lo Russo:
I like that, moral courage. So for leaders who want to create greater social impact,, how do they go about that? What do they need to do to exercise that moral courage?

Simon Longstaff:
Well, I think first of all, they've got to work out what it is that they consider as impact, and how direct or how ambiguous a route they wish to take. There are some areas where it is literally cause and effect. We know for example, if you give someone a polio vaccination, you reduce the chance of that person catching polio. And you say, "There's the impact. I worked on the vaccination. I gave the vaccination." That's fine. People can really understand that, particularly in a world which has really wedded to assessing impact.

And some people will have a really clear sense of what needs to be done. They'll follow a plan in a quite methodical way. There'll be other people who are experimenting, who will try lots of things. They'll fail lots of times, they'll learn from each incident. And it's not to say that one is better or worse than the other, they're each bringing something different to the process. But they will check themselves on a regular basis to know whether or not the good they thought they would at least attempt is being realised, and they'll try and do that with a sober gaze. They won't allow others to convince them or convince themselves that everything is perfect if in fact that's not the case, because then you end up, I think, living a disappointing kind of life of bad faith, where you claim these things that you're doing for a better world, but you don't actually deliver it. And that's why I think part of this moral imagination that I mentioned before is as much about being honest with oneself as it is about being honest with others and getting in their shoes.

Emma Lo Russo:
But then how do you drive and maintain that culture in an organisation? And how do you measure it, to your point, as well?

Simon Longstaff:
Well, I think the measurement, and I'll come to it in a moment, that's actually the easiest part in some ways. It's very confronting, but it's not impossible to do. But the person I have always admired for having the most profound effect is a man called Paul Anderson, who for a period of time, was the CEO at BHP, and completely reformed it. I started my working life as a cleaner, and then later in the safety office at BHP's then subsidiary, on Groote Eylandt in the Gulf of Carpentaria. So I knew firsthand what a futile organisation it had been. Very conservative, people were very reluctant to tell the truth. And Anderson came in after a period of minor crisis, nothing truly terrible had happened, and he just was like a breath of fresh air. And he sat down in his office and he wrote this thing called the BHP Charter, which still operates to this day. I mean, it's been changed a little bit, but it's effectively, still the same idea.

And then he began to live it. That's most important. From the top, he began to live it. And I've never seen such a remarkable change in such a short period of time, as he was able to bring to bear in a company that is today, the world's greatest mining company. There's no doubt about it. It's done, in recent years, the decisions it's made, it's been brave, it's been progressive. It's not perfect, it would never claim to be, but it's really lasted. You can see the enduring effect of that change. Now how do you measure this? Well I think you've got to use tools such as some of which we've developed at the ethics centre using a process called Everest, which does two things, and both of them are necessary.

So partly what you need to do is recognise that the thing you are going to measure is not to benchmark an organisation against other organisations, because that's, to my mind, irrelevant. What you want to know is how much is this organisation like what it claims for itself to be? Because as I mentioned, one of the two great enemies of ethics is hypocrisy. So if you're finding an organisation that says one thing, but does something else routinely, you know that's a recipe for disaster. So the first set of data that you look for are the experience and perceptions of people who deal with the organisation. Most importantly, those who work for it, but also suppliers and customers and others. And you're basically asking them simply, "Do you think, in your experience, that this organisation does what it says it does? It talks about this purpose. It has these values and principles. Is that true? Yes? No? And if not, why not? What can you say that's inconsistent."

The second thing you need to do, and this is the part that is often neglected, is you need to bring a forensic gaze to bear in assessing an organization's systems, policies, and structures. And the reason for that is that you will have really committed and sincere leadership in a company. And all the right words are being said, all the right behaviours appear to be being acknowledged and rewarded. And yet you will have a system of recruitment or induction or remuneration or product development or marketing. There'll be something somewhere, which maybe a legacy issue, that at the same time is pumping out a quite contrary signal saying not in these words, but the effect of it is, "Actually we say this, but that's not really what we're going to measure. That's not really, what's important." And of course, people in an organisation when they experienced that, they say "Well, they must know that they're doing this. This can't be an accident. Therefore, all those words, we hear all those symbols, don't believe them." And then they say, "Well, if they don't believe them, why should I?" And of course you start to see a potential corruption of the culture.

