What is involved in a sustainability transformation, and what are the benefits?

Home » What is involved in a sustainability transformation, and what are the benefits?

by Simon Brod

Over the past years sustainability has become mainstream, gaining attention from media, regulators, governments, industry, consumers, and investors. At the 26th UN Climate Change Conference of the Parties, held in November 2021 (COP26), businesses around the world pledged to reach ‘net zero’ in power generation, aviation, shipping, food, electric vehicles, agriculture, and other sectors [1]. New legislation requires companies to monitor and report a wide range of Environmental, Social, and Governance (ESG) metrics [2]. And attention to sustainability extends beyond reporting and compliance. The global drive towards low carbon brings new risks and opportunitiesfor companies and needs to be considered in major decisions which affect all aspects of business. How to choose suppliers and design products for ‘net zero’? How to evolve towards circular business models [3]? We are at the start of a fundamental shift in the global economy, and businesses will need to learn new situations, understand the uncertainties, and adapt fast [4]. According to the 2022 EcoVadis Network Impact Report [5], which surveys a global pool of 90 000 companies, engagement of corporates in managing sustainability is increasing. Nevertheless, 35% of companies scored low on sustainability engagement. And with respect to action plans specifically addressing carbon emissions, over 50% scored low (and only 13% scored high).

What should organisations do to become sustainable? First, accept your business is going to be impacted, and you must be willing to change and adapt. The next stage is to plan and manage the sustainability transformation. Let us look at some typical elements to be addressed:

Impact mapping

If you are to make sensible choices, you need to know what impact your business has on the environment–not only pollution from your own operations, but also from the complete life cycle of your products and services, including the impact your suppliers have, and the impacts your products and services have while in use by your customers and at end-of-life. Techniques such as Life Cycle Analysis (LCA–also known as life cycle assessment) are essential; however, a full LCA study can represent a significant amount of work. It helps to be selective: a preliminary study will help you form a clear idea which parts of the ‘impact map’ you want to fill in first. Internationally recognised standards (such as the ISO 14000 family) are a useful guide. Classification into impact categories and use of weighting factors can help orient decision-making and prioritise actions, by aggregating impact data and making them comparable [6].

Business model innovation

Your business may be radically different in a few years’ time. Consumers increasingly seek products and services which are sustainable, or at least low impact. How will you compete in this new situation? How to thrive while making your products more sustainable? There’s a balance to be found between using less-impactful raw materials, creating longer-lasting products, and changing consumer behaviour. To address these challenges, many ‘product-as-a-service’ offerings have emerged, which tend to align business with customers’ wishes. They eliminate ‘planned obsolescence’ of products, which has become a damaging feature of our economy [7]. When considering a sustainable future, be open to re-imagine every aspect of your business. Encourage business model experimentation among your product teams and create an organisation and processes to facilitate such innovation.

Swapfiets, founded in 2014 in The Netherlands, offers bicycle-as-a-service. Subscribers pay a monthly fee instead of buying a bike outright. If their machine needs repair, Swapfiets simply delivers a replacement and takes the old one back. This business model gives Swapfiets two key advantages (and there are other advantages besides these two). First, both Swapfiets and its subscribers want reliable bikes which don’t break down and need no maintenance. And because Swapfiets buys in bulk, it can, over time, influence the design and manufacture of the bikes to make them more durable (and therefore sustainable). Second, compared with traditional bicycle distributors, Swapfiets has an ongoing relationship with its subscribers, and is therefore in a better position to continue developing offerings they will want to buy.

Capability mapping

Mapping business capabilities is a valuable exercise [8]. It gives you a concise view of the business as it works today and enables you to imagine your future business and envision the transformation required. This is not about creating a rigid plan; it is about having a view of what capabilities you might need in the future, so that you can guide the process to acquire them. Mapping starts with what the business does at the highest level. The key is to concentrate on capabilities that the business has and will need, not on organisational units. Mapping can be gradually extended to a deeper level of detail to inform business process design and automation/system requirements [9].

