Katrin Muff & Thomas Dyllick

Read full article: https://www.mdpi.com/2071-1050/18/2/793

Business decisions increasingly influence societal challenges like climate change, water scarcity, inequality or corruption. As a consequence leadership for sustainability requires competencies that go beyond internal performance and short-term effectiveness. It requires the ability to navigate ambiguity, build trust with diverse stakeholders, manage conflicts of interest, and understand systemic interdependencies. The question is not only how leaders behave, but how their competencies enable organizations to become more capable actors in sustainability transformation.

This article strengthens the bridge between responsible leadership and business sustainability by identifying where leadership can make a difference inside organizations—through specific “impact areas” that enable external contribution. We describe organizations that orient their strategy and value creation toward addressing societal and environmental challenges as Positive Impact Organizations (PIOs). PIOs aim to create products and services that solve relevant problems while maintaining financial viability. They are led by impact leaders: leaders who recognize that contributing to societal problem-solving can be integral to long-term business success and legitimacy.

Conceptual approach

In this article we develop a mapping between a responsible leadership competency model and a developmental sustainability model that share a compatible worldview: sustainability is not only a risk to be managed, but an opportunity to align organizational purpose and value creation with societal needs.

For leadership competencies, many established models explain effectiveness mainly in terms of individual performance, emotional intelligence, or organizational climate. By contrast, the Competency Assessment for Responsible Leadership (CARL) explicitly integrates ethical orientation, stakeholder relations, and systems thinking, and frames leadership in relation to sustainable development. CARL also distinguishes three action domains—knowing, doing, being—which enables competency development to be examined as knowledge bases, visible skills, and underlying value orientations. Here our emphasis is on the doing domain: observable leadership actions that influence organizational change.

For organizational sustainability development, reporting standards, assessment systems, and strategic concepts provide useful classification and benchmarking, but they often lack a developmental logic explaining how organizations progress toward higher levels of societal contribution. The PIO concept addresses this by describing transformation as a shift from an inside-out orientation (reducing negative impacts, managing risks) to an outside-in orientation (societal needs defining strategic priorities, innovation, and accountability).

This alignment supports the introduction of impact leadership: leadership that builds on responsible and sustainable leadership competencies but adds an explicit outcome orientation toward positive societal and environmental contributions via organizational transformation.

The impact cascade: How impact leadership functions

Leaders rarely create societal impact directly. They create it indirectly by shaping the organization that produces it. Their behavior influences governance, incentives, culture, and decision routines. These organizational conditions shape how products are developed, how supply chains operate, how partnerships are formed, and how trade-offs are handled. Only then do outcomes appear in the wider world. We call this the impact cascade.

This shifts sustainability leadership from moral aspiration to practical leverage. The key question becomes: which leadership behaviors strengthen which organizational levers so sustainability becomes part of value creation? Let’s now look at how this impact cascade is internally connected.

Competencies of impact leaders (CARL)

CARL conceptualizes responsible leadership through five competency dimensions:

1. Ethics and values: integrity and fairness in dilemmas; values-based decision-making.
2. Self-awareness: reflective practice; adapting communication; learning transparency.
3. Stakeholder relations: trust-building; dialogue; consensus-oriented engagement across differences.
4. Change and innovation: challenging the status quo; translating ideas into actionable sustainability change.
5. Systems thinking: understanding interdependencies; navigating complexity and ambiguity; anticipating consequences.

These competencies matter because sustainability transformation increasingly involves extended value chains and multi-actor ecosystems. Leaders must collaborate beyond organizational boundaries and combine internal execution with external engagement.

Strategic leadership impact areas inside organizations

While sustainability impact is often discussed as external contribution, leadership impact operates first inside organizations. Leaders influence structures and processes that enable the organization to generate credible and scalable external outcomes. We identify five strategic impact areas in which leadership can have direct organizational influence:

1. Governance alignment: embedding sustainability in decision rules, roles, accountability, incentives, and transparency mechanisms.
2. Sustainability culture: establishing shared norms and routines that prioritize sustainable solutions, cross-functional collaboration, learning, and long-term orientation.
3. External validation: integrating stakeholder perspectives into decision-making, supported by credible transparency and responsiveness.
4. Higher purpose: translating purpose into product and service innovation aligned with societal and environmental challenges.
5. Transformative sustainability: applying a transformational perspective across all domains—moving beyond incremental improvements toward systemic contribution.

These areas can progress developmentally: from compliance and episodic initiatives toward integrated decision-making, externally oriented priorities, and accountability for measurable outcomes.

Mapping competencies to organizational impact areas

A core contribution of this article is a mapping that connects each leadership competency to the organizational leverage point it most directly strengthens:

• Ethics and values → Governance alignment. Values-based, fair decision-making builds trust and supports credible accountability structures, decision rights, and transparent performance assessment.
• Self-awareness → Sustainability culture. Reflective leaders model learning, openness, and adaptive communication, enabling norms and incentives that make sustainability part of daily work.
• Stakeholder relations → External validation. Trustful collaboration and structured dialogue integrate legitimate external perspectives into decisions, reducing symbolic engagement and strengthening legitimacy.
• Change and innovation → Higher purpose. The capacity to challenge assumptions and implement solutions translates purpose into tangible offerings, partnerships, and business model evolution.
• Systems thinking → Transformative sustainability. Systems awareness supports navigation of complexity, helps avoid unintended consequences, and aligns transformation efforts with system-level outcomes.

This mapping is intentionally simplified: competencies overlap, and contextual factors may moderate what leaders can achieve (e.g., organizational culture, sector pressures, geography, life circumstances, and geopolitical conditions). The framework is therefore best seen as a heat map of primary leverage points, not a full causal explanation.

Implications for leadership development and research

By mapping CARL leadership competencies to strategic organizational impact areas drawn from the PIO concept, this framework clarifies how leadership development can connect to concrete mechanisms of sustainability transformation—governance, culture, stakeholder integration, purpose-driven innovation, and transformative systems change.

For educators and leadership development specialists, the mapping enables two complementary approaches:

• Strength-based focus: leaders can concentrate on the organizational impact area that matches their strongest competency.
• Developmental scaffolding: leaders can actively develop weaker competencies through targeted learning and support.

Practical development might include ethical deliberation and policy implementation; 360-degree feedback and reflective routines; stakeholder mapping and co-creation workshops; pilot projects and innovation processes; and scenario planning and systems training.