A sustainability strategy to turn intent into action
The IPCC’s latest assessment report is a loud and clear ‘code red’ for humanity. We need immediate, rapid and large-scale reductions in greenhouse gas emissions just to limit warming to a, still-dangerous, 2°C. And, according to the World Economic Forum, the pandemic’s economic shockwave will immediately increase inequality.
Many business leaders have realized that their organizations have for too long prioritized profit over people, social and environmental responsibility. Now it’s the time to think beyond “we should do something” and put all our energies into “how are we going to make it happen”.
Transforming your organization into a sustainable model isn’t easy, of course. It requires a sustainability strategy that unites not only the organization at all levels, but also supply chain partners, and the entire ecosystem. It demands a more people-focused approach to setting, delivering, measuring, and improving your ESG (Environmental, Social and Governance) targets. It will take the collective effort of many people.
3 common derailers to executing on a sustainability strategy
We typically see three common derailers when it comes to executing an ESG and sustainability strategy:
It’s hard to let go of the fundamental aspects of your business that were core to success. Even if these are the very things that make it unsustainable. This means every leader needs to be on board with the strategy – including the Board of Directors.
2. Siloed approach
Sustainability can’t just be allocated to an ESG department. It needs to be embedded in your culture and philosophy – just as safety might be for an oil and gas company. This means every person in your organization needs to be educated on ESG and sustainability and they need to see it as part of their role.
3. Short-term hit
When you operate in a fast-paced, on-demand environment, putting social or environmental impact first may affect revenue, profits, and total shareholder return. However, evidence shows that over longer time horizons, ESG initiatives noticeably improve financial performance.
Start by identifying your sustainability and ESG opportunities
Performing a materiality assessment will help you identify where to focus your efforts. This process identifies the most material and highest priority ESG and sustainability opportunities and risks for your organization and industry. It is accomplished by soliciting input from a range of people who are directly and indirectly affected by your actions – your stakeholders.
5 factors to ensure a successful ESG & sustainability strategy
There are many ways to go about developing your sustainability strategy. However, there are five elements that will allow you to define and implement it successfully and efficiently.
1. Align leaders on the purpose, material issues & publicly voice the intent
Sustainability needs to be woven into your purpose and the fabric of your business strategy, not treated as a side-venture. To do this effectively, you need public commitment from the entire executive team and the Board.
This is partly an education journey. It involves helping all leaders understand and embrace the language of sustainability and frameworks such as ESG, Triple Bottom Line or Sustainable Development Goals.
Until the leadership team understands and buys into the fundamental material issues, their opportunities and threats, they cannot be resolved. These include economic, environmental, and social risks and opportunities.
2. Understand & quantify the downside risks & upside opportunities
Once the material issues in your industry and business are understood, you need to measure their impact and set targets for change.
You can do this by thoroughly assessing your operations internally and across your ecosystem and by actively engaging your stakeholders and listening to their opinions. For example, what is your policy and approach to diversity, equity and inclusion, exploitation of labor and animals used in testing, pollution and waste control? How confident are you in your business partners’ practices?
Dimensions to determine where you are in your sustainability journey
You can also work out where you sit relative to the sustainability maturity of other players in your industry (Basic, Progressing, Advanced, Leading Edge) across five strategic dimensions:
- Awareness: commitment by the Board, senior and mid-level leaders, and employees to understand and build awareness of the value of ESG.
- Risk management: effective infrastructure, capabilities, and behaviors for identifying, quantifying, mitigating, and preventing ESG-related risks.
- Talent integration: integrating ESG into talent and rewards systems, and assessment of leader and employee behaviors.
- Operations integration: leveraging ESG efforts as a catalyst for performance, innovation, and business results.
- Market integration: integrating ESG efforts with market, customer, and community strategies to enhance customer experience and competitive advantage.
3. Reimagine a better, sustainable future
Once your leaders are aligned around a strong sustainability purpose, it’s time to bring everyone on this crusade. This means by shaping and telling a better story about the future.
It begins with a new purpose or reason statement for being in business and then mobilizing people, behind it. To help stakeholders make personal meaning of the purpose, and for it to have business impact, it must be translated in six ways:
- A clear ambition statement outlining a measurable and stretch goal.
- An uncomplicated multi-year strategy, with clear outcomes and milestones, about where you will play, how you will contribute and how you will win in a sustainable world.
- A compelling set of organizational values that complement and bring the purpose to life through behaviors, relationships and ways of working within and across the organization’s ecosystem.
- An integrated leadership framework for inspiring change and igniting action.
- A brand that embodies what the organization stands for.
- A way of telling your organization’s story and celebrating with your people.
All of these help your organization make congruent decisions, guide your actions and develop your culture.
4. Find out what needs to change in your leadership, ways of working, organization, talent and culture
This stage is about developing strategic capabilities and identifying what needs to change in your leadership model, your operating model and organization structure, and your people to help your business thrive in a sustainable world. It involves creative design thinking and innovation.
It begins by acknowledging that there are many ways to move forward. And, by adopting a discovery approach, you will quickly learn which solutions could work best for your specific circumstances.
The first step in experimentation is to define a series of hypothesis or breakthrough questions. It could take the form of, “The team believes that doing X will result in Y”.
The next step is to design the experiment, allowing for a control group where possible, and an experimental group. Specific actions and measures should be tracked over a defined period.
During the final step, lessons and insights from experiments are captured. It is critical that the reigning mindset is grounded in developing insight and awareness. This focuses teams on working within a specific context to drive noticeable results. These results can then be used to conduct larger scale experiments which form the basis for transformation over time.
5. Evaluate what works and scale that across the organization
The process of experimentation may well happen in project teams. However, sustainability must at some point be integrated into your core operating model to make the difference. These initiatives need to be visible. Because they will create their own momentum and catalyze a shift in the organization’s culture and mindset.
As new practices become part of the rhythm of how you work, you will find your organizational model and culture evolve. Fluid organizational structures work better in adaptable and sustainable enterprises.
By removing siloes and hierarchies, you can build a more inclusive organization and empower your people to contribute in different ways. This is the foundation of ongoing innovation and accountability. Some people may take on multi-portfolio roles, or you might find tribes forming around ideas rather than business functions.
This change may also mean rethinking talent acquisition and management processes. We know diverse and inclusive teams enable innovation and creativity. Creating fair and transparent talent processes will not only help you meet ESG targets, it will help drive organization-wide transformation.
Flexible structures may also mean involving contingent workforces, or embarking on joint ventures, and putting in place more flexible work practices. With this comes additional responsibilities. How do you reward a flexible workforce? And how do you ensure they have the right workplace environment?
At this point in your journey, your organization should consider assuming a bigger role in your industry to deliver on a collective sustainability agenda. This could be as a knowledge sharing or by creating partnerships. Furthermore, act as the voice of change and call out disbelievers and poor behavior. As you continue to test and learn, make sure you measure the results, celebrate the small wins, learn quickly and share lessons from failures.
Bringing it all together to harness the power within your people
Sustainability strategy is ultimately a series of decisions - what will we do, and what will we choose not to do. These become a lot clearer when an organization is united by a shared commitment to sustainability and has defined ESG goals.
Ultimately, it is only by harnessing the collecting ingenuity, energy and commitment of your people that you will be able to execute your sustainability strategy. That means fostering the right mindset and culture within your organization. It means providing the right structures and platforms to learn, share, collaborate and execute. And it means ensuring leaders are aligned and committed to making ESG and sustainability part of the business strategy.