So these three principle components of an organisation out of which everything grows, all of its culture, those components being principles, values, and purpose, they need to be there to calibrate all of those policies and practises and structures to see whether or not they're consistent or not. I've given you a bit of a kind of overview. Then there's lots of things, data that flows from that. And then you can have data-driven interventions to close the gaps and to help the organisation to become a thing it says it wants to be. And that drives out the cynicism, it brings and end to the hypocrisy and some of it can be done really simply and has no great cost. Other things take time to make more profound changes. But leaders want to know about that. They want to look in that particular mirror, even though it's uncomfortable. But the truth is, relatively few do. The majority don't want to know because once you know you've got to do something.

Emma Lo Russo:
I'm glad you touched on that alignment. I've actually seen firsthand those organisations where what's said at the top isn't necessarily the experience somewhere in the organisation. How do you challenge leadership at all levels to have that same commitment to measurement, that honesty that you were talking about?

Simon Longstaff:
Well, I think firstly is to try and normalise it. I mean, once you understand the basic logic behind all of this. And for example, if you're atop the tree or anywhere really, you realise today that you don't need to be a chairman of a board or a CEO to generate strategic effects. You can be quite a newly minted employee who does something a bit silly, example on social media, and all of a sudden it is the chairman and the CEO having to deal with it, but they never had anything to do with it. So the distributed nature now of how people can affect strategic interests of an organisation when you've got to distribute also the sense of being engaged in this work of maintaining its integrity. And that means creating a culture in which people are curious about the apparent inconsistencies that they encounter.

And rather than having to be brave and sort of having speaking up culture, and there's a lot of investment in that language, but the more I've thought about, that actually makes it sound pretty dangerous and unusual to have to speak up. I'd much rather see leadership as you've put it, which is distributed through every part of the organisation as a kind of component or function. I'd much rather to see that in a case where people say, "I just don't understand. We say this, but we do that." And that act of wondering is seized upon and celebrated. "Yeah, isn't that fascinating. I wonder why we say that and do that." Well, we better change it one way or the other, because otherwise we're going to appear to have hypocrisy and that will prompt cynicism. And we know that cynicism of that kind of acts as a kind of acid that eats at the bonds of any kind of organisation or community.

So that's when I think it becomes an exciting, vital thing. Not a problem, it's not a part of a compliance thing. Are we going to try and get the ethics people in, or have this as part of our leadership so that we can manage risk and prevent bad things happening and all the rest? No, this is going to be exciting. We're going to unshackle our capacity to find these areas of inconsistency. And we're not going to be unrealistic, thinking we can address everything in a moment. Because some of these things will be big rocks. But at least we'll acknowledge them and start working on them.

Emma Lo Russo:
So we've gone through quite challenging times, in recent months that's impacted business models and the personal, whether it's the employees, customers, family members, overseas friends, et cetera. Where is this challenge that ethical leader or the organisation trying to lead social impact.

Simon Longstaff:
I think it's been an extraordinary period for a couple of reasons. One, which I won't say a lot about now, is that I think it has given us a taste of the future that is to come. In other words, I think we're going to see fairly large scale displacement of employment because of new technologies and the whole range of other things. And I don't think we've thought seriously enough about how we're going to manage that. I think that question has been begged now by COVID-19. But I think the more important thing is that if you follow a crisis, like COVID-19, then it reveals something very profound about purpose. So any kind of crisis, you take something like a shipwreck. And in the first phase, people will be there clambering to survive, but there'll be very cooperative. They'll bend their backs to the oars, if they're in this lifeboat, to get away from the wreckage to get to someplace and safety. So they band together.

Simon Longstaff:
Then there's a second phase, which is where things become scarce and you start to see different patterns. Some people become quite selfish. Some people become entirely selfless. So they might say, "Oh, there's not enough food. I'm too old, I'm too frail. Let me go" and they drift away from the side of the boat. There are people then in the middle and as that is unfolding, not only are people suffering what's called moral fatigue, where they become worn out by these constant decisions, but some of them are storing up the possibility that they've suffered moral injury by doing things which they look back on and say, "How did I do that? What happened?" And certainly in the pandemic, there was a grave fear, and it was realised in some countries, that doctors and nurses and others were going to be exposed to this moral injury by having to make endless decisions about who lived and died because of access to limited medical and other facilities.

