Putting people at the heart of your sustainability transformations

As more and more organisations consider beginning a transformative journey for their sustainability ambitions, it is becoming evident that their drivers and approaches are different. The ones leading the pack put a much greater emphasis on opportunities for growth and differentiation than the laggards¹. At the same time, many of these organisations face increasing pressure to demonstrate their sustainability credentials, from customer and stakeholder demands, and from governments reporting requirements on ESG (Environment, Social, Governance) performance. Although reacting to each of those forces might alleviate the immediate pressure, that response should not ignore the fundamentally changing business landscape.

Recently, there has been a lot of focus on observable efforts such as reducing emissions in operations or manufacturing. These attempts are producing real improvements, but they are incremental in nature. It is becoming clear that merely funding sustainable “things” will not produce sustainability outcomes². In addition, businesses are often being called on to play a more significant role in creating meaningful outcomes for people, the planet, and prosperity³. To respond well to this call while ensuring a profound and lasting change takes root in their core, organisations cannot ignore the human element of their sustainability transformations².

People are a vital part of any business. As employees, they create policies, collaborate cross functions, make decisions, influence politicians (people), serve customers (people), design products (for people to use), and buy materials (made by people in other companies). And as clients, they consume products and services, support or boycott businesses, share their views, and live in places that are impacted – directly or indirectly – by a company’s presence: economically, socially, or physically. Sometimes, they are part of the supply chain without being free to make the choice.

In addition, organisations rely on workers and talent. Today, many of those people might consider whether the business is an asset, or a liability, for them personally. According to Deloitte Global 2022 survey, a considerable number of Gen Z and Millennial respondents reported putting pressure on their organisations to prioritise sustainability topics⁴. Furthermore, 30% of workers in a 2021 Deloitte survey stated that they would consider changing jobs to work for a company that has a stronger environmental sustainability focus⁵. As values such as integrity gain increased importance in the job market, and the line between work and personal life becomes more blurred (from both sides), employers must ensure that their values align with those of the employees they want to attract and retain.

Businesses must take swift and tangible actions to demonstrate their commitment to these values. This requires focusing on human element by operationalising people-enablers in the organisation such as re-skilling the talent and making work better for humans and embedding human sustainability into the organisation’s sustainability strategy. This is where fundamental and lasting behavioural change takes root and outcomes can be achieved in alignment with sustainability goals². Having said that, according to Deloitte 2023 CxO Sustainability Report, only 50% respondents are training their employees on climate change actions and impacts while only 33% have linked senior management pay to environmental performance⁶.

The investment in the people aspect of transformation is crucial for other reasons too. Studies have shown that organisations with a diverse workforce have significantly higher revenues and sales compared to those with lower levels of diversity⁷. Additionally, most respondents (84%) in a Deloitte 2022 HC Trends Report Survey acknowledged that clearly defining responsibility for ESG progress and outcomes is vital to their organisation's success⁸. Furthermore, despite being an old business cliché, the most significant obstacle that organisations face in accomplishing their ESG objectives is not technology but the company culture⁹.

Having said that, this investment is often overlooked. Our Chief Transformation Officer (CTrO) survey revealed that 52% had underinvested in talent during their transformation¹⁰. It seems most businesses still struggle to shift mindsets and put people at the heart of their thinking. An important part of making the shift is to get away from being reactive and start thinking independently. The urgency of reporting requirements, for instance, can make a business preoccupied with what it is doing when, instead, it should focus on the why, of its purpose. Clarity on that essential – and existential – question can illuminate a company’s journey to developing a sustainability strategy and putting people at the heart of that strategy.

That is not the end of the story, of course, and sustainability transformations covers many more ESG topics, including those in the social domain. One overarching topic which is often making headlines is the inequality issue. Acting on inequality will always be complex since some specific business practices continue to play a role in causing it. Having said that, inequality is a product of our economic systems and not the nature, which means it can be changed. It is possible to build a world in which dignity and rights are respected, basic needs are met, and equal opportunities are available for all. This needs close collaboration between different sectors and governments; and businesses, for their part, play a critical role through the opportunities they generate for value creation and distribution¹¹.

Finally, the road to sustainability needs more than good intentions. To provide a focus for practical action, we’ve identified five key topic areas where sustainability and people are closely interwoven: Reporting & Compliance (e.g., creating a structure and governance, engaging staff, and communicating authentically with stakeholders and the public); the case of Social in ESG (human rights, financial inclusion, etc.); Sustainable Work, through embedding inclusivity and wellbeing; Education & Upskilling (e.g. Sustainability Academy), to build sustainability skills and knowledge through a learner-centred experience; and Sustainability Transformations, to execute the sustainability strategy throughout the organisation, tackle the challenge of large, high-emissions capital projects, and navigate the unpredictable route to Net Zero. Sustainability transformation is not just about Net Zero though. As mentioned, it covers many more ESG topics, especially those in the social domain.

References

1. Dimke, Marckstadt, Obermann, and von Zittwitz. “Demystifying sustainability transformations". Deloitte Insights, 16 Dec. 2022, www2.deloitte.com/uk/en/insights/environmental-social-governance/transformative-sustainability-demystification. Accessed 23 Jan. 2023.
2. Poynton, Shannon, and Van Durme. “2023 Global Human Capital Trends.” Deloitte Insights, 9 Jan. 2023, www2.deloitte.com/us/en/insights/focus/human-capital-trends.html#advancing-the-human. Accessed 23 Jan. 2023.
3. United Nations Environment Programme. “Emissions Gap Report 2022.” UNEP - UN Environment Programme, 21 Oct. 2022, www.unep.org/resources/emissions-gap-report-2022.
4. Deloitte. Striving for Balance, Advocating for Change. 2022.
5. Rogers, Stephen. “We’ve Had a Lot of Time to Think, and We’re Thinking a Lot about Time.” Deloitte Insights, 11 Apr. 2022, www2.deloitte.com/xe/en/insights/industry/retail-distribution/consumer-behavior-trends-state-of-the-consumer-tracker/rethinking-work-value-of-time-consumer-business.html. Accessed 23 Jan. 2023.
6. Deloitte. Deloitte 2023 CxO Sustainability Report Accelerating the Green Transition. 16 Jan. 2023. Accessed 10 feb. 2023
7. Herring, Cedric. “Does Diversity Pay?: Race, Gender, and the Business Case for Diversity.” American Sociological Review, vol. 74, no. 2, Apr. 2009, pp. 208–224, 10.1177/000312240907400203.
8. Eaton, Kraig, and David Mallon. “The Worker-Employer Relationship Disrupted.” Deloitte Insights, 21 July 2021, www2.deloitte.com/us/en/insights/focus/human-capital-trends/2021/the-evolving-employer-employee-relationship.html.
9. Eaton, Kraig, and David Mallon. “The Worker-Employer Relationship Disrupted.” Deloitte Insights, 21 July 2021, www2.deloitte.com/us/en/insights/focus/human-capital-trends/2021/the-evolving-employer-employee-relationship.html.
10. Deloitte. “Survey: Chief Transformation Officers | Deloitte US.” Deloitte United States, www2.deloitte.com/us/en/pages/consulting/articles/survey-chief-transformation-officers-success.html. Accessed 19 Jan. 2023.
11. The Business Commission to Tackle Inequality. “Tackling inequality: The need and opportunity for business action.” June 2022. https://tacklinginequality.org/files/introduction.pdf. Accessed 23 Jan. 2023.