Embracing planetary challenges: 4 ways to drive environmental and business resilience

In brief:

• The planetary boundaries framework provides a roadmap for holistic sustainability, allowing companies to target and prioritize environmental areas that pose the highest risk.
• By fostering a culture of environmental stewardship, businesses can integrate sustainability goals across all business functions.
• Embracing a circular economy model, discarding outdated practices and investing in sustainable alternatives can drive long-term environmental and economic sustainability.
• Collaboration with suppliers is key to transforming supply chains, fostering transparency and ensuring commitment to sustainability targets.

The health of our planet requires urgent attention — and businesses are expected to support ambitious efforts to heal it. But with this expectation comes opportunity, since there’s also a clear business case for companies to take on sustainability. As drivers of innovation and progress, businesses are uniquely positioned to steer the economy to align with the Earth’s limits. Yet, the path to operating within planetary boundaries can appear daunting, especially when considering all of the uncertainties and complexities within environmental sustainability.

The updated planetary boundaries framework reveals that humanity’s actions have caused the transgression of six out of nine boundaries and serves as a stark reminder of the need to mitigate the over-exploitation of Earth’s finite resources. But it also provides a beacon of hope by equipping us with a clear roadmap for collective and corrective action. By prioritizing holistic sustainability, companies can adapt to our changing environment and build resilience across their value chain, ultimately ensuring long-term viability.

Here are four critical actions companies should take to operate within planetary boundaries:

1) Understand your dependencies and impacts on nature (and the associated risks and opportunities) across your value chain.

The foundation of sustainability lies in a deep understanding of the nature dependencies and impacts woven into your company’s operations. From raw material sourcing to manufacturing processes, distribution and product use, companies rely on ecosystem services at every stage of the value chain. A common misstep is when companies focus sustainability efforts solely on their highest volume operations, rather than factoring in steps in the value chain that may bear intense environmental impacts.

Companies need to ask themselves: Does my current sustainability strategy consider all nature topics, focusing on areas that make the company most vulnerable to environmental threats? Begin by conducting a robust environmental impact and dependency assessment to identify risks and opportunities associated with your operations. This goes beyond carbon emissions, delving into the intricacies of water and energy consumption, biodiversity loss, and land use and degradation. By understanding these dependencies, you’ll be able to mitigate risks while also uncovering avenues for innovation and efficiency. For example, a cosmetics company may focus on the impact of its packaging or high-volume ingredients, only to find that certain lower-volume ingredients represent much of the environmental burden and constitute a significant dependency, thus posing a potential financial risk to the business. While the company could certainly make progress with its original strategy, it would expose the business to considerable risk by failing to address its biggest environmental hotspot.

High dependencies and impacts may be associated with high physical or transition risks, translating to a potential rise in operating costs or loss of market share. The most challenging part is often not just identifying hotspots across the value chain but juggling the various indicators and articulating them into a consistent action plan – without losing too much energy on indicators that aren’t crucial for company-specific activities.

2) Push the other business functions to embrace environmental stewardship.

Sustainability teams often operate as satellite functions, with strategies and action plans that aren’t fully integrated across the business. Leaving one team to handle an entire company’s sustainable business transformation is unrealistic and overwhelming – especially when that team is siloed from the rest of the business. Sustainability teams aren’t familiar with the operational realities of every department, which makes it even harder to set relevant targets.

To successfully enact sustainable business transformation, sustainability insights and data must be engrained throughout the company, not just within sustainability teams. C-level, V-level and even D-level management across key functions, such as R&D, sourcing and marketing, need to be able to utilize the insights that the sustainability team provides to enact change in their own departments.

For change to truly take root, specific mechanisms and incentives must be adopted to ensure department heads act on these insights in addition to their usual priorities. Each department within the company, from product development to marketing, would be tasked with setting sustainability goals aligned with broader corporate objectives. Such collaboration could look like:

• Marketing: launching a consumer engagement campaign focused on educating consumers and incentivizing sustainable behaviors;
• Operations: anticipating environmentally-linked operating risks and collecting advice on potential certifications;
• Finance: collaborating with the sustainability team to anticipate the regulatory environment, assess potential financial impacts of operational risks and meet investor expectations around sustainability;
• Procurement: managing physical and transitional risks associated with a company’s portfolio of raw materials or products to ensure supply continuity.

This type of organizational shift requires a clear sustainability vision where goals are embedded in the decision-making process at every level. By creating goals that are relevant for each department, those outside of the sustainability team can understand how they contribute to the overall strategy, building a strong culture of sustainability. This cultural shift can help companies see real progress in their sustainability efforts and can help generate more business value.

3) Unlearn conventional business philosophies that aren’t aligned with the changing landscape.

Due to overconsumption and the degradation of nature and ecosystem services, many companies have resorted to using more even more natural resources, such as water, that further degrade the land they source from just to get the same quantity yields, thereby begetting further degradation and incrementally diminished quality. This ultimately results in an inferior product at premium pricing. More time, money and resources would be required from companies to maintain product quality, and it simply isn’t sustainable in the long run, both environmentally and economically.

Companies need to discard the take-make-waste practices that don’t set the business up to thrive in a planetary economy. A move to more circular and regenerative approaches requires a fundamental shift in thinking. A circular economy model involves minimizing waste by keeping resources in use for as long as possible, extracting maximum value from them and then responsibly recovering and regenerating products and materials at the end of their life.

Investing in research and development focused on sustainable alternatives to current practices is a way to break free from conventional business models. Companies can start by reevaluating their procurement processes and building stronger relationships with suppliers that adhere to circular economy principles. This includes sourcing materials that are easily recyclable and promoting closed-loop systems. Explore alternative packaging materials, adopt innovative production processes or reimagine product life cycles. Additionally, embracing technological advancements and digitizing business operations can optimize resource use and enhance overall efficiency.

4) Collaborate with suppliers to transform supply chains.

Sustainable transformation cannot be achieved in isolation. Between shareholders, consumers and suppliers, there are several stakeholders that companies rely on to make progress on their sustainability goals, especially since for many value chains, nature impacts lie outside of direct business activities.

Suppliers are integral stakeholders, and collaborating with them is essential for transforming supply chains. Once a company has mapped out its suppliers, conducting a thorough supplier audit and identifying their own sustainability initiatives can unearth opportunities for improvement and foster collective commitment. Engage in open dialogue with your suppliers, encouraging them to embrace sustainable sourcing, labor and manufacturing processes. This will most likely also require some sort of financial support, whether through offering premiums or financing programs to train suppliers on best practices.

Operating within planetary boundaries safeguards the environment and humanity while also yielding tangible benefits for businesses. Companies that prioritize sustainability can future-proof their business against future environmental disruptions, thereby ensuring their long-term resilience and competitiveness in the market. It also makes business sense today: integrating sustainability into business operations can foster, mitigate regulatory risks and enhance stakeholder trust among suppliers, investors and consumers.

These principles provide companies with a roadmap to adapt and thrive within the constraints of our planet’s resources. By taking the right steps to address their impacts, companies can mitigate environmental risks and unlock their sustainability transformation.