But of course that didn't happen in Australia. Where it's happening now is in the workplace where people are saying, "Can my business survive? Can I sustain the employment? Do I have to make people redundant?" And so on and so forth. And so they're storing that up. So you get through that stage and you think, "Oh gosh, that's bad enough." But the really important point is the third stage, which is at the point of rescue and survival. And it's at that point that all the people who have survived the trauma that has happened in the first two stages, start to suffer the terrible guilt that survivors feel. "Why did I survive? What about the people who missed out?" And it's no point telling those people "Well, it's okay, you survived because you survived." The only way they can lift themselves to achieve something more is if they're convinced that there is a purpose that they can serve, that explains, and in some sense, justifies the sacrifices that have been made along the way.

Now if you're a leader in that situation and you come along and you say, "Okay, we've gone through this terrible time, but there is a purpose and this should inspire you," and they listen to you talking about that purpose. And then they look back at all the things you did as a leader along the way and they start to laugh and say "That can't be true. It simply cannot be true because of what you did in this step and this step and this step." Then you'd have completely destroyed the opportunity for seizing what needs to be seized at that time.

So the lesson in this, which I just don't know if enough people have realised is, is that you actually have to project yourself into the future as a leader, to think of the state that you want to emerge into and allow your understanding of that future to inform the decisions in the present. And not foreclose on the possibility of a purpose that might actually rescue the whole enterprise when the moment comes. And I reckon that's a lesson people ought to be reflecting on now because yes, the pandemic may be under control, but the effects of the recession are not. And we're going to have to think long and hard within organisations about how we manage the implications of that.

Emma Lo Russo:
That leads to a really great question, which I'd like to close on. Let's talk to the leaders about the change, their preparedness for this future and the fact that is where they are at time. What can we tell them to do? What's your advice to them?

Simon Longstaff:
I think from a strategic point of view, I'd first of all, want them to understand that the ecology of business is changing. It's no longer an ecology in which each of the different elements is defined by what they do. So banks, for one example, are almost indistinguishable in terms of what they do, their goods and their services. And if somebody does innovate, someone else can catch up pretty quickly because the information flows are so quick. So where you distinguish yourself is not by what you do, but by what you mean. But the great thing about this ecology is you don't have to be like your next door neighbour. You can be distinctively different. But whatever you are, it has to be true, can't be faked. And you've got to take your chances that if you are something which the larger society rejects as just completely incompatible with where its interests lie, then you may not actually attract enough of any of those things to be able to survive.

So as a leader, you've got to see, is it possible for me to find a place in which I exercise my leadership, where my own personal values and principles are sufficiently aligned to the organization's purpose, values and principles for me to feel at home? I don't want to be a clone, but I need to have a sense that this is comfortable territory.

Emma Lo Russo:
And Simon, could a leader do this from anywhere in the organisation?

Simon Longstaff:
Yes. You can do that kind of leadership anywhere. I think there are more challenges in different places. Sometimes one of the hardest places is to be at the very top because everybody expects you to be something which you cannot be, because you're having to manage so many different competing demands.. But I think there are others who are trying to lead in the way I've described, where there are really considerable forces arrayed against them who just don't want them to lead. And that's where the skill of expanding your own capacity through alliances and being nuanced in your judgement about how to do this, in finding ways sometimes to manage up where you enrol others to see why it's in their interest to be part of the process that you're trying to institute.

Emma Lo Russo:
I love the congruence you brought to this, like that these things have to literally be something that drives the purpose of the organisation, the purpose of the leader and who you care for and the impact that you're having. So thank you very much Simon.

Simon Longstaff:
Thanks for the opportunity to chat with you, Emma.

Emma Lo Russo:
Some fascinating insights from Doctor Simon Longstaff there. It’s clear from our conversation that building a strong ethical core, both as a leader and culturally within your organisation, provides you with a foundation for purpose and driving social impact.

My next guest is the embodiment of that philosophy. She’s combined her technological mastery with an innate desire to do good. The result is Agri-Digital — a business dedicated to improving pay inequalities in agricultural supply chains through trusted and transparent operations.

Let’s hear from Emma Weston, on the Agri-Digital story.

Emma, thank you for joining me on The Business Of. I'm really interested to hear your story behind founding AgriDigital.

