Here at Business Initiative Directions, one of our core concerns is leadership performance. We give awards to business and organizational leaders from all over the world who, with proven results, show they are steering their organizations in the right direction. But how, exactly, can a leader’s work be measured? How can it be improved? How closely tied are the work of one person and the results of an entire organization? Obviously, leadership is important. But in what ways does it matter most?
Harvard Business Review has come up with one answer to these questions. The publication evaluated 907 CEOs of companies from around the world by integrating a bevy of financial results with something it has dubbed “ESG performance,” which deals with environmental, social, and governance results. These parameters are meant to synthesize everything we might call “sustainability” or “corporate social responsibility (CSR)” into one, simple ranking, and were provided by outside research firm Sustainalytics.
To calculate the final ranking, HBR combined the overall financial ranking (weighted at 80%) and the ESG ranking (weighted at 20%) to order the subjects of the study. This is, more or less, how we normally think of the best CEO’s. Financial metrics are important, such as stock price, profits, and revenues, but positive results in those areas can be tainted if the company is constantly battling bad press, scandals, and punitive judgements from governmental agencies. Sure, we all loved Volkswagen Group, until, well, we didn’t.
Novo Nordisk was the only company to hit top twenty marks in both the financial ranking and the ESG ranking, placed at number 6 and 15 respectively. John Chambers, CEO of CISCO Systems for over 20 years, earned the number 2 spot with a particularly high financial ranking, hitting number 7 in that metric with excellent financial results, despite having just recently stepped down from his position in July.
Pablo Isla, the outsider CEO handpicked by Inditex founder Amancio Ortega Gaona to take over the company in 2005, earned the number #3 spot on the strength of having relatively high rankings in both the financial and ESG metrics. The last ten years under Isla’s guidance has seen Inditex explode in growth internationally. It dominates the clothing retail scene in its home country of Spain, and its flagship brand, Zara, has become a major player in the upscale retail sector in the United States and beyond.
The company’s innovations are countless, and its approach to “fast-fashion” has been copied with varying amounts of success around the world. Isla has taken steps to modernize supply chains and take a data driven approach to decision making, such as what garments to restock and what to pull from stores.
His focus on quality and meeting customer needs quickly and efficiently has given Inditex a huge boost over the last decade. Perhaps the most amazing thing about the fashion-giant’s placement on this list is that, unlike its neighbors in the rankings, it isn’t working in high-margin technological fields like biomedicine and internet technology. It works principally in low-cost fashion, meaning not only are margins thin, but there’s an ever-present need to maintain an effervescent “cool” factor through smart marketing and excellence in brand management.