Sustainability Strategy Driving Commercial Value

Sustainability Strategy Driving Commercial Value

By: Lorena Paglia

Sustainability. What is it and how do business leaders and boards navigate its complexity?

Sustainability is about more than demonstrating corporate social responsibility activities. It is uniquely complex to navigate as it incorporates environmental, social, ethical and governance integration, right through to how these issues are addressed in every day business activity and risk mitigation.

Increasingly business leaders are rallying behind sustainability and it’s commercial worth. Demonstrated through McKinsey’s global survey results of sustainability commercial value, ‘with 43 percent say their companies seek to align sustainability with their overall business goals, mission or values’.

Sustainability strategy is an opportunity for growth, providing a vision for business leadership and a pathway for creation of investment value driving efficiency and productivity.

It is important to all of us, because of how it impacts on board decisions and strategy; how the strategy then integrates into operations; how both then engage stakeholders; and how it can influence government agenda.

We look at the challenges facing businesses, what are some of the gaps in sustainability approach and the start of strategic engagement for business leaders and boards on this topic.

The challenges facing businesses

Challenges Road Sign

Businesses today face a challenging landscape. Macroeconomic shifts and external stakeholder intervention, is shaping the business requirement to be transparent in activity and ensure that both investment and impact is positive, strategic, and effective.

1. Businesses are being called to be leaders beyond, Corporate Social Responsibility,demonstrating vision beyond supporting social causes for brand value only. Global evidence demonstrates social and environmental issues are intrinsically linked. Whilst businesses are not exclusively responsible, the business community is a powerful influencer in the conversation that enables solutions.

2. Increasing macroeconomic shifts forcing change. Futurists’ patterns see a demonstrable long-term lasting shift in macroeconomic conditions, with increasingly globally interdependent markets, high expectations and the need to manage resources well. Competitive pressures are forcing a more agile, responsive and productive business model(s).

3. Increase in stakeholder power. Multi-stakeholder groups are informed and active, with increasing stakeholder influence instrumental to the business need to engage dialogue around social and environmental issues. Particularly when doing so, with key stakeholders (including governments) can actively reduce risk and create positive impact.

4. Increasingly, governments are engaging in policy creation for sustainability issues. Particularly in emerging countries where companies gaining license to operate need to minimise environmental and social risk impact, whilst demonstrating how profits from significant projects will be reinvested into local communities.

Realisation of gaps in sustainability strategy

gaps

Whilst there is active interest and rallying behind the commercial value of sustainability strategy, we frequently see key gaps remaining in how businesses approach sustainability.

1. Existing confusion in standards application Confusion exists around governance standards and how to integrate their application strategically, outside of siloed management systems.

2. Disconnect between leadership and operations. We also see disconnects between leadership and operations where the lines of accountability, communication and operational activity are blurred in intent and organisational silos. At times, sustainability managers are actively employed in driving sustainability culture, though in isolation from board accountability.

3. Not sure how to go about it. In many cases we see companies and boards demonstrate a desire and understanding of what needs to be done, though they are not sure how to go about it or where to start.

4. Look at “Environmental” and “Social” as isolated elements.Overwhelmingly, “Environmental” and “Social” aspects are often considered as isolated elements. Whilst the work in these areas is outstanding, tangible benefits are not realised from working in isolation.  True value comes from integrating strategic intent and everyday operational activity to create efficiency and productivity.

More work needs to be done to engage external stakeholder groups, whilst interlinking environmental and social aspects of business activity to sustainability strategy intent.

Sustainability Strategy

strategy

The commercial value of engaging sustainability strategy and its tangible long-term benefits come about through:

  1. Leveraging alternative business models in response to competitive challenges facing businesses
  2. Reduction in waste, negative impacts, risk, reputational damage to demonstrate sustainable development and leadership
  3. Create social, environmental and economic benefit to the company and community
  4. Realising efficiencies and productivity through environmental, social and stakeholder process improvement and redesign, creating sustainable evolution and development

It is achievable through demonstrable business leadership in sustainable development and engaging a strategic pathway with operational integration for tangible outcomes.

Sustainability strategy enables a whole system integration approach to the environmental and social challenges facing businesses, creating innovation and investment value.  The focus is how to minimise risk (to people, environment and systems) and demonstrating smart sustainable outcomes in efficiency and productivity.

This is where true investment value exists in engaging sustainability strategy.

Author:

Lorena Paglia, Director at LVP – Lateral Visionary Projects