Emma Weston:
Thanks, Emma. It's really great to be included. Basically I'm the CEO and a co-founder at AgriDigital. I have two co-founders, Bob McKay and Ben Reid. We're actually all farmers as well. And AgriDigital is a technology company for the grains and cotton industries. So we build out commodity management software for those industries all the way from farmer through to exporter, processor, trader, and beyond. So we cover the whole grain supply chain. And we also have a finance business, but I'm going to talk about that a little bit as well. Bob, Ben, and I came together because we had actually exited previous businesses and thought that we had unfinished business with agriculture and with the supply chain.

And that unfinished business really was that there was some deep entrenched problems in agriculture globally, and in supply chains more generally that we felt hadn't been solved during our careers and it didn't look like anyone was planning to solve them. And really that's where AgriDigital was created. Back in those days, it was really about really settling on the problem. There are so many problems that exist in global agriculture, but what problem could we really solve? We were really focused around payment issues, so making sure that everyone in the supply chain gets paid for the effort they put in, for the production that they bring to that supply chain, and making sure that that payment was done as quickly and as safely and securely as possible. I'll give you a little example there. So when farmers deliver their product into the supply chain, into market, they don't always get paid. In fact, they hardly ever get paid when they actually deliver that product. So sometimes they will deliver into a market.

The market has actually consumed the product the farmer may not have been paid. So if something happens to disrupt that payment process, the farmer doesn't get paid and they don't have the produce either anymore. So that obviously causes an enormous amount of pain in the industry, and we've seen that firsthand ourselves. So that was part of the impetus starting AgriDigital. But since then, we've really moved into being a full service technology platform and we manage all of the operational processes of the supply chain, including payments, and now ensuring that we can bring liquidity into the supply chain so we can support small to medium enterprise to continue to grow their businesses. And we have a really competitive marketplace then for consumers.

Emma Lo Russo:
It sounds like you've been building still to that promise, but where were the challenges in meeting that opportunity?

Emma Weston:
I think the challenges have actually been, in some ways that they've been quite mundane challenges that everyone shares. It's access to talent, so can we find the right people at the right time to share and to be part of this journey In the early days, it was a challenge to actually explain that we shouldn't be doing what we've always done, that wasn't the right way. And in fact, that this problem that we wanted to solve, which everyone thought was just how business was done, was in fact a problem. So it took some time for us to learn how to articulate that problem and why a solution was so important, and the value that that solution delivered.

Emma Lo Russo:
I mean, technology is such a great enabler of change, but how did you use it to address the inequalities that you saw in the system that was the charter behind the founding of AgriDigital?

Emma Weston:
Yeah. I mean, I guess that's really the noble purpose that sits behind AgriDigital, is one of the things that we're very grateful for, or I'm grateful for as a participant in agriculture and as a farmer, is that we have a broad spectrum of participants in our supply chain. And what we see when we don't have that broad diversity is we see a lack of competition, we see pricing concentrations, and we normally see that impact both farmers and consumers as the polarities of supply chain. So we've been very passionate about the need for inclusion and diversity in the supply chain. And for us, what that means is, yes, that could mean race, it could mean ethnicity, it could mean location. But as much as anything, it also means just including small business and making sure that even if you are a small land holder or a small business within the supply chain, that you are able to grow your business and you have the tools and the technology importantly to do that. We saw that we could bring technology to the small business sector and we could bring finance.

That was the other big piece of having an impact was businesses were saying to us, "Yep. I need the tool. I need the technology. But if I don't have access to finance when I need it on flexible terms, then I just can't grow my business." And that's where we knew we could have an impact.

Emma Lo Russo:
So that tension or the balance between doing well financially and doing well from a social impact, how have you been able to manage that given the challenging periods?

Emma Weston:
When we set up the business, we had a very clear idea of what we were building, how much it would cost to build, how long it would take to build. And then, of course our initial investors said that's all very good, they might now double it. And that was probably very good advice. But what that meant was that we would be quite dependent upon investors coming into our business and financing our business through a period. And that's still going to be a really important part of our journey, but what we've realised is we actually need to be more self sufficient. We need to have our own agency in our development, and that means actually getting to a cashflow positive position as soon as possible. And if we can do that, then we're actually more in control of our destiny, which means that we can help our customers. So that really became the galvanising piece with my team, is explaining ... Unpicking, I guess, the financing of a startup and explaining that we need to move very quickly to a cashflow positive position.

