A systems focus for corporate sustainability transformation

The systems change imperative for corporate sustainability transformation

Companies need a toolkit to help navigate the energy transition and adapt to the new economy, and that’s where the language and logic of systems transformation comes in. As climate change disrupts the economy at every level, it is ever more critical for business leaders to be able to identify when systems change is happening and to understand how to respond.

The transition to a low-carbon economy demands the synchronized transformation of multiple, interdependent systems. An electrified vehicle fleet significantly addresses climate change only if it is charged with clean, renewable electricity and manufactured with circular, low-waste processes using sustainably extracted raw materials.

It is only by adopting a more comprehensive view of the emerging low-carbon economy that we can begin visualizing the critical connection points and contingencies, in turn allowing organizations to work collaboratively to remove barriers, reach critical tipping points, and accelerate adoption of some of the most impactful climate solutions. Isolated initiatives miss the essential synergies in this transition.

This series of reports from Deloitte and RMI provides the language and logic of systems thinking to help leaders develop new corporate emergence strategies that adapt to far-reaching system transformations and capture their opportunities.

How emergence strategy can drive systems change

The climate imperative is driving fundamental changes across the economy, with potentially far-reaching consequences for companies up and down value chains and around the globe, well beyond the energy and materials industries. Moreover, sustainability efforts are creating new system linkages across sectors: An airline company is working on biofuels production in farming regions; a shoe company is considering sustainable wool production in New Zealand. All of this means that companies’ strategy processes should adapt to gather and metabolize new kinds of information, taking into consideration the systemic impacts of sustainability and climate action.

Where a particular area is seeing potentially transformative changes, executives should assess how the system might evolve and what role their company can play. This emergence strategy approach uses systems thinking tools that integrate external sensing, sustainable solution identification, and modes of action to identify and catalyze the fundamental changes emerging in a particular business ecosystem, sector, or value chain in connection with corporate climate action strategy.

In this report we explain how emergence strategy’s three functions work recursively, each informing and supporting the others.

The five phases of systems transformation

The transition to a climate-aligned economy won’t just happen. Facing severe climate disruption with worse to come, global actors are deliberately and proactively—albeit disparately— working to reconfigure the energy, transportation, industrial, and food systems.

Companies have the power to drive virtuous, reinforcing feedback loops to help make this happen. Often this requires collaboration across the value chain. For example, in the early days of an innovation’s commercialization, high costs and limited availability may understandably deter customers. Shortsighted producers often interpret this as a lack of market demand and fail to make the investments necessary to bring down costs—a balancing feedback loop that may stall the innovation.

To solve this problem, a group of first movers can form a buyers’ coalition to aggregate demand, helping send a market signal to producers and giving them confidence to invest in the innovation, increase production, and bring down costs.

All transitions can be harnessed, this report explains, as they follow the same pattern of shifting dynamics in five phases.

Get in touch

	Scott L. Corwin Managing Director | Deloitte US Sustainability, Climate & Equity Growth Practice +1 212 653 4075 scottcorwin@deloitte.com		Preeti Pincha Director | Deloitte US Sustainability, Climate & Equity Growth Practice +1 347 266 5412 ppincha@deloitte.com		Derek Pankratz Climate Change & Sustainability Research Leader +1 920 242 1141 dpankratz@deloitte.com
	Allison Connell Manager | Deloitte US Sustainability, Climate & Equity Growth Practice +1 224 423 3295 aconnell@deloitte.com		Hanna Bowgrow Senior Consultant | Deloitte US Sustainability, Climate & Equity Growth Practice +1.312.486.4059  hbogrow@deloitte.com
	James Newcomb Senior Expert | Strategy  +1 720 317 1019 jnewcomb@rmi.org		Laurens Speelman Principal | Strategy  +1 720 314 3511 lspeelman@rmi.org		Yuki Numata Senior Associate, Strategy | RMI ynumata@rmi.org

Acknowledgments

The authors would like to thank the many colleagues who contributed valuable insights for these reports, including: Blythe Aronowitz, Andrew Ashenfelter, Andrew Blau, Matthew Budman, Charlie Bloch, Ambar Chowdhury, Jon Creyts, Steve Goldbach, Sydney Hicks, Matt Majsak, Marissa Medina, Rich Nanda, Anna Ng, Pradeep Philip, Freedom-Kai Phillips, Jon Raphael, Jennifer Steinmann, Geoff Tuff, and Michelle Varney.