Today on BusinessLoungeLK’s journey to bring you the voices of Sri Lankan business professionals, we are honoured to have Dr. Ravi Fernando to help us understand more about the importance of sustainability and leadership in the 21st century. Dr. Ravi Fernando is the Chairman/ CEO of Global Strategic Corporate Sustainability Pvt. Ltd, and a board member of Dilmah, Aitken Spence Plantations and LOLC Holdings.
1.) The world has lived under the Coronavirus pandemic for the last two years, and during these past two years it was essential to have strong leadership to navigate us through the crisis. Why is it a good time to reflect or even reconsider what leadership means?
When we talk about leadership, leadership isn’t just about winning when things are going well, leadership is winning when the tides are against you and the circumstances are not predictable.
I think it’s safe to say that we live in a very unpredictable world, however, the pandemic was a crisis waiting to happen, because for many years our world leaders have ignored the cause of pandemics.
As we kept destroying our forest covers all around the world, we ended up making the world ready for pandemics. 80% of the world’s forest cover has been destroyed to date, and Sri Lanka has destroyed 84% of its magnificent forests. So, what happens to all the animals and wildlife that used to live in these forests? Unfortunately, they get caught up to the wet markets of the world which are mainly in Asia, and this is primarily how these viruses migrate from animals onto human beings. Covid-19, SARS, H1N1, Ebola, MERS are all examples of outbreaks which happened recently as a result of our deforestation habits.
So, leadership in the 21st century is science-led and immediately resonates the fact that you have to rethink the world’s circumstances and the world’s position before you make a decision, because nothing is going to be predictable anymore.
The companies who are going to be successful in this environment are the companies who have planned for every eventuality. So, dynamic and proactive leadership as opposed to leadership which is reactive and laid back is what is required in our modern era.
2.) What are some of the most immediate crises and emergencies that modern leaders must face?
A majority of business schools and governance programs are NOT preparing modern leaders to be relevant and strategic in the 21st century by ignoring the new realities and challenges they face. As a result, the 21st Century Board Leadership model becomes an essential supplement to all modern leaders. There are three emergencies that every company or nation will have to face. The first emergency is the climate emergency which is unfolding right in front of our eyes. The climate emergency will destroy supply chains all around the world and agriculture as we know it. It will disrupt our access to crucial materials and minerals which we take for granted every day, and we will be facing extreme weather incidents at a rate we have never seen before.
The second emergency arises as a direct result of ignoring the climate emergency, and this is the health and social emergency. As I described previously, as we cut down all our forests in the hope of replacing them with concrete jungles, we will continuously encounter new strains of viruses which creates health emergencies, and these health emergencies consequentially lead to social emergencies, just like we saw with the Coronavirus.
Finally, we have the economic emergency. The economic emergency is not an emergency which transpires in isolation, the economic emergency occurs when you ignore the climate, health and social emergencies. There is no such thing as a company facing “a major economic emergency”, because when you dig deeper to understand why, you will realise that it is the result of ignoring the other emergencies.
21st Century Science-Led Leadership Model
3.) What do the leaders of the 21st century need to understand and bring to the table when leading organisations, and what are the pillars that you would advise people to focus on?
To start, we need to ask ourselves what is unique about the 21st century? And why is it so important for us to understand the challenges of the 21st century differently from the challenges we faced in the past?
A book that influenced my thinking and my view about how a leader in the 21st century should behave was “21 Lessons for the 21st Century” written by Yuval Noah Harari. In his book, he has masterfully explained the challenges of the 21st century and as a result captured these 21 lessons. What I realised was that these 21 lessons could be categorised into not more than 6 modules, so that inspired me to create the 21st Century Board Leadership model (which I created in 2020). It was based on understanding the 21 lessons that Yuval Noah Harari captured in his book, adding onto it a “sustainability mindset” in the hopes of educating our upcoming leaders on how to lead in the 21st century. This model is now known throughout Europe, and it encapsulates all the key elements of a 21st century leader. In addition, being science-led is an essential attitude of any 21st century leader.