So what do we need to do to get there? And getting all the heads in the room around that, both from a crowdsourcing of the wisdom that they bring, but also just from sharing and collaborating in the problem together. And we worked out that, we were not that far away from that. There was some trimming that we needed to do on the expense side, there was some growth that we needed to do on the revenue side. But it was very important that we do that so that no matter what happens in these challenging times, we can continue to build the best product and deliver in service to our customers. That was at the forefront of our mind.

Emma Lo Russo:
How have you continued to have your team contribute to that culture of innovation? What is the way to keep them engaged and contributing?

Emma Weston:
The number one priority, I think, for the team and to most people is to actually feel safe and secure. So we have these really open conversations now around do we feel safe and secure? And what would make us feel safe and secure? Because if the team feels safe and secure, they're actually much more likely to come up with innovative ideas. Either, one, they're not scared around having the dumb idea, or the stupid idea, or the stupid question, because there are no stupid questions of course. But also we're trying to get better and better at explaining that it's okay to try things and if those things don't work, we just don't want to keep making the same mistakes.

So mistakes and failure, we're trying to pull those apart as different pieces. And I say failure, which it'd be great to have a better word than "failure". But trying new things and things not working is fine. That's actually part of building great product and servicing customers, and that actually is innovation. It may not be the innovation that led to a product launch, or it may be. It may be that that became the essential piece that said, "Don't do this." So we're trying to take a really wide definition of innovation. The other one is transparency. I think that transparency brings the team along. When COVID hit and we realised that we were going to have to ask a lot of our team, and have to ask for some sacrifices to be made, I also realised that we need to say right down to the last dollar in the bank accounts, "This is how much runway we have." And be super transparent about that. And making yourself vulnerable with that transparency, I don't think that ever backfires.

Emma Lo Russo:
How would you characterise the five years of leadership and the changes you've had to make?

Emma Weston:
Well, to begin with, I actually wasn't the leader in the organisation. I was a co-founder, but one of my co founders was the original CEO. I was the COO, I guess we would say. In the early days, everybody's doing a bit of everything so perhaps those distinctions are not quite as clear. But the company and the technologies that we were using, and in particular, the work we were doing in blockchain which had become a bit of a passion project for me, just meant that I became more adept at strategizing around where the company was going and talking to the narrative that we were building as a company. So literally, that meant I became the front person for the company. And then as a founder group, we actually decided, "Oh, we think that the face of the company should also now be the CEO." So that's how that decision was made. And quite often, I think as a leader, my bias has been to action. And what I've learned is that over time, some of those actions become very hard to unwind as the organisation gets bigger and your customer base gets bigger. So taking more time to reflect and really think about is that the right time to take that decision, and to work through those decisions, I think is something that I've learned as part of the journey. And that's just a personal thing because I think I was a pretty action based operator before.

Emma Lo Russo:
What tips would you give to other founders or to leaders, who want to implement more sustainable businesses and develop that practise and your learnings?

Emma Weston:
I guess I just really think that this is crucial for businesses that want to operate in the sustainable space. And for goodness' sake, what business doesn't want to? I mean, that's just a ... It's almost an oxymoron in and of itself. But at AgriDigital, we have had a look at the sustainable development goals that have been set by the UN, and have used those as a basis for thinking about strategically how do we actually contribute to a sustainable world? And not every sustainable development goal or SDG is immediately applicable to what we do, but there are a couple that really are well aligned and that we can actually frame our business, and our planning, and our strategy, and our customer acquisition around. So that's been part of what we've done. And I've actually suggested to many other businesses previously that they have a look at the sustainable development goals, and they've been really surprised by how that has then influenced their thinking as well. I think it's because quite often in Australia, we are in a fairly privileged environment.

So we think about sustainability with respect to almost corporate social responsibility instead of at a more fundamental level. So when I'm talking about sustainability, I am really thinking about it at that fundamental level.

Emma Lo Russo:
So that social ethical responsibility to shareholders, but ultimately, to your point that you said talking to your organisation, you need to stay in the game so you can keep serving those customers. How do you balance that? What's your advice on keeping all those aspects together?

Emma Weston:
And I don't really have a good answer around, I allot so much of my time to this, or so much of my time to that, because that's just not the way it works for me. In my mind, I have a very clear view about what we're doing at AgriDigital, and whether we think we've done good today or not. I mean, that's what we talk about internally, "Did we actually really build value today? Or was it just one of those days where it felt like we spun wheels and we didn't get the value that we would like to get?"