Culture and Ways of Working

Sustainability will become part of how your business makes decisions. The organisation will take sustainability into account as a natural part of everything it does. Often the best solutions will require conversations involving suppliers, customers, and other stakeholders. Product managers will seek continuous reduction of harmful impacts even if this means radical change. Employees with a challenger mindset will be valued as catalysts for change. The whole organisation will become accustomed to continuous adaptation. Maintaining such an organisation requires distributed, collaborative decision making, and people open to continuous learning and experimentation. To get there, an organisational change plan needs to be carefully considered and executed. The good news is employees are keen to embrace sustainability [10]. A healthy sustainability culture is an advantage in recruitment and retention.

Data-informed decision-making

Sustainability challenges are usually complex, involve multiple stakeholders and often require new data to be gathered. IoT and digital technologies are essential, enabling fast analysis of complex situations. A high level of digital maturity [11] is a big advantage in your sustainability transformation.Anyone who has gone through a ‘digital transformation’ process will no doubt recognise much of what is described here. Sustainability and digital transformations are both change processes; success depends on mobilising commitment throughout the organisation. People matter more than technology. Pre-requisites are finding the right leaders; building capabilities; empowering people to work in new ways; and communicating a strong storyline. The result, in both digital and sustainability transformations, is a more agile, faster-thinking organisation, better able to adapt.

Get in the habit of doing the ‘grandchildren test’

It may be hard to envisage what kind of transformation will best serve in your case. Sustainability is complex, and every business has its own unique set of circumstances. A good way to imagine what’s needed is the ‘grandchildren test’: ask yourself what proportion of decisions made by your organisation today you would be proud to tell your (future) grandchildren about. If the answer makes you uncomfortable, there’s a need for change. And in answering the question you’ll have already formed a first impression of what to address.

Getting started

When starting out on your sustainability transformation, it pays to first establish goals and strategy. As change may affect all parts of operations, start by aligning the leadership team. Experience shows that, especially in medium-sized enterprises, leadership teams may not yet have developed a common view on the best approach. Radically different ideas on sustainability may exist within one company. A structured process to discuss the topic, starting from a realistic picture of where the organisation stands today, will give you kick-start. Such a process must address the human aspects as well as more technical questions. It should be guided by independent, expert facilitators. And it must produce an actionable roadmap for your organisation to reach its goals.Once the leadership team is aligned, you will be able to start using the elements outlined above. Make a coherent plan that combines them. It will help to get expert oversight to maintain focus and ensure the right level of coordination while starting on the transformation. You may be surprised to discover how much is possible. And you may even find that the process of working on your business with an open mind yields ideas and opportunities beyond the sphere of sustainability, boosting results in other ways too.

References

[1] https://www.weforum.org/agenda/2021/12/from-pledges-to-action-what-s-next-for-cop26-corporatecommitments/

[2] for example, in the European Union the Non-Financial Reporting Directive has been in force since 2018,and the Corporate Sustainability Reporting Directive is expected to be adopted in 2022

[3] ‘Circular business models’ are business models which are in balance with natural resources, producing no waste. Everything is re-used, remanufactured, or recycled. You can read the European Commission’s
Circular Economy Action Plan here: https://eur-lex.europa.eu/legalcontent/EN/TXT/?qid=1583933814386&uri=COM:2020:98:FIN

[4] https://www.mckinsey.com/business-functions/sustainability/our-insights/taking-the-first-steps-towardnet-zero-emissions

[5] https://resources.ecovadis.com/sustainability-impact/ecovadis-network-impact-report-2022

[6] https://ec.europa.eu/environment/eussd/smgp/documents/2018_JRC_Weighting_EF.pdf

[7] https://durabilitymatters.com/planned-obsolescence/

[8] Business capabilities are distinct from specific expertise, resources, processes, or organisational units.They describe what a business does – for example ‘online marketing’ or ‘production planning’.

[9] https://community.mega.com/t5/Blog-EN-Business-IT/Everything-you-need-to-know-about-businesscapabilities/ba-p/27189

[10] https://www.hrreview.co.uk/hr-news/younger-employees-prefer-to-work-for-sustainablecompanies/140909

[11] https://www.linkedin.com/pulse/digital-maturity-what-how-achieve-graham-james

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