Don’t vote sustainability off the island! Outplan, outpace and outperform through strategic action and alliances

In brief:

• To achieve a sustainable transformation, companies need to embed sustainability into every department, moving beyond isolated initiatives to comprehensive, organization-wide action.
• While data gathering and analysis are crucial, companies should prioritize implementing sustainability plans rather than just perpetually building business cases.
• Businesses need to engage in scenario planning to anticipate future environmental and social pressures, allowing them to adapt and thrive in various potential futures.
• Embedding sustainability into the wider corporate strategy involves not only having a seat at the table but also guiding the company’s overall goals toward sustainable outcomes.
• Companies need to recognize the greater financial risks of inaction and understand that systemic, transformative changes are necessary to address current environmental challenges.

Despite growing awareness and investment in sustainability, many companies still find themselves unable to make the transformative leap necessary to address the global environmental crisis. As the world grapples with the tangible impacts of climate change and nature loss, companies face mounting pressure not just to commit to sustainability but to demonstrate real, measurable progress. The stakes have never been higher, and action needs to be taken now to avoid irreversible consequences.

The United Nations Framework Convention on Climate Change’s (UNFCCC) 2023 Synthesis Report of the First Global Stocktake, which assesses where the world stands on climate change, painted a picture of our stark reality. It showed that global greenhouse gas emissions aren’t in line with modeled mitigation pathways to the 1.5°C goal and assigned businesses and financial institutions with accelerating systems transformation to align with the Paris Agreement.

Most CEOs wouldn’t be surprised by this assessment; they’ve heard it before. The past decade has seen corporate investment and C-suite interest in sustainability increase substantially. And while the recognition of the need for progress is progress, it’s not enough to move the needle. In the meantime, the steady stream of bad news surrounding the state of our planet continues to escalate into a deluge.

While the 1.5°C degree threshold is the favored threshold for both corporate reporting and the media, it represents just the tip of the melting iceberg. Nature is in trouble. Access to abundant clean water, soil health, air quality and our planet’s biodiversity are all in peril. These factors are already wreaking havoc on communities, our natural resources and businesses themselves.

Yet, despite the tangible nature of the environmental crisis, companies simply aren’t transforming at the speed and scale necessary to achieve sustainability goals. They struggle to move past incremental adjustments to the status quo. But more of the same won’t help leaders rise to the challenges facing businesses and humanity at large. Securing a stable planet calls for transformative solutions, innovation and an overhaul of business as usual.

Of course, transformation is easier said than done. It’s a complex, monumental task – to make progress, companies need an accurate picture of the challenges at play and a path to overcome them.

Getting (un)stuck in the data weeds

Businesses continue to spend time, energy and resources building out teams to monitor, measure and manage their sustainability-related impacts. Many have established baselines, collected data, measured their footprints and set appropriate carbon reduction targets. Almost 5,511 companies (at the latest count) have gone further, aligning their goals with the best available science. Naturally, this investment is necessary since a problem can’t be solved if it isn’t first identified and understood. Measurement is key, and digital solutions show tremendous promise to help conduct these activities with greater accuracy and efficiency.

However, all too often, sustainability teams find themselves stuck in an endless cycle of analysis. Sustainability teams are often only in control of perpetually building the business case rather than authorizing concrete actions in the short term. While effective monitoring, evaluation and measurement are critical components to support decision-making and prioritization, continuous number crunching won’t always lead to better insights — and it certainly isn’t a proxy for sustainability progress. After all, even possession of the best data insights in the world won’t lead to actual change unless the information is used to fuel action.

Companies shouldn’t limit the scope of their investment to data gathering and analysis. Resources need to be directed at not just developing plans but actioning them. While it may represent a higher upfront cost today, the financial risks of inaction are even greater.

For any chance at avoiding the most severe impacts from the climate crisis and failing ecosystems, entire industries — from food and logistics to fashion and construction — must be transformed. Take transmission system manufacturing, for example. We’ve known that electric drivetrains represent the future of the industry for a long time now, but adoption has been slow. Without a doubt, there are big hurdles for conventional manufacturers to clear. They must retool their factories, retrain their workforce and shift their supply chains. But they also need to push for more extensive charging or alternative fueling infrastructure on cleaner grids. They need to use all their innovation might to make these electric drivetrains as good (if not better) than traditional transmission systems to remove all reasons not to buy. And they need to bring consumers with them.

