The fundamentals of societies and economies are intrinsically linked to healthy, stable, resilient business environments. Similarly, the income, career opportunities and innovations created by businesses play an important role in creating quality of life.
However, the resilience of many businesses - and their ability to generate revenue, provide employment, and benefit societies - has been tested by COVID-19. From responding to the pandemic, some organizations have re-invented themselves, and some may have also learned new and sustainable ways to operate.
Various stakeholders have already taken notice of sustainability and its potential benefits. According to the Business for Social Responsibility (BSR)/GlobeScan report, The State of Sustainable Business in 2019, investor interest in sustainability has increased significantly, with 40 percent of responding companies citing it as a key factor, up from 25 percent in 2018. Even during the disruptions experienced globally by COVID-19 in April 2020, an IPSOS Mori poll showed 65 percent of respondents support government actions to prioritize climate change in the economic recovery after COVID-19. And, 71 percent believe that climate change is as serious a crisis as COVID-19 in the long term. This sentiment is consistent with calls from global investors looking for recovery to be focused on clean infrastructure, crop resilience and flood defenses.
With sustainability on the rise, how can companies make it a key part of their strategy and operations? Here are some steps for elevating sustainability throughout an enterprise.
Look at Sustainability Differently
To start, businesses may need to shift their mindset around the cost/benefit equation of sustainability. Up to this point in time, the majority of companies have associated sustainability with elevated costs, additional reporting and increased compliance requirements, and rarely as a source of competitive advantage.
Having lived through the COVID-19 experience, now (more than ever) is the time to think of sustainability not just as tradeoff, or a “nice to have”, but as a prerequisite to long-term business performance. This shift can lead businesses to identify and realize opportunities that will secure long-term benefits – such as more resilient supply chains, more efficient business operations, more innovative, customer-centric products, and better long-term financial performance.
Review Existing Corporate and Sustainability Strategies Side-by-Side
To realize the intended potential of sustainability in the operational performance of the company, the first step is to incorporate sustainability objectives with overall business objectives, including in the setting and delivery of financial metrics. To do so, organizations will need to review their company and sustainability strategies in tandem to determine the extent to which they are aligned and mutually reinforcing, or conversely, conflicting.
The strategies can also be stress tested through a number of lenses, including peer comparison and competitive pressures, stakeholder current and future expectations, and the wider operating environment. Later, a company can use this information to help in elevating and incorporating sustainability within its overall strategy and operations.
Develop and Select New Strategic Options
Both gaps and opportunities may be identified at the intersection of business and sustainability strategies, allowing companies to explore different strategic possibilities to drive greater sustainability and competitive advantage. Companies may think expansively of where and how they could enhance their sustainability and business model impact, and build long-term resilience and performance. A company’s ability to deal with uncertainty will be particularly paramount.
Once identified, the strategic options should be evaluated and prioritized by making underlying assumptions explicit, and seek to reduce uncertainty and increase confidence through targeted validation. Ultimately, organizations will have to make choices for today, while potentially keeping options in play for an uncertain future, with an eye toward balancing short-term performance with long-term sustainability and value creation.
Execute on the New Strategy(ies)
After defining their strategy, companies will need to determine the steps and actions needed to start executing. This will require creating measurable targets for tracking progress against the strategy, including side-by-side tracking of financial and non-financial (i.e. sustainability-related) performance. One might also think about how to communicate the strategy – its processes, impact and progress – to various stakeholder groups.
The process of integration is a prolonged, iterative one, until the point where the sustainability and business strategies become one.
Start Your Journey Today
The need to elevate sustainability within business strategy is being driven by a number of different factors and stakeholders, including environmental and social issues, as well as changing expectations among consumers, investors, corporate Boards, employees, regulators and governments. COVID-19 is accelerating the focus on sustainability among these audiences, with greater awareness of the vulnerability of businesses to demand and supply shocks, and appreciation that resilience is a function of the strength of trust and relationships with customers and employees.
Companies may consider re-prioritizing sustainability and making it more prominent in their strategy and operations going forward, because it can allow firms to become more resilient in the long run, and benefit from improved operations and performance, greater customer satisfaction, and better financial results. With Purpose and Values being the organizational compass that helps businesses navigate through tricky decisions and build a loyal following, this is also the time to ask: are the promises within our purpose statements aligned with society’s expectations, and do we live them through our business strategy?
Chi leads the Sustainability and Climate Change team at Deloitte Australia and has over 23 years’ international experience. Chi supports businesses, NGOs and governments internationally, on integrating sustainability into business models and strategies, improving disclosures aligned with the expectations of regulators, investors and customers, and assurance. Chi is an expert panel member of the Resilient Rivers Blueprint, a flagship project of the International River Foundation. This project supports river authorities around the world, to improve resilience of the river systems, from ecological, social and economic perspectives, whilst contributing to the WBCSD/WRI GHG Corporate Protocol. In recent years, Chi has worked with mining, finance and real estate businesses on climate change (including exposure assessments to physical and transition risks and green bonds); retail businesses and the not-for-profit sector on impact evaluation and sustainable finance, and the food and agriculture sector on climate adaptation and resilience building.