By Knut Haanaes and Julia Binder
In any given moment we have two options: to step forward into growth or step back into safety. This quote, attributed to Abraham Maslow, emphasizes the importance of change management. Change is never easy but companies that embrace change and its growing pains often create new competitive advantages.
Not all companies survive transformation, but those that do often redefine their industries. Neste, once a traditional oil refining company, faced a critical crossroads as the world moved away from fossil fuels. When Matti Lievonen took over Neste in 2009, the Finnish oil refining company faced strong headwinds, including a sharp fall in oil prices, market overcapacity, falling margins, and coming EU carbon emissions legislation. The company’s market value dropped 50% between 2008 and 2011. Instead of resisting change, the company made a radical pivot—shifting its core business from petroleum-based products to renewable fuels and sustainable solutions. This wasn’t a minor adjustment; it was a complete reinvention that required new technologies, new markets, and a new way of thinking about value creation. Today, Neste is the world’s largest producer of renewable diesel and sustainable aviation fuel, proving that embracing transformation can lead to both financial success and a leadership position in the global energy transition.
Neste’s transformation didn’t happen through strategy alone. It required bold decision-making at every level, a cultural shift that engaged employees and stakeholders, and the ability to execute at scale. Change of this magnitude isn’t just about having the right plan—it’s about mastering the head, heart, and hands of transformation. The head ensures that the strategy is forward-looking and well-defined, the heart creates the motivation and cultural buy-in necessary to move forward, and the hands ensure that change is implemented effectively and at scale. Even the best-laid plans fail to take root without alignment between these three dimensions.
A bold strategic vision alone is not enough; it must be matched with leadership that mobilizes people, drives cultural shifts, and ensures execution at scale.
What makes this kind of transformation particularly challenging is the unavoidable short-term versus long-term tradeoff. Companies in transition often face pressure to deliver immediate financial results while simultaneously making investments that may not pay off for years. Many organizations hesitate, fearing the short-term costs of change—whether it’s capital investment, shifts in workforce skills, or restructuring business models. However, those that delay transformation risk falling behind permanently, while those that take bold steps forward create new competitive advantages. Neste’s leadership understood that transitioning to renewable fuels required years of investment and an initial financial burden, but the long-term payoff—market leadership in a growing sector and alignment with global sustainability trends—far outweighed the short-term sacrifices.
Companies that aim to lead in sustainability or any large-scale transformation must learn from examples like Neste. Change is not just about adopting new goals—it requires shifts in thinking, leadership, and execution, all working in continuous alignment. This interplay can be visualized as an infinity loop, where strategy and leadership continuously reinforce each other. A bold strategic vision alone is not enough; it must be matched with leadership that mobilizes people, drives cultural shifts, and ensures execution at scale. At the same time, leadership must remain adaptable, feeding insights back into strategy to refine and evolve it over time. Neste’s transformation exemplifies this approach—its shift to renewable fuels was not a one-time decision but an ongoing process where strategy and leadership worked in tandem, adjusting to market dynamics and technological advancements. Companies that embrace this continuous cycle create a self-sustaining mechanism for transformation, ensuring that change is not only envisioned but fully realized.
Strategy: A Blueprint for Resilience and Reinvention
For many organizations, strategy is treated too much as a one-time roadmap—an initial push in a new direction. But leading real change, particularly in sustainability, requires a dynamic and adaptive strategy, where each decision fuels further transformation. The companies that get this right don’t just react to external pressures; they proactively shape their own futures. This starts with breaking free from the limitations of the present. Too often, organizations are bound by short-term performance metrics or industry norms that no longer serve them. Leaders must resist the urge to optimize existing systems and instead design for the future, using tools like scenario planning and future-back thinking to anticipate what’s coming and position themselves accordingly. A critical link between strategy and leadership is that of crafting an aspiration. An aspiration differs from a vision, as it is time-bound and can be changed as the context changes. A good aspiration inspires people.
Some key strategic decisions define successful transformation. Companies that integrate circular economy principles, redesign their supply chains for resilience, or invest in regenerative business practices are not just mitigating risk—they are creating entirely new value propositions. Siemens is a strong example of this approach, embedding circularity into its operations and product lifecycle. By designing products for longevity, modularity, and recyclability, Siemens not only reduces waste but also creates new business opportunities, such as refurbishing and reselling industrial equipment rather than discarding it. The company has also embraced digital twin technology to optimize resource use and energy efficiency across its supply chain. Organizations that hesitate, waiting for perfect solutions, often find themselves left behind. Instead, companies that lead in sustainability experiment with emerging technologies, pilot alternative energy sources, and develop new service models that will give them a competitive edge when the market catches up.
Financial priorities must evolve as well. Traditional return-on-investment models often fail to capture the long-term benefits of sustainability. Organizations that integrate sustainability metrics into their financial decision-making, link them to investor expectations, and embed them in capital allocation are better positioned for the future. Sustainability must also become part of the broader business ecosystem. No company can tackle it alone. Successful businesses form partnerships—working with governments, NGOs, suppliers, and even competitors to drive systemic change rather than isolated impact.
These decisions don’t just dictate a company’s trajectory; they redefine the playing field entirely. But even the best strategic choices will falter if leadership fails to execute them effectively.
Leadership: Mastering the Human Side of Change
If strategy is about deciding what needs to change, leadership is about ensuring that change actually happens. This is where many organizations fail—not because their strategy is flawed, but because they underestimate the human factors that drive or block transformation.