Emma Lo Russo:
Emma, it sounds like you have such a lovely level of humility. You talk about transparency, I hear it in the way that you're sharing your own journey and learnings.

Emma Weston:
But I didn't always actually, Emma. Yeah, I really think that that has come as part of the AgriDigital experience where just so patiently, I didn't have all the answers and I couldn't even pretend I did. There was no choice but to be humble about that and to share that, and to realise that didn't make me less of a leader or less of a person not to have all the answers. In fact, the responsible thing quite often is to say, "I don't know." And to work out how to get the answer. So I think in my earlier career I felt I always had to have the answer, and it's really liberating to realise that you don't and that it doesn't impact the outcome if I don't have the answer. But I can sometimes be really fundamental in finding the pathway to getting the answer.

Emma Lo Russo:
Well, that's a big lesson that I've heard from you, is that continuous need to ask the questions that promote the change and the fact that you asked that of your team. You don't have all the answers.

Emma Weston:
No. I absolutely know I do not have all the answers and it's not just even humility or a sense of self that brings me to that spot. I know that because I've been wrong. I've seen myself be wrong and I've had to eat humble pie, and I've had the value of being wrong. But being wrong at a time that didn't really matter, if you like. So I've been wrong at the right times, rather than being right at the wrong time.

Emma Lo Russo:
What's next for AgriDigital?

Emma Weston:
Well, the next is really North America for us. We have had some impact with everything that's happened on our timelines there, but we do see that we've put not just effort into the market, but we've actually created a demand for the product there and we really need to satisfy that demand. So that's definitely in the short-term what's next for us. We also have a fantastic harvest coming up in Australia, which is the first one in a while. We've been in drought for a long time in Australia on the East Coast, so it's really exciting to be able to see a lot of the products that we've been building, customers actually using that. We've actually had customers who haven't been able to use our product, my family included. We actually just planted our first crop for three years the other day. So it's really exciting to see our customers coming back on board and the environment favouring them. The other area for us is as we're building out our finance business, we want to be able to take that investment proposition to a broader class of investor, so that is a debt investor.

And we've had a lot of interest from superannuation funds, high net worth family offices, but also impact funds. So working out how we can really connect these impact investors with the underlying asset, and the underlying supply chain, and agriculture sector that they're investing in is of paramount importance to us.

Emma Lo Russo:
Emma, given that you had farming as your background, you've talked about your family and recognising those challenges, how important do you think that background has been to really solving the problem for AgriDigital's future?

Emma Weston:
Look, the background and what continues to be a family business for us as well has been crucial because it's the domain expertise really crossed with the passionate purpose and the technical execution that enables us to do what we do. So I don't think we could have one without the other.

Emma Lo Russo:
Thank you for taking the time to talk to us today.

Emma Weston:
Thanks, Emma. Great to speak.

Emma Lo Russo:
There’s plenty to take away from Emma’s experience leading the charge on trusted and transparent operations at Agri-Digital.

It’s interesting to hear the motivations behind the company’s social impact journey, acknowledging the pain for the individual farmer, as well as an industry wide inaction as a deeply entrenched issue. This became the organisation’s purpose, a clear direction for Emma and her team to build a culture of innovation and growth around.

My final guest for this episode is Doctor Kristy Muir, Director at the UNSW Centre for Social Impact. Kristy uncovers some key insights from her research into socially responsible leadership, and shares her tips for developing more socially conscious business models.

Kristy, let's start with, what does social impact mean?

Kristy Muir:
There are lots of different definitions around social impact, Emma. The one that we use is social impact is all about long-term social or environmental change. And it's as a result of an action, an intervention, a policy or a programme. So, the key here is around outcome. So, something has to change and it has to change as a result of doing something. And that might be intentional, so it could be a direct intervention, or it might be an outcome that happens that's not intentional or a secondary type outcome. The other key thing to think about is when people think about social impact, they often think about it being positive, but actually, social impact can be positive, negative, or neutral.

Emma Lo Russo:
That's interesting. So if we look at it from a leadership perspective, how do you define socially responsible leadership? Because, responsibility would be the key in that then.

