Reflections and Insights on Corporate Sustainability
You have no doubt heard us say that “we believe leaders influence” – and as a leadership influencer brand, we see we have an important role to influence others and take a leadership role in sustainability as we help businesses re-define their future vision and strategy. The world must solve three big mega trend crises, that are gaining disastrous momentum, being: climate change, increasing social inequality, and rapidly declining biodiversity.
Businesses do not operate in isolation, so while individuals can make choices as to how they impact the environment, business operations can make far greater impact by the choices they make on a daily basis. We see sustainability as a critical requirement for businesses to understand their impact and footprint on the world; and to be able to support our business network to be more intentional about their decisions and actions as they consider the wider environment and more positively impact on people, planet and profit.
That is why we have bought a specialist sustainability advisor Kate Ross onto our team, and for the later part of 2021, I undertook study at the Yale School of Business on Corporate Sustainability Management: Risk, Profit, and Purpose. Having reflected on this over the Xmas break, I wanted to share some of my key insights, reflections and observations.
It’s more than the environment and it’s interrelated:
For most of us when we think sustainability, we jump to the environment, climate change and Carbon Zero, and while this definitely has a level of immediacy, we also need to consider social inequality and biodiversity loss, and how these three mega trends are interrelated. So, what do we need to do as businesses to reduce/limit our impacts on things such as land use, over-use/exploitation, emissions, invasive species, consumption, waste, pollution, climate change, or access to healthcare, education, food and housing?
The Financial and Sustainability Systems. Traditionally our businesses are set up purely as a financial profit system. However, to be effective for the future this needs to be integrated with the Sustainability System. An increasing number of organizations are realizing that sustainability makes business sense, as both sustainability risks and opportunities have the potential to financially impact business. By incorporating sustainability principles into business decisions, strategies, and economic development, businesses can mitigate risks and maximize opportunities (aligned to the UN Sustainability Development Goals).
Materiality. At its core sustainability planning is about understanding what sustainability topics are material to us and our stakeholders, and how we can impact that. How do our business operations positively or negatively contribute to our stakeholders along our value chain, directly or indirectly, and what can we do about it? This approach requires engagement, inclusion, collaboration to explore and responsiveness and execution to make and measure impact. In my view, for medium sized businesses, if you want to be thorough and deliberate then start with stakeholder engagement and collaboration. This information can then help to formulate a well-informed materiality matrix and plan to then execute and measure. If you want to go fast and start making impact. Make some assumptions about the stakeholder views on materiality, then make an initial plan based on those assumptions, and start implementing – then continue to test and validate your assumptions as you implement those actions, then iterate and refine based on concurrent stakeholder engagement and involvement.
Making a difference. Some businesses have been doing aspects of this for some time, like clients Isaac Construction existing to support the Isaac Wildlife Trust, or the Cape Sanctuary both focused on supporting species bio-diversity. Other businesses such as Ethique have been purposeful from the outset with a desire to reduce waste to landfill, while others such as Kathmandu are transitioning and becoming B Corp certified, or Elastomer Products shifting by developing bio-polymers (plastics-like compounds that are biodegradable). Many government agencies are now leading the transparent implementation of sustainable practices.
These moves and desires then influence requirements that cascade down through their respective supply chains (similar to the requirements when health and safety standards were introduced), and soon if you want any government contract you will have to demonstrate your own sustainability, and thus the secondary and tertiary sustainability influence starts to domino.
Where to start? I see for businesses, especially those small to medium sized businesses who don’t have an appointed sustainability role (yet) that it is a question of where to start. There is a process that is relatively easy to follow but to accelerate your journey and get insights I recommend seeking help from experts. Get under the surface of knowledge. Get their experience and insights beyond the theory so that you can look up and down your value chain and make real impact. You don’t have to reinvent the wheel.
You can’t do everything. Every business is on a journey. Some, as demonstrated earlier, are just at different stages on that journey – and everyone understands that. So once you start, have the courage to be transparent and authentic with what you are doing, and what you know you still have to work on – people respect that. Everyone knows you can’t do everything all at once, but being genuine, taking action on what is most important, measuring your impact and telling your story clearly is what matters. This gets you beyond tokenism and ‘green-washing’ – people quickly see through that.
The upside. It is not all about risk mitigation, as there is a huge upside from focusing on people, planet and profit. Businesses are becoming increasingly aware that their stakeholders; from customers, suppliers, shareholders, employees, to future investors are increasingly making choices that take into account how purpose is material to the performance of your business. Talent considering employment options, customers making ethical preferences, suppliers wanting purposeful alignment all flows to the triple bottom line. They are looking for evidence of metrics and how they are being actively monitored and linked to business outcomes. They also want to clearly see that purposeful activity produces business outcomes. This needs to be reflected in how senior-executive teams are aligned through the incentive systems that deliver purposeful activity. Additionally, ESG needs to inform capital allocation decisions, both financial and human capital.
Reporting. The final concern is standardisation of reporting. A good example of this is where we recently worked with one of our clients who was conducting a logistics and infrastructure review of their national business, and both sustainability and people impacts were part of their key decision-making considerations and criteria. It is often about making trade-offs when creating more sustainable practices, but it is also understanding that we should intentionally consider people, planet and profit - especially when making future legacy decisions because we want to be creating products and services that contribute positively to the environment and improving communities where we operate.
Doing well, by doing good. Businesses are now doing well, by doing good and doing what is right – and thereby, directly and indirectly, increasing their influence. It’s the old saying of ‘think globally, act locally’. The time to start was yesterday – don’t put it off anymore, don’t wait for the perfect plan. Everyone is on a journey, so just start taking action on what you think is key and concurrently develop your plan to pull it together, test, iterate and develop a more robust plan and process over time.
This article was contributed by Greg Allnutt, Partner and Strategic Advisor, Pivot & Pace.