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.
Interest in sustainability is at an all-time high.
130+ countries with net-zero goals
Up to 45% of European households expected to be eco-active by 2027
80% of millennials want to work for a company strong on ESG
ESG assets expected to grow from $35 trillion in 2020 to $50 trillion in 2025
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.
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.
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.
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.
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.
Why go looking for the latest logistics trends and business insights when you can have them delivered right to you?
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.
Here is some of the things your sustainability strategy and ESG reporting must include.
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.).
Published: August 2023