Leading change requires leaders to redefine their roles, moving beyond traditional models of top-down authority to become architects of culture, mobilizers of action, and enablers of progress. Leadership is no longer just about making decisions; it is about creating the conditions in which transformation can take root and thrive. To do this, leaders must shift from command and control to influence and empowerment. People don’t follow change because they are told to; they follow it because they believe in it. Leaders must craft a compelling vision that connects sustainability to a broader sense of purpose, helping employees, investors, and partners see their role in building something bigger than themselves. A powerful narrative is essential—not just a set of facts and figures, but a story that creates urgency, meaning, and momentum.
At the same time, leaders must recognize that change is deeply personal. Fear, uncertainty, and inertia are natural responses to transformation, and ignoring these realities only deepens resistance. Trust is the foundation of any successful change effort. Employees and stakeholders need transparency, not just in the company’s goals but in the challenges and trade-offs along the way. A leader’s willingness to acknowledge setbacks, explain decisions, and engage in open dialogue can make the difference between skepticism and commitment.
Adaptability is another critical trait of leaders who successfully manage change. Organizations cannot afford to abandon their core business overnight, but they also cannot afford to stand still. Leaders must simultaneously operate in two modes: stabilizing current operations while exploring new frontiers. They must create environments where continuous learning is encouraged, where failures are treated as sources of insight rather than mistakes to be punished, and agility becomes a fundamental business capability.
The most forward-thinking leaders also recognize that sustainability and large-scale transformation cannot be achieved within the boundaries of a single organization. True impact requires systems leadership, where leaders look beyond their own company to shape change across entire industries, supply chains, and ecosystems. Collaboration with governments, NGOs, industry peers, and even competitors is becoming essential to driving systemic shifts. Whether it’s setting industry-wide sustainability standards, co-developing breakthrough technologies, or influencing policy, leaders must think at a systems level. Organizations that act in isolation may find their efforts falling short, but those that engage broader networks can accelerate transformation at scale. Beyond internal engagement and external partnerships, governance plays a crucial role in embedding sustainability at the highest levels of decision-making. Leadership must ensure that sustainability is not an isolated initiative but a core part of corporate governance. Boards must evolve to reflect this new reality, integrating sustainability expertise, redefining executive incentives, and holding leadership accountable for long-term impact rather than just short-term financial performance. Change also requires courage. Leaders who succeed in sustainability transformation understand that they will face resistance—not just from within their organizations but from investors, customers, and markets that are slow to adapt. Standing firm in the face of skepticism, making long-term decisions even when unpopular, and staying committed to sustainability even when immediate financial returns are uncertain are the hallmarks of leadership that drive meaningful change.
Standing firm in the face of skepticism, making long-term decisions even when unpopular, and staying committed to sustainability even when immediate financial returns are uncertain are the hallmarks of leadership that drive meaningful change.
The change at Microsoft provides a good example of such leadership transformation. Satya Nadella, who became CEO in 2014, has transformed the company by embedding a growth mindset, in parallel with shifting its focus toward cloud computing, artificial intelligence, and cross-platform solutions. He moved the culture from the mindset of knowing and judging to that of learning and development. He did that by promoting continuous learning, collaboration, and innovation. Nadella also underlined empathy as an important leadership principle, shaping a more inclusive and customer-centric approach. By embodying this shift himself, he inspired the organization, suppliers, and partners. This cultural shift has driven remarkable business success, revitalizing Microsoft’s competitive edge and solidifying its position as a more future-ready leader.
The Future of Change Leadership
Leading change for good—where sustainability and transformation become lasting advantages—requires a deep integration of strategic foresight and human leadership. The companies that master this balance, aligning strategy with leadership in a continuous loop, will survive change and define the future.
Change is not a one-time initiative; it is an ongoing journey. The organizations that thrive in this landscape are those that view strategy as a living process, not a static plan. They engage the rational and emotional sides of change, ensuring that logic, culture, and action move in unison. They see sustainability not as a challenge to be managed but as an opportunity to lead, innovate, and leave a lasting impact.
The future belongs to those who embrace change with vision, determination, and the ability to bring people along for the ride. The leaders who master this balance—between the head, the heart, and the hands—will be the ones who turn transformation into legacy.
Implications for Executives
- Accept the short-term cost to unlock long-term value – Transformations may require initial financial sacrifices, operational shifts, and even temporary instability, but delaying change risks losing competitive advantage in the long run.
- Treat strategy as a continuous process, not a one-time plan – Sustainable transformation requires ongoing adaptation, future-back thinking, and the flexibility to evolve as new challenges and opportunities arise.
- Lead with both logic and emotion – A strong business case (the head) must be matched with purpose-driven leadership (the heart) and clear execution (the hands) to drive lasting change.
- Create ecosystems, not just internal change – Collaboration across industries, supply chains, and regulatory bodies accelerates impact and ensures sustainability is embedded beyond the organization.
- Balance stability with innovation – Leaders must optimize their current operations while actively exploring disruptive solutions, ensuring long-term resilience without neglecting present needs.
- Build trust through transparency and shared ownership – Engaging employees and stakeholders early, communicating openly about trade-offs, and giving people a stake in the transformation fosters commitment and accelerates adoption.
About the Authors
Prof. Knut Haanaes is an IMD Professor of Strategy and Lundin Chair Professor of Sustainability.
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Prof. Julia Binder is Professor of Sustainable Innovation and Business Transformation at the Institute for Management Development (IMD).
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Prof. Knut Haanaes and Prof. Julia Binder are the editors of Leading the Sustainable Business Transformation, an IMD playbook for planning, executing, and showcasing corporate sustainability.