In this model there are three emergencies on the top, and three disrupters at the bottom. An “emergency” is a situation in which you need to act with urgency. The three emergencies in this model as I mentioned previously are the climate emergency, the health and social emergency, and the economic emergency. Sadly however, our world leaders haven’t properly grasped the meaning of the word “emergency”, because if they had our world leaders, our national leaders and our business leaders should treat these issues with the due urgency they deserve.
The next group of issues are the disrupters. There are three disrupters which affect every business, every organisation, and every nation. The first disrupter is technology, every company in every nation will be affected by new technology. If people don’t understand what is happening in the technology landscape, you run the risk of being caught unaware when new technology is brought in, and most leaders (who I like to refer to as 19th century leaders) are not interested in finding out about emerging innovations, and that attitude is unacceptable in the 21st century as our leaders need to be aware of all of our present and future possibilities.
The second disrupter in the world is geopolitics. A country’s foreign policy about another country will not only affect that individual country either positively or negatively, but it will also disrupt all the businesses operating in that said country as well. So, in the 21st century, our leaders can’t afford the luxury of ignorance and say that it’s not their issue. Leaders of today must understand geopolitics because otherwise they run the risk of being caught off guard because of geopolitical manoeuvring. A prime example of this was when Chinese companies like Huawei and TikTok struggled to operate in the US because of the US-China trade war.
Finally, the third disrupter is governance. This disrupter refers to world leaders, companies and national leaders who ignore the term “governance” and tell themselves that “it doesn’t matter if we compromise as long as we don’t get found out”. One way to remember the word governance is asking yourself the question, “are the decisions being made today by our leaders putting profit before planet, and profit before people?”. If they are, that is referred to as governance disruption, because what they are revealing through those decisions is that they chase profit and economic growth at any cost.
So now that we know what the model consists of, let’s try to understand the importance of this model a little better by taking the climate emergency as an example. What is the climate emergency? In 1987 a report called the Brundtland report was published by the prime minister of Norway which highlighted that the world’s climate is changing, and the reason behind this change is because of the excess combustion of fossil fuels which increases the carbon concentration in our atmosphere, resulting in a greenhouse gas effect which is heating up our planet. This report was published 35 years ago, but since then, the only thing that our world leaders have done is totally ignored the emergency, and today, we are facing the consequences of their negligence.
In 1992 we had the Rio Earth Summit in Brazil, and they concluded that the world should exit fossil fuels by 2000. By 2015, they realised that nothing was done to improve the climate emergency let alone phase out fossil fuels, so they had the Paris agreement where they agreed to exit fossil fuels by 2030. Now, when we look at the recent targets discussed in the COP26 summit, they are stating that this issue will be addressed by 2050. This is a good example of how leaders have misunderstood the term “emergency” and postponed acting on problems that are going to have immediate consequences. Therefore, in the 21st century, any business leader who doesn’t understand the climate emergency is not a person who is fit to lead, because they will be leading the business blindly.
So, I challenge anyone to ask any business leader the question, “what is the climate emergency” and see what the answer they will give, because most of them won’t give you a clear representation of the emergency. This isn’t because they are naïve, it’s because they have not had the opportunity to learn these subjects before in their MBA programs or their executive courses. This is why the leaders of today should top up their professional knowledge by learning these emergencies and these disrupters as they are crucial to understand in order to overcome the challenges of the 21st century.
4.) Is there a dearth of 21st century leadership at a national and international level, and what are some examples of 21st century leadership in action and not in action, both in terms of political and at an organisational level?
First it is important to understand what a 21st century leader is. A 21st century leader has four key traits.
1st Trait - The first crucial characteristic of such a leader, is that they are science-led, and their decisions and opinions are formulated by consulting scientifically backed evidence.
2nd Trait - The second trait is that a leader must have urgency to impact the climate emergency, because it is important to lead your organisation in a way that doesn’t contribute to the emergency, but instead is a solution to it.
3rd Trait - The third trait is that they have a “sustainability mindset” and because of this mindset, they put people and planet above profit in every decision that they make.
