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How to embed ‘sustainability’ into your business strategy & practices?

How to embed ‘sustainability’ into your business strategy & practices?

As Larry Fink (Blackrock’s CEO) mentioned in his annual letter, there is a “tectonic” shift to sustainable investment accelerated by nations and investors drive towards a “net-zero” economy. But this shift isn’t limited to climate change (SDG13) but a broader sense of the word “sustainability”, encompassing the social, environmental and economic impact. Below we will outline 5 actions to embed sustainability in your daily business practices

 

Lots of business have suffered from the COVID-19 pandemic, as a result of a major shift in the “way we do things”. The business as usual was compromised, however new opportunities also arose. However, the “muscle” to tap into new opportunities that might arise from a VUCA environment, is not well trained in many companies yet. This requires companies to explore, as opposed to only exploit, on a higher level than previously used to. And to top it all off this has to be done in a remote-working manner. One where work-life balance and -integration are playing a bigger role than ever before. In addition, sustainability is often a separate department and not perceived as a company wide responsibility.

This blog will provide you with 5 actions to “reconfigure” your organization, in a more sustainable manner where integrated value is underlying all business practices. The end-goal is to make sustainability a criterion and make a sustainability team redundant. After all, the business case for engaging in sustainability is quite positive:

These are just some of the benefits to be realized. Let alone that ignoring them can lead to competitive disadvantage. Are you curious how to achieve so yourself and get your organization and stakeholders onboard? Let’s dive in!

Exhibit 1: Five actions to embed sustainability into strategy & business practices

Step 1. Map business impact along your value chain

It is important to understand the full ecosystem that your organization (in)directly affects. Both positively and negatively. By not doing so you risk a negative relationship, which can ultimately end up hurting your reputation, environment, people and financials. So, it is crucial to engage with your ecosystem and identify where there is room for improvement.

A renown framework to use as a benchmark is the United Nations (UN) Sustainable Development Goals framework, also known as the SDGs. By carefully mapping the high likelihood impact areas, you get insight in the fields to focus on.

Approach

  • Identify your high-level value chain
  • Map current and future SDGs that are being impacted along your value chain
  • Prioritize SDG impact area
    • Based on impact, legislation, upward potential, market shortages etc.
  • Select the main SDG indicators you’ll focus on

Step 2. Align strategy and sustainability

Now that you have identified the main SDG impact area’s it is time to make it central to your strategy. The strategy should underpin the sustainability commitment. A common pitfall is that companies set targets purely based on financial data. This at times causes divergence as financials are a lagging indicator. Lagging indicators confirm long-term trends, but they do not predict them. Sustainability criteria would be a leading variable to create business value.

Without having sustainability underpinned and aligned in your business strategy it makes commitment and prioritization difficult. To solve this you have to set targets. Some common outside-in approaches to set sustainability targets are:

  • Join the B-Corp movement
    • Demonstrate commitment for overall positive impact on workers, customers, community, and environment through third-party validation, public transparency, and legal accountability.
  • Align to achieving global net zero by no later than 2050
  • Limit global warming to 1.5c according to Paris Agreement
    • The Science Based Targets Initiative (SBTi) is a tool to be used to calculate how much and how quickly companies need to reduce their greenhouse gas (GHG) emissions to prevent the worst effects of climate change.

There are some great examples of clear ambitions set on sustainability:

  • Unilever: In 2010, under leadership of Paul Polman, Unilever announced their Sustainable Living Plan. The plan sets out to decouple Unilevers’ growth from their environmental footprint, while increasing their positive social impact. This is demonstrated by their ambition to realize their vision:
    • Improving health and well-being for more than 1 billion
    • Reducing environmental impact by half
    • Enhancing livelihood for millions
  • Vattenfall: Fossil free living within one generation. Vattenfall is aiming for climate neutrality for its entire value chain including the end-user (also known as scope 1, 2 and 3). This ambition is operationalized in their CO2 roadmap.

So now moving from business strategy to embedding in your business practices…

Step 3. Commit to ‘SMART’ goals incl. business metrics

As “Peter Drucker” once said “Only what gets measures, gets managed”. This is no different in the arena of sustainability. This requires consistency and unambiguity in the reporting of progress. In doing so there are two main elements that should be considered here:

  • Make use of universally renown data collection & disclosure practices
  • Cascade goals from organizational level up until team/individual level
    • Translate the goals from one level of the organization to the next in ensuring there’s an alignment from the top and bottom of the organization in terms of their contribution.

Step 4. Embed sustainability into the way-of-working (daily business)

So up until now we have a clear idea of which SDG’s we want to tackle, what our strategy should incorporate and how we are going to measure our progress. But this doesn’t yet make sustainability practical or actionable, it just gives us an end in mind. Successful strategies partly compose of giving the right balance of context and freedom.

We’ve seen that successful companies have e.g.:

  • Procurement policies: Using green/renewable sources of energy, non-hazardous inputs (check out Cradle-to-Cradle),
  • Design criteria: Set-up a few design criteria that incorporate sustainability elements as must-have’s, e.g. must be usable for people with a visual impairment, >50% of renewable / biodegradable input, etc.

Map out use-cases per department giving insight in what people will do in their daily work to contribute to sustainability. For example: product development will take into account the user-friendliness for the disabled and will validate this. Or the Finance department will adhere to specific guidelines when investing or reporting, which also encompass non-financial considerations.

Step 5. Communicate and empower stakeholders

And to top it all off, sufficient attention should be given to achieving these ambitious targets that contribute to your strategy. At the end of the day, you want to ensure you book progress that results in an integrated value creation for your stakeholders at large. So, it is important to communicate this both in- and externally to engage and empower your stakeholders. The communication should be as authentic and real as possible, and include elements such as but not limited to:

Stakeholder Tools
Board / Management ·      Quarterly retrospectives on progress/hurdles

·      Lean Budgeting (quarterly)

Organization ·      Newsletters incl. progress

·      Ideation Campaign on lagging targets

·      Forums on strategy topics

Consumers ·      Provide transparency of the supply chain, with tools such as Provenance
Startups, Innovators ·      Open Innovation Ecosystem on White Spots
Intergovernmental bodies ·      Report on progress based on standard data insights

·      Provide insights on effective approaches to incorporate in legislation and/or to be used for knowledge sharing

In all the above-mentioned actions we recommend to minimally adhere to a set of principles in order to ensure maximum and organizational adoption. These would be to:

  1. Co-creation: Involve diverse stakeholders from all layers of the organization, not just in managerial positions. In addition, ensure the group is composed of a diverse group of people such as but not limited to gender, working experience, sexuality to maximize the synergy potential.
  2. Visual story telling: Maximize the visual potential of translating your sustainability commitment into an actionable yet appealing visual. This allows for a better absorption.

As Rahm Emanuel said, “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before!”

How will you transform and enable sustainable practices in your organization to ensure your personal and organization’s future existence?

About the author
Sander Oleana (He/Him) is a Strategy Designer at Stay Future Proof in the Amsterdam office.
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