Driving the sustainability agenda from the top-down
Public concern over climate change is well and truly in the mainstream, thanks to activists like Greta Thunberg and exposure such as David Attenborough's war on plastic. Whilst some of the repercussions are well publicised (plastic oceans, the effect of greenhouse gasses, deforestation), other are less well known (for example topsoil erosion, water scarcity and climate change exacerbating inequality). One of the most critical challenges in the march towards a sustainable world is ensuring that progress in one of these areas is not to the detriment of the others. Similarly, we need business leaders to understand that climate change transcends traditional boundaries of company structures, governments and geographies, meaning that genuinely sustainable business models need to incorporate factors well outside their own back yard. As Peter Oswald, outgoing CEO of Mondi group put it "Mother Earth doesn't look at individual countries or regions, it's the overall picture and the current system simply doesn't work".
The good news is that CEO's recognise the urgency, with nearly 100% of respondents in The UN's global compact CEO survey saying that sustainability was critical to their future success. They recognised that finding sustainable solutions wasn't just about publicity, it was fundamentally necessary to the long-term health of their business. Yet just 64% of them say climate action is prioritised in their companies’ mission, and only 35% have a plan to set a science-based target within the next year.
Source: UNGC CEO survey (2019)
This disconnect between the recognition for change and the prioritisation of such change are down to a few reasons:
Sustainability targets are often reported on and managed separately to financial targets. This often causes them to be overlooked in strategic decision making.
There's often a disconnect between managers responsible for sustainability issues (such as waste management, resource efficiency etc) and the Executive level. With no clear accountability to deliver at the top, sustainability issues become easier to deprioritise.
Lack of clear, measured data across the value chain is difficult to obtain, making affirmative action less certain.
Our global equitable systems don't (yet) place a priority on sustainability. Whilst companies such as Unilever declare their responsibilities to sustainability, beyond those to their shareholders, the majority are still bound to financial systems that favour shareholder returns over social responsibility.
Whilst these may feel like insurmountable challenges, I remain confident that major change and disruption in governmental and business is around the corner. The signs are there: increasing public pressure to act, improving financial incentives to push for truly sustainable solutions, and increasing risk for those who don't make relevant changes. The snowball effect of investment to go green will also increase, but will truly scale through government policy, and the increasing risk to finite resources rendering traditional (non-sustainable) business models obsolete.
How can business disrupt the status quo and deliver on global sustainability targets? Below are a few suggestions to drive change from within.
If you believe (as most do) that climate change will have a severe impact on your businesses future, then you also believe that it should be a major component of the board's accountability. Ensure there are clear (SMART) objectives that the board must meet alongside their financial objectives. Mirror the operating model of other business critical activities, by providing a direct line between the people accountable at the board level, to the teams on the ground responsible for the innovation and execution.
Educate internal and external stakeholders on the opportunities unlocked by green tools and technologies.
63% of CEO's surveyed see 4R technologies as a critical accelerator of the socioeconomic impact of their companies. Yet it's arguable that total investment in green technologies (particularly biotech) isn't growing at the pace we require. Investors and decision makers have real potential not only to contribute toward achieving 2030 climate change targets, but also to capitalise on the vast array of opportunities from green-tech. These manifest not only in their existing markets (for example, through improving brand trust) but also in unlocking future potential revenue (for example through circular economies).
Source: European commission
Collaborate: with your value chain, and with your competitors.
Whilst big data, machine learning, and cloud computing remain top of the investment bucket list, their utility in tackling sustainability issues is severely limited through the scope and connectivity of the foundation of data they rely on. Casting a bigger net for your data lakes through collaboration can not only help identify inefficiencies (and conversely save costs) in your supply chain, it can also help discover new opportunities. More detailed measurement and reporting also helps to improve consumer trust, which will only increase in importance as "greenwashing" continues to cast a shadow over truly green initiatives.
Establish full life-cycle costing (or similar) as an integral part of your internal decision making.
As a consultant who tends to work in the commercial strategy space, I've never been asked to assess the environmental impact of my strategies! Incorporating this into your decision-making framework will force stakeholders at all levels to consider environmental consequences, whilst also driving the need to the aforementioned solutions.
Finally, seize the impetuous to act now rather than tomorrow. The urgency to act fast was emphasised at this year’s World Economic Forum meeting in Davos, calling on all of us to change how we think and act. I expect such a rhetoric to be a staple of many business conversations in 2020, and rightly so.