4th Trait - The final trait is that they can bring this sustainability mindset and implement it successfully into the board agenda and the company corporate strategy or the national strategy. That is how I would describe a 21st century leader.
So, who are these leaders? To me, the most outstanding, science-led leader who displays urgency for the climate emergency is Elon Musk. Most of his businesses are companies that actively try to counteract and lower the impact of global warming. Tesla sells electric cars, SpaceX develops rockets which are reusable, SolarCity helps create houses which are completely off the grid and self-energy sufficient, and The Boring Company is an infrastructure company which builds underground tunnels to free up traffic in heavily congested parts of cities.
So, the interesting fact is that by doing the right thing for the planet as a science-led leader, Elon Musk has achieved amazing rewards as he is currently the wealthiest man in the world. So, if you can be in tomorrow’s businesses with a science led mindset, an urgency to impact the climate emergency and bring it into the business agenda, you can experience unprecedented rewards.
Sundar Pichai the CEO of Google, Jay Weatherill the 45th Premier of South Australia, Henrik Poulsen the CEO of the energy company Orsted, Yvon Chouinard the founder of Patagonia and Ana Patricia Botín the Executive Chairman of Santander Bank, are all fantastic examples of 21st century leaders who resonate these four characteristics.
Unfortunately, we also have individuals and organisations on the other end of the spectrum who prefer to keep profit above planet and people. In 2015 there was a list of world-renowned banks which signed the Paris agreement and pledged to not invest any money in fossil fuel-based projects. When we fast forward to 2020, the top ten banks who invested in fossil fuel-based projects invested more than four trillion dollars into the fossil fuel industry despite signing the Paris agreement. JPMorgan, Wells Fargo, City Bank, Bank of America, Standard Chartered and HSBC are some of the well-known banks which made the list.
When we look at Sri Lanka in the last 15 or so years, I haven’t seen any leaders emerging who firmly stand behind science when making decisions to fight the code red for business by exiting polluting fossil fuels. So, on a national level in terms of politics, I don’t believe that Sri Lanka has had any 21st century leader who ticks all four criteria.
When we are looking for businesses or organisations in Sri Lanka that are trying to tick that 21st century box, we first need to ask ourselves whether they are aligning their business models to be a 100% renewable energy sourcing model, because if companies with much larger carbon footprints like Google, Unilever, IKEA, and Patagonia are 100%, why can’t our businesses strive to be like them as well? And the second area we need to investigate is whether their logistics are based on sustainable transport. Unfortunately, in Sri Lanka it is difficult to find companies that commit themselves to sustainability, there are a few companies who are trying, but in Sri Lanka the idea of companies pivoting themselves to commit to sustainability has yet to take off.
Sustainability in Sri Lanka
5.) What role does sustainability play in corporate boards?
In the boards that I sit in, I always give a target to the company that I work in to move to 100% renewable energy driven in a certain time frame. Aitken Spence Plantations Ltd and LOLC Holdings are examples’ where we have already achieved by 2022 the vision the President has set to be 70% renewable energy driven, and of how sustainability can be introduced and implemented through 21st century leadership at both the board level and operations level. It is my vision that by 2030 Aitken Spence Plantations will be 200% driven by renewable energy and LOLC achieves 100% by 2023 and 150% by 2030.
An excellent example of how sustainability played a key role in corporate boards can be seen through the company Aitken Spence Plantations, Elpitiya sustainability initiative. I joined their board in 2017, and I gave them a target to be 100% renewable energy driven in four years’ time. At first, it looked quite impossible because their operations spanned too wide throughout Sri Lanka with their 16 factories and 14 plantations. When we fast forward to 2022, Aitken Spence Plantations is now 140% driven by renewable energy, which means that for every Rupee that we spend on electricity in the company, we earn 1.40 Rupees back. Energy is a profit centre, not a cost.
Another Board where I have led the change into sustainability is the LOLC Holdings LOLC Green sustainability initiative.