Harnessing scenario planning to envision alternative futures

Traditionally, businesses have used historic data to solve problems and inform their planning. But the context in which they are making plans has changed profoundly. Environmental and social pressures brought about by global temperature rise, more stringent regulations and changing market conditions mean future conditions will be quite different to those of the past. Erroneous planning and decision-making made in the present – combined with the aforementioned economic, political, technological and market conditions – can have devastating business consequences. Just look at the latecomers to the electric vehicle party to understand the business imperative of understanding what’s around the corner and being prepared to act sooner rather than later.

We can’t prevent tomorrow’s catastrophes unless we anticipate them today. Companies that envision alternative futures can better sense, shape and adapt to the future. To gain this strategic foresight, company executives need more forward-looking analysis, not only of their own operations, but also further upstream to truly understand the environmental impacts and risks across their value chain.

Scenario planning can trigger that “ah-ha” moment for senior leaders and serve as the catalyst to put real change in motion. It allows firms to take some of the uncertainty out of the future by exploring plausible futures – not necessarily to predict what will happen, but to establish how your company can react and navigate across an array of possible realities.

There are many different potential scenarios as to how the climate crisis will impact the planet in the coming decades. A worst-case scenario brings higher physical risks. So companies will need to understand how, for example, increased storms, droughts, floods, and heatwaves might disrupt supply chains. Similarly, if a low-carbon economy becomes a reality very quickly – with heavier carbon-related regulations and increased costs – businesses need to explore their vulnerabilities and understand just how adaptable they are.

Scenario planning can be combined with scenario testing. So, rather than developing their own scenarios, companies apply scenarios that have been developed by others (such as industry bodies) to test what risks the scenarios pose to their company – and whether they’re able to remain resilient under each scenario.

Removing sustainability from its island and playing on the same team

In the global hit show Survivor, contestants are initially split into “tribes” and compete against each other in challenges. As the game progresses, the tribes merge into one, leading to individual gameplay where alliances shift and contestants must adapt to new dynamics to outlast their competitors and win the ultimate prize. It’s not unlike the way corporate players navigate sustainability.

Sustainability typically exists as an entity unto itself. Like any department, it has a limited sphere of influence; it has to compete for resources, make business cases and convince other departments to adopt and act on its advice.

A key factor in the “below the iceberg” considerations of corporate culture is “how things get done around here.” How a company is organized shapes the subsequent practices that enable professionals to work and perform their duties. If your duties consist of enacting changes and driving best practices across functions, you not only need an adequate amount of authority, but proximity and access. Most sustainability teams have neither. They also can’t leverage the usual operational workarounds.

For example, sustainability departments would be hard-pressed to set internal controls to ensure sustainability in the way that marketing can set a control to review any mass communication that leaves the company or finance can require approvals of certain spending levels.

“Make sustainable” isn’t a node on a process flow. Sustainable transformation of an organization not only requires driving change across functions, designing and implementing the actions to achieve it are as complex as the enterprise and its operations itself.

Realizing the diagnostic and actionable strategy needed for operational improvements, perhaps it’s time to consider embedding sustainability specialists into various functions and sub-functions across the organization. By having this proximity and access, transformation can be actively driven from within, rather than passively influenced from without.

Calculating the cost of inaction, not just action

Understanding – and weighing up – the cost of not acting compared with the cost of acting is another crucial shift that will make transformation happen, or at least kickstart action where it’s stagnating. All too often, companies lack the confidence to initiate change because the focus is still very much on the cost associated with taking the action rather than the price of inaction. It’s time for firms to ask themselves some big questions: What are the risks attached to transforming our product lines that may fall out of market, or may not be legally compliant in the near future? How will the price or availability of our raw materials change in the future?

With answers to these questions, companies can explore the fundamental changes required to transform what they are doing, weighing those investment costs against the cost of business as usual.

For this to work, however, the focus on sustainability must be embedded in the wider commercial strategy of the business — not only with a seat at the table, but steering the table in line with the company’s overall goals.

Companies often build individual business cases for individual changes. For example, they might have identified a new source of packaging for one particular product, reducing carbon emissions by 15%, albeit at a slight increase to costs. While this may be a small win for the environment, rather than fighting for incremental changes, businesses must start thinking about systemic changes that drive and accelerate transformative ones.

While any and all progress is welcome, the magnitude and urgency of the challenges we face call for bigger, bolder action. In reimagining our systems, behaviors and priorities to create a more equitable, resilient and regenerative world, companies must understand and accept that they won’t be able to keep everyone happy. The transition period may require short-term sacrifices to enable a long-term future. But it’s only through transformation that we can hope to address sustainability challenges comprehensively and effectively.