How advanced is your sustainability strategy?
If you want to build a sustainable business, you have to get your foundations right. Here we share a blueprint for building a sustainability strategy and map out how to navigate the highly complex and changing governance landscape.
A retrospective on the 'Era of Sustainable Logistics' 2023 Global Summit that took place in Valencia, Spain.
Shape your business, deliver the future
The first person in history to walk to both the North and South Poles, Robert Swan, OBE, famously said: “The greatest threat to our planet is the belief that someone else will save it.” In recent decades, it seems much of the world agrees. Nearly 200 countries have committed to UN Framework Convention on Climate Change and the Paris Agreement. But the climate crisis didn’t end when those documents were signed. Everyone must take action – governments, companies, and consumers – to bring about change.
The list of organizations committed to climate action is also growing. The Race to Zero is the largest coalition of leading net-zero initiatives. The Race to Resilience seeks to catalyze a step-change in global ambition for climate resilience. The Glasgow Financial Alliance for Net Zero (GFANZ) is an international coalition of leading financial institutions committed to accelerating the decarbonization of the economy. At COP26, GFANZ mobilized hundreds of firms across 45 countries to commit over $130 trillion toward transforming economies towards net-zero emissions.
But commitment is one thing. Action is another. And this is where many people stumble. The problem is often: Where do you start?
It may sound obvious, but building a sustainable business starts with a sound sustainability strategy and a solid governance framework. Business leaders must honestly assess their business practices and shape a new business model that sheds the unsustainable habits of the past. They must also understand the highly complex and changing governance landscape – and that these two together can create a competitive edge.
Below we share a blueprint for building a sustainability strategy and map out the highly complex and changing governance landscape.
Sustainable business: Times have changed
Interest in sustainability is at an all-time high.
Strategy: Five steps to sustainable business
A successful sustainability strategy must address a variety of key issues and become an integral part of your business model. Follow these five steps to ensure that you get there.
1. Frame your strategic ambition.
Define the scope and dimensions of your sustainability strategy, balancing your business’s actual circumstances and capabilities with your greatest possible ambitions. You may need to review and adjust initial goals, but always include clearly defined roles, responsibilities, and KPIs to ensure you’re responding to shareholder and consumer expectations.
2. Diagnose your pathway to net zero.
Your sustainability strategy should include a robust reality check, including assessing your current performance against peers. A healthy dose of competition will stimulate ambition and value creation as you seek to outperform rivals, optimizing costs and striving for profitability.
3. Forecast your relevant value pools.
Understand your cost curves and value pools to respond effectively to disruptive market trends. New regulations, technologies, and business practices may reduce certainty and predictability, so you must continuously reassess your performance in light of emerging risks and opportunities under a new, sustainable paradigm.
4. Search for your best strategic moves.
Continually reassess your sustainability strategy and plan ahead based on rigorous analysis of strategic options, costs, impact, value creation, and potential scenarios. Explore the effects of possible moves and responses by stakeholders and competitors.
5. Choose concrete targets and initiatives.
Develop specific, science-based targets and appropriate initiatives to achieve them. Leverage well-defined KPIs and milestones, supported by reliable data and analysis, to ensure stakeholders understand and can follow your progress. Science-based targets put your sustainability strategy on solid ground – and they can become a powerful narrative for all inside and outside your company.
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Governance: from compliance to competitive edge
A sustainability strategy charts your way forward, but corporate governance keeps you on course. However, you must know the regulatory landscape well to manage and leverage it for added value. And that’s no easy task. Governance is highly complex and changing – and now consumers and investors are scrutinizing business practices alongside governments.
The three fundamental aspects are reporting, investing, and compliance. They help you create transparency and enable stakeholders to evaluate your company’s goals and progress.
Reporting: You are what you measure
How do you know whether your company’s sustainable business strategy is working or not? The answer is by going beyond financial returns and taking stock of environmental and social impacts. You must systematically measure and monitor your environmental, social, and corporate governance (ESG) commitments and performance. This is the only way to clearly understand your achievements and challenges – and it’s the basis for the transparency needed to satisfy the growing interest of clients, partners, employees, and the general public.
It comes down to this: you are what you measure. ESG reporting now covers a wide range of issues, including waste, emissions, energy efficiency, diversity and inclusion, human rights, and data protection, to name only a few. These are the standards against which authorities, consumers, and investors increasingly measure companies.
ESG Reporting Today
Here is some of the things your sustainability strategy and ESG reporting must include.
Investing: Make your company a sustainable investment
Sustainable investing has become mainstream. Investors now have sustainability strategies of their own, balancing the goals and interests of various stakeholders and consider both financial and non-financial performance when making investment decisions. They want to see economic, environmental, and social returns.
The real challenge is looking at all financial decisions through the lens of your sustainable business strategy. That means always factoring in the environmental dimension (e.g., carbon footprint, waste management, water use, etc.), social responsibilities (e.g., protecting human rights, promoting diversity, fostering inclusion, etc.), and business practices (e.g., transparency, workplace diversity, management ethics, etc.).
Compliance: Adopt a sustainability mindset
The regulatory landscape is vast, variable, and changing quickly, making compliance complex and challenging. But getting it right is essential. You need to take a robust and comprehensive approach to compliance backed by a solid sustainability mindset that starts at the top and spreads across your entire organization.
Full compliance with ESG regulations depends on several critical factors:
- Active, visible, and consistent commitment by top management to developing a culture of compliance.
- Clearly defined goals and tasks alongside procedures (e.g., a compliance management system) to monitor them.
- All relevant risks identified and assessed, with results duly incorporated in your reporting.
- Policies, guidelines, and risk-mitigating measures to limit exposure and avoid non-compliance.
- Appropriate organizational structures, with clear roles and responsibilities, supported by proper resources and adequate training.
With a sustainability mindset grounded in your sustainable business strategy, your workforce will internalize the need to constantly track performance and ensure adequate compliance management procedures are in place. They’ll identify risks and potential shortfalls early and continuously improve internal controls and efficiency.
Embracing sustainability is the right business decision
Embracing sustainability means a sustainable business strategy that looks beyond short-term profits to long-term impact and realizing that profitability alone will not make a business sustainable.
But good intentions and vague promises are not enough. All businesses must develop a clear sustainability strategy – then publish and adhere to those plans, subject to verification and assessment. And this requires making the necessary financial commitments – investments in sustainable business practices that align with the urgency of the climate challenge we all face.
Protecting our planet’s future is the right business decision. With a comprehensive sustainability strategy and robust governance, you’ll lay the foundations for a new, sustainable business model and ensure your business is a part of that future.
Published: August 2023