Today, LOLC Holdings is by far the most profitable company in the history of Sri Lanka’s listed companies and most probably unlisted family companies too. It’s one of the fastest growing conglomerates in Sri Lanka, and LOLC group reported the largest profits by a Sri Lankan company for the last three years in a row. I have been on the LOLC board since 2000 and the company started out as being a Sri Lankan company focusing on leasing, but now it is an international and diversified business. LOLC operates in over 25 countries outside Sri Lanka and over 80% to 90% of group profits are generated from international operations.
Today, over 78% to 80% of LOLC Group energy is offset by renewable energy. If the most profitable company in Sri Lanka is 80% renewable energy driven, then every other Sri Lankan company has the capacity to strive and achieve ambitious sustainability goals themselves, provided they have 21st Century leaders who are science led and want to help achieve the vision for the Nation of 70% by 2030. Sadly many Sri Lankan companies are engaged in greenwashing CSR campaigns instead of focusing properly on sustainability.
This is how a 21st century leader can influence the board to set the right targets and become sustainable, and it shows that even being a company that is 100% renewable energy driven is not a target which is out of reach.
6.) How far is Sri Lanka from being a sustainable energy enabled destination and is the lack of a sustainability focus the reason behind our current power crisis?
Sri Lanka’s current energy mix is 30% renewable and 70% fossil fuel-based energy. Our President wants to flip those figures to 70% renewables and 30% fossil fuel-based energy, the CEB (Ceylon Electricity Board) on the other hand would rather have a 90% fossil fuel-based energy mix and just 10% renewable energy. The problem that prevails in Sri Lanka is that there is no clarity or cohesiveness in a renewable energy strategy.
The first challenge is the renewable energy challenge. A country’s power supply is a crucial element of their economy, and Sri Lanka must reconsider the composition of its energy mix in order to remain competitive in the global markets. If Sri Lanka wants to be globally competitive it needs to understand that it is cheaper to harvest our natural sources of renewable energy such as our solar power, wind power and hydroelectricity rather than to import natural gas and coal from other companies to run our power plants. The massive energy issues the nation is currently experiencing could have been avoided if we were 70% renewable energy driven currently. We would not be trying to look for FX to buy polluting fossil fuels. Lack of science-led leadership driving towards renewable energy beyond hydro- electricity in the past 75 years has created the current crises.
The second challenge lies in moving away from being a commodity exporting nation to become a branded value-adding exporter. Majority of our exports come in the form of commodities, and the profit margins we attain from that is extremely low. Therefore, if our energy bill is renewable-driven, we will be able to drastically lower our electricity cost and subsequently increase our profit margins which will allow us to compete with the rest of the world and add value to our exports.
Sri Lanka has immense potential to fulfil its ambitions of being a renewable energy destination. For example, Sri Lanka has over 30,000 water bodies, and we can utilise that space by placing floating solar panels to harness the sun’s energy and combined with battery storage power walls to help shift our energy mix even further towards 100% renewably sourced energy. South Australia has done it, Barbados has done it and Hawaii has done it, if all these islands were able to utilise their natural energy, why can’t we?
That is why it is high time for a Sri Lankan 21st century leader to emerge and recognise the immense potential that our motherland has.
7.) As a nation, are we being smart about how we manage our national resources and moving forward, what are the resources that Sri Lanka needs to focus on more?
I have mostly worked in multinational companies, but I feel like one of the best jobs I did for Sri Lanka was when I was placed as the CEO of SLINTEC (Sri Lankan Institute of Nano Technology). During my tenure as CEO, I was able to conduct a study of all the natural resources that Sri Lanka can leverage in the global market and presented it to our heads of state.
What I came across was that Sri Lanka has the purest titanium in the world, which is 73.8% pure. In comparison, the titanium found in America is only 30% pure. So, our titanium is twice as pure as the titanium found in the rest of the world.
Sri Lanka also has the world’s purest graphite. Our graphite is 99.8% pure. Now why is graphite going to be an essential raw material in the future? Graphite is a key material used in the production of batteries, and one of the fastest growing markets in the world is the electric car market, and every electric car on the planet needs 35 kilograms of graphite.
