How do you most optimally change your organization to move more sustainably? We asked more than 250 European executives across all sectors to distill what makes business sustainability strategies so particular and what sets extraordinary sustainability leaders apart from their peers. This is what they told us.
A sustainable business is a profitable business. It is a well-proven fact that progress in ESG is positively correlated with financial performance. However, closing the knowing-doing gap can be difficult. Organizations continue to grapple with making sustainability transformations work and adapting the various environmental, social, and governance (ESG) frameworks. This is a challenging task, as the challenges of ESG-related issues are multifaceted.
So how come some work so well while others fail? We asked more than 250 executives in Europe what they considered to make their ESG transformations successful. When looking at large-scale business transformations, my colleagues across Europe have identified four keys to success:
1. Don't greenwash, but integrate your sustainability efforts into your core strategy and transformation agenda
Our research shows that sustainability leaders are way beyond symbolic actions and selective disclosures on ESG. They have gone for a much more profound integration of sustainability into their purpose, business strategy, and operating model.
The degree to which business models are impacted by the various ESG issues and resulting transformation needs of their business and operating model varies between sectors. This drives the risk and opportunity landscape of the company and, thus, its transformation approach. Some transform to survive while others transform to differentiate and win market share. Leading businesses should identify where they lie on the spectrum.
2. Get the transformation fundamentals right
Moving sustainability from the edge to the core also enables companies to leverage their current capabilities to innovate, transform, execute, and harness their existing transformation capabilities. Sustainability leaders succeed by harvesting the business transformation excellence they already have. They put revenue before cost (make ESG a value driver rather than a cost bucket) and possess strong transformation capabilities.
3. Invest in your strategic foresight and ecosystem co-creation capabilities
"We are on a highway to climate hell with our foot on the accelerator," Antonio Guterres, UN's general secretary, said at COP27. Companies need to act now to have a chance of attaining their climate goals by 2050. However, acting now will require significant investments in unproven technologies today. Investments that won't pay back for a long time.
To combat this, we found that organizations that lead in these transformations anticipate the future and are aware of the regulatory, market, and technology shifts. They know what society expects of them.
Also, sustainability leaders create strategies and actions with their network to achieve their desired pace and scale it accordingly.
Finally, sustainability leaders find it more meaningful. They are better at formulating a powerful narrative that mobilizes internal and external stakeholders and breaks down their strategy into various initiatives.
4. Choose your transformation mode based on your starting position
The companies analyzed were in different starting positions and execution modes. That led us to create four types of execution modes: The ones just beginning; the ones that were decentralized energized; the sustainability heroes; and finally, the ones we called 'All efforts unite,' where a central team was coordinating and integrating the efforts, but where initiatives were executed in all parts of the organization and jointly financed.
One size does not fit all, but executives need to start by honestly assessing the organization's current strategic and transformation maturity. Then, carefully choose the execution mode that is the best fit and invest in a focused way in those transformation capabilities that move the needle.
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