Kristy Muir:

Responsibility is key in social leadership. I think the other thing about social leadership is leadership is what you do, it's not your role or your particular title. Holding onto that and what it means to then be a socially responsible leader is quite important. And so, part of that is then going back to that, "What kind of social impact do I want to have as a leader?" and understanding what role you might play and your organisation might play to create that change. We also want to ensure that that impact is positive.

 

And so, one of the key things around that is to think about what problem that you actually want to help try and solve for and be clear about that. The other piece then is that we know in complex social problems, and almost any kind of problem, that people are trying to solve for a social environmental one is complex, so those wicked problems: homelessness, poverty, environmental, climate change, those kinds of things are wicked, complex social problems. They usually require lots of different intervention points, lots of different levers by lots of different groups and people to be able to create some kind of change. So, in terms of defining a socially responsible leader, it's thinking about, "What am I going to do? What's my intervention? Who do I work with? For what problem do I want to help solve for?"

Emma Lo Russo:
Why is ethical leadership important and what are the attributes that need to be there in a leader?

Kristy Muir:
Yeah. So I know it might be controversial, but sometimes it feels like our leadership has lost its moral compass. We've seen Royal Commissions in a whole range of areas around our financial services. We've seen that in institutional abuse against kids, age care, disability, a whole raft of areas. And we've even seen it, for example, with our sporting leaders in terms of cricketing recently.

I think one of the things we have to think about with ethical leadership is not just what's legal but actually, what is right and the right thing to do. The decisions that we make as leaders can have implications for others and we need to be kind of clear about that. I think there are probably a whole bunch of ethical frameworks we can draw on to think differently about the type of leadership that we can act and the type of questions that we might ask ourselves when we're facing these ethical dilemmas and ethical challenges.

Emma Lo Russo:
So based on your research, what are you seeing are the trends or drivers behind those organisations trying to make those changes and increase their social impact?

Kristy Muir:
There's a whole lot of trends that are happening around social change. And I think we're not just talking about corporate social responsibility here, we're talking about other forms of social leadership and social responsibility that businesses are adapting into. Things around shared value, rethinking about what they fund, how they fund, how they collaborate with others. And largely, a lot of the trends are to do with social licence, to be honest, to operate. There is a piece, in terms of social licences, that businesses need for who their employees might become, so who wants to work for them? There are issues and drivers around who's going to purchase their products if they don't actually have a social licence to operate? There are issues for shareholders, et cetera. And let me just give you a couple of examples.

So, we know millennials are driving a lot of these changes in thinking around businesses needing a social licence to operate. So, a recent US survey that Deloitte did found that, sorry, millennials make up 35% of the workforce in the US. And this survey that Deloitte did found that almost two thirds of that group of millennials said that their primary purpose of business should be for improving society, not generating profit. And so, some of our brightest, smartest graduates are looking for businesses that have that social licence to operate.

We know there's a trend in this regard as well. So, business leaders like Larry Fink in his 2019 letter to CEOs called out quite emphatically that purpose isn't the sole pursuit of profits and that it was really about coming up with a purpose and an animating force to achieve that purpose for businesses. And interestingly, most of the population still have an issue with trust around businesses and still have an issue around trusting CEOs to address societal challenges.. And we know that trust is key around businesses remaining relevant and businesses remaining viable.

Emma Lo Russo:
I like how you connected that before to this social licence, right? That's kind of the ultimate measure. So Kristy, if someone wants to really practise ethical leadership, what steps would they take?

Kristy Muir:
Emma, there's a whole lot of frameworks around ethics and when we look at what ethical leadership actually means and looks like. When I look into those, I've distilled them into a number of key steps. And so, these might be things that people can think about going forward. It doesn't matter what the topic or the issue is. They're generic. So, the first key thing is around purpose. What is the greater purpose we are trying to achieve? And thinking about that, that's the utilitarian approach.

The second key step is considering people's rights. So, what are the moral rights we might need to consider of the people that might be affected by the options that we take or the options we're considering? Number three is to consider fairness. So, am I treating people fairly? Are we showing favouritism or discrimination? Which option treats most people the same? And if we have to treat people differently, can we morally justify that? So, that's number three, is consider fairness.

Number four is consider social responsibility and that comes back to what option might be best for the common good. So, are we just thinking about me and my family or me and my organisation, or is this actually going to be a good outcome for the community and society more broadly? Number five, is around considering morals and values. So, is the decision I'm making really aligning to my morals, principles and values? And that's where the virtue approach sits.