Additionally, graphite can be turned into a material called graphene, and graphene is the worlds most advanced water desalination method. So, you can use a sheet of graphene to turn seawater into freshwater as it allows the water molecules to pass through but captures all the salt molecules. So, we have the ability to make graphene in Sri Lanka as well because we have the best graphite. Thirdly, Sri Lanka has some of the best phosphate in the world as well.
So, Sri Lanka is filled with an abundance of natural resources which are essential materials for products all over the world and thus, is in high demand, so the question which remains is whether we are being responsible with how we use our natural resources. The simple truth of the matter is no, we are not.
We are exporting all these expensive resources at miniscule prices relative to their true worth. For example, we are exporting the ilmenite from our shore which is rich with titanium at $200 per ton, and most of it goes to a company in Japan. When they extract the titanium out from the ilmenite suddenly the price goes up to $2000 per ton. We sell about 200,000 metric tons of ilmenite to these companies and they can make around 100,000 tons of titanium with it. It's a similar story for graphite as well as we have sold our top two mines to German companies. So, they take our graphite, purify it, then easily sell it to America for more than $5000 per kilo. So, at the end of the day, they are covering their costs and making an extremely healthy profit off our resources. This is not how we should be utilising our national resources, when they have so much more potential.
So, when I was at SLINTEC I started three projects, one was to create nano titanium, one was to obtain graphene and create water desalination mechanisms, and the last was to create nano fertilisers in Sri Lanka using our phosphate. These are the type of innovative steps we need to take to make maximum use of our resources and remain competitive on a global scale. We filed US Patents for each of these innovations, but Sri Lanka is yet to leverage and commercialization
8.) How has the course that you have developed for the Institute of Directors of Luxembourg been received so far?
A question which I asked myself at the time was, “who is teaching world leaders the 21 lessons for the 21st century, and the need for a sustainability and science mind set?”. Upon doing my research, what I realised was that none of the business schools or governance courses/ executive courses around the world are teaching these 21 lessons, and that is when I took it upon myself to at least start teaching these important lessons.
The course that I have developed was first launched in September 2020 to the Institute of Directors of Luxembourg. We are now going into our fourth cohort in Luxembourg, so we have had four batches of twenty enrolled in the course, in which all of them are directors of top companies in Europe.
We have also expanded our reach and we offer the course in Ireland and United Kingdom and I have done one masterclass in Sri Lanka of the 21st Century Leadership Model for charted accountants in Sri Lanka.
This course is supplementing the knowledge gaps of today’s leaders. The reason that it is doing well internationally is because all business leaders have also recognised that these courses are not being taught anywhere. So, I believe that I have found a gap at a global level. On top of that, what is unique about our course is that we change 80% of the content for every batch. So, for example if the batch which did the course last year met the batch who are going to do the course this year in March, what they will find is that 80% of the syllabus will be different. This is because we update all the materials to represent current most up to date information.
The lack of dynamism of most curriculums is why many leaders are ill equipped to face the reality of 21st century challenges.
9.) What is your advice for aspiring young leaders of the 21st century?
The first bit of advice I give to any young Sri Lankan is that we are not second class, we are not third class, we are world class. We have a world class heritage, and it’s up to us to continue that legacy.
Secondly, it’s always important to think global and be at a level in which you can do anything at any organisation in the world. The first step to achieve that is to continuously update yourself with what is happening out there in the world. Unfortunately, most young people know shockingly little about the current events transpiring around the world, so if you want to be world class make sure to never fall into that category.
Thirdly, it is important to have a clear vision and a clear focus. You need to understand that you can’t be world class in everything. You need to have a narrow focus and in that narrow focus you need to go as deep as deep can get.
Understand what is happening out there in the world and build a very clear focus that gives you the opportunity to be relevant in an emerging area of future knowledge and always prepare for the challenges of tomorrow.
Never settle for anything less than being the best, and always choose to be world class by being a focused 21st century science-led, sustainability mindset leader.
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