A few years ago, sustainability was considered a trend that businesses were
undertaking to combat the effects of the environmental and social impact caused
by the previous decades of heavy industrialization. Today, sustainability is a
standard and framework that every business must consider or risk failure. Paying
attention to environmental, social, and governance (ESG) related challenges has
become extremely critical for all organisations across all industries.
According to a McKinsey Global Survey, 83% of Csuite executives and investment
professionals believe that ESG programmes will generate more shareholder value
in five years’ time than they do today. This thought process directly reflects
corporate actions toward sustainability in recent years.
Most of the world’s largest companies now issue a sustainability report and set
goals; about 33% of Europe’s largest public companies have pledged to reach net
zero by 2050, and more than 2,000 companies have set a sciencebased carbon
target. Corporate leaders are becoming aware of the need to reuse and recycle, as
well as steadily moving toward the circular economy. It is a huge area for growth,
with the renewable energy market expected to be worth $2.15 trillion by 2025.
On the social side, organisations have been expanding diversity and inclusion
efforts, committing funds to fight racial inequity, and speaking out on societal
issues that were previously swept under the rug.
To understand this strategic and philosophical shift, It is important to understand
what sustainability is, beyond its use as a buzzword. Sustainability is simply how a
given organisation approaches the creationof longterm value by taking into
consideration how it operates its ecological, social, and economic conditions.
Sustainability is predicated on the assumption that developing such strategies
cultivate organisational longevity.
The current wave of sustainable practices can be directly attributed to the global
shift towards environmental friendliness, transparency, and social equity. As
information becomes more easily accessible and consumers/investors become
more aware of their surroundings and the internals of previously obscured
organisations, there is now an increased call for companies to take increased
responsibility in their social, political, economic, and environmental activities.
When an organisation properly creates and executes a sustainable strategy, it
opens itself up to a plethora of positive impact.
Brand value is greatly increased as the dominant generation is highly keen on
sustainable companies and products, and this also translates into investor demand
(Gartner research finds that 85% of investors considered ESG factors in their
investments in 2020). It also helps ensure regulatory compliance as global
initiatives such as The Paris Climate Agreement forces countries to implement
rules that benefit and foster sustainable action. A proper approach towards
sustainability also attracts employees and increases productivity.
With these benefits, it is clear to see why some of the world’s biggest organisations
have taken steps toward sustainable production, helping to reduce environmental
stress and climate change: Nike has committed to using 100% renewable energy
in its factories by 2025, large scale manufacturers such as Unilever and Nestlé
have both taken on major commitments; Unilever is targeting netzero emissions
by 2039 and a deforestationfree supply chain by 2023. Nestlé has also committed
to achieving netzero greenhouse gas emissions by 2050 and having 100%
recyclable or reusable packaging by 2025.
In spite of the obvious actions taken by market and industry leaders, the average
corporate executive is unlikely to be interested in sustainable action. According to
a study by MIT/BCG, 90% of executives acknowledge the importance of
sustainability, but only 60% incorporate it into their strategies, and barely 25%
include it in their business models. This study is a bit dated, so chances are the
numbers have gone up as sustainability has moved firmly into the mainstream.
However, it is important to point out the troubling increase in “Greenwashing,”
which is basically providing unsubstantiated claims to deceive
consumers/investors into believing that a company’s products or operations are
environmentally friendly or have a greater positive environmental impact than what
is true. One can understand the allure of “greenwashing.” All the benefits are
reaped with any work done, and as the idea of sustainability is still evolving,
getting caught is rather difficult unless you choose to be overly egregious like
Volkswagen in 2015.
Regardless of this, it is important that organisations properly incorporate and
implement sustainability in their strategies, if not for all the benefits I mentioned
earlier, then for the sake of the planet and humanity. The world is in dire straits,
and inaction will take us down a dark and painful path. You’d be hardpressed to
enjoy profits and bonuses if the world wasn’t working as intended. (Read Why Is
Sustainability Important In Business? To see what a possible timeline could befall
us if we don’t do better.)
As sustainability continues to evolve, there are some practical steps an
organisation can take to keep up with the changing landscape:
Aligning strategy with sustainability: Executives need to ensure that the strategy of
an organisation and its sustainability efforts are properly aligned. There is usually
some disparity, especially during the earlier stages. As time goes on and the
organisation iterates, both strategy and sustainability efforts would be better
optimised for execution.
Moving from compliance to competitive advantage: Organisations must address
compliance, which often involves regulations in waste management, pollution, and
energy efficiency as well as human rights and labour responsibility. Proper
compliance also concerns investors. Investment is all about managing and
mitigating risk. None is riskier than a noncompliant organisation. However,
compliance is not enough as it is the bare minimum. Organisations must be willing
to come up with sustainable actions and strategies to stay relevant in the global
economy. According to the 2021 EY Global Institutional Investor Survey, 74% of
institutional investors said they were more likely to divest from companies with
poor sustainability performance, while 90% said they would now pay more
attention to a company’s sustainability performance when making investment
Be proactive and not reactive: A good number of the leading brands I mentioned
earlier are only currently waving the current sustainability flag because they had to
resolve an earlier crisis. With the current love for “cancel culture”, your
organisation may not get a second chance if it finds itself in a crisis. An analysis of
the entire organisation could provide insight into sustainability gaps that would
Transparency as a value: To evaluate and improve your sustainability practices,
you must be transparent. Transparency functions because the more open an
organisation is in its environment and with the community, the more opportunities
for performance to improve. The only way for organisations to accomplish
transparency is through open communications with all key stakeholders built on
high levels of information disclosure, clarity, and accuracy, as well as an openness
to recognizing faults and improving practices.
Board Engagement: For the type of organisational change a sustainability strategy
can create, the board of directors must be fully involved to generate substantial
results. Directors can restructure aspects of the organisation to better complement
the needs of a sustainable strategy.
Ecosystem Engagement: Sustainability is not a ‘one organisation’s game’. Your
organisation must be willing to collaborate with external stakeholders to ensure
that its sustainability practices are efficient and well executed for success.
Sustainability continues to prove a challenge for organisations all over the world,
and as more companies continue to adapt in a postsustainability world, the idea
remains everevolving. It is necessary that one understands that no matter how
much the idea of sustainability changes, as long as one sticks to the core
principles that uphold it, one will always be able to stay relevant.
As we all continue to understand and implement sustainability as a brand strategy
and approach to business, professional communications and good intentions are
no longer enough.
Responsible leadership must ensure that they approach sustainability not just from
a standpoint of compliance and competition but by aligning strategy with
sustainability: creating longterm value by the way it functions across ESG