And then finally, I would recommend that people look out for blind spots, which is classically known as moral hazards. So, once we've been through all those other five steps, what are the potential moral hazards of the decisions that we're making? And do we need to think about where our blind spots are and how we address those blind spots in the options we're considering?

Emma Lo Russo:
And that's a great model to adopt. So, coming back to business leaders wanting to make this change, where do they get it wrong, or what do they need to keep in mind to make those changes to result in those types of programmes?

Kristy Muir:
I think that one of the traps that we see is people looking for employee engagement programmes that just make them feel fundamentally good. There is a joke in the not-for-profit sector around putting up fences to give corporates something to paint. So, you really don't want to fall into the trap of finding a not-for-profit to ask for a fence to paint. So really, the key there is finding employee engagement and volunteering that actually matters and using resources and skillsets that can contribute to positive changes.

Another tip that I would give businesses is around, how do they lift their gaze for the actual public good and public benefit as opposed to for their own purpose that they might have written down? So for example, we see in, say, the homelessness space, businesses and others coming up with innovative ideas that might be great at addressing rough sleeping. But actually, those ideas do nothing to fundamentally shift the number of people who are homeless, because instead of temporary rough sleeping accommodation in car parks, what we really need is safe, stable, affordable accomodation. And so, I think it's easy to fall into the trap of finding solutions that sound innovative and are interesting to organisations, but actually might not focus on solving the core of the problem.

A couple more quick things. One is watch out for unintended consequences. One of the things we teach at the Centre for Social Impact is systems thinking. And one of the things we know about systems is there are often feedback loops and sometimes things happen that we don't intend. I think that's really something that organisations need to look out for in being socially responsible. And then finally I would say, check your power and check your privilege. We know that's really important. Lots of people are aware of certain levels of power and privilege. The ones we know are most dangerous is latent power, and it's the blind spots that we don't necessarily see. And so, I think around that being open to giving up power to others, ensuring that you engage with lived experience, understanding the different perspectives that people might bring and going in with a mindset of, "We don't actually know what the answers might be here."

Emma Lo Russo:
Given challenging times like what we're experiencing now, what do you see, or when do you see that relationship between the drive for ethical business models and balancing the challenge of today? What happens and how do organisations navigate that?

Kristy Muir:
It's a really tricky situation, the navigation that's going on at the moment as a result of COVID and in any economic crisis we see that. What we have now is not just an economic one, but also a health one, and a whole lot of social implications. And really, the landscape that we're in now, we have not seen this kind of fundamental shift to so many aspects of society since one of the last great wars. And so, we are in a different environment going forward. I think leaders have that social responsibility to think about, "Well, what role do I play in creating and reimagining a society going forward? And how do I lift my gaze beyond just my business? So, this isn't just about how do we survive as an organisation, but how do we survive and contribute to the kind of society we want to live in going forward? And what role can we play within that?"

I think organisations that can hold both the crisis and the recovery and re-envisaging that recovery and can appeal to people who, sometimes for the first time in their lives, are now seeing what it's like to see a family member or a friend or personally lose a job, to struggle to pay bills, to be affected by a major health crisis. I think what we're seeing in society is not just those big macro changes and implications for businesses and people's lives, but actually the personal effect of what this means and the empathy that might bring out in people around understanding how quickly we can fall off a cliff edge and the kind of society that we all might want to live in, so that if and when that happens we have a responsive society that business plays their role, not-for-profits play their role, governments play their role to create a more equitable future.

Emma Lo Russo:
Kristy, thank you.

Kristy Muir:
Thanks, Emma. Thanks for having me.

Emma Lo Russo:
It’s been a fascinating dive into the nuances of ethical leadership and social responsibility whilst delivering business results. I hope you enjoyed the conversations as much as I did.

As a leader, it has been challenging to live through this period of disruption, but it has given us real opportunity to pause and reevaluate the way we do business. We can look at the method and purpose that underpins the way we lead.

It’s motivating to see renewed emphasis being placed on the social impact of business, and that both established and emerging leaders are using it to influence wider societal change.

As Doctor Simon Longstaff explained, hypocrisy and unthinking are the enemies of ethics, and that’s a mantra we could all do well to remember. For me, congruence and challenging your team to connect what they do to a bigger purpose and why will help you engage them and deliver better business outcomes.

Talk to you next time on, The Business Of.