- Making sustainability an intrinsic part of your business strategy and putting a robust corporate sustainability strategy in place is key to ensuring a business can adapt to the sustainable economy of the future
- In this article, we discuss the fundamentals of a corporate sustainability strategy and how to develop a strategy
Climate change and global sustainability issues are now firmly on the boardroom agenda. In the World Economic Forum Global Risk Report 2021, “Climate action failure” is highlighted as the most impactful and second most likely long-term global risk identified by survey respondents.
This risk to the global economy ultimately affects businesses, driving business leaders to integrate sustainability and climate action into their business strategies.
In the past, top-level management would argue that sustainability inhibits business growth. But the game has changed. Consumers, investors, and employees are now gravitating towards sustainable businesses in huge numbers. This is leaving companies without a sustainability vision and focus behind.
So how can businesses benefit from this new opportunity? If companies want to grasp the opportunities sustainability has to offer, they have to be serious and make sustainability an intrinsic part of their business strategy.
What is a corporate sustainability strategy?
A corporate sustainability strategy is a multi-year company framework. It sets out business objectives that focus on investment and drive sustainable growth. For corporations, a strategy will seek to improve the business in many different areas. These can include environmental impact, labour and human rights, ethical business, and sustainable procurement.
In 2015, the concept of a sustainability strategy was re-defined. The Paris Climate Agreement was finalised and the UN launched the Sustainable Development Goals (SDG’s). These initiatives created clear guidelines for the transition towards a sustainable, low carbon economy. As such, both initiatives have become an integral part of companies developing their sustainable strategies today.
Why is a sustainability strategy important for businesses?
The transition to a sustainable low-carbon economy presents the biggest business opportunity in a century. Investments in green infrastructure, sustainable food, and equality will all grow exponentially in the coming decades. For example, the European Green Deal plans to make €1 trillion of funding available - to help Europe become the world first climate-neutral economy. Companies with a sustainability strategy will be best placed to take advantage of this.
Looking more specifically at business operations, a corporate sustainability strategy can yield the following benefits:
- Reduce costs: Companies that become more resource-efficient will benefit from lower operating costs. In 2019, Apple invested in energy efficiency upgrades, lowering electricity needs by nearly one-fifth and saving the company $27 million.
- Lower risks: National and local governments are regularly pushing through new climate policies and regulatory changes. A corporate sustainability strategy ensures companies are better prepared for future policy changes e.g. introduction of a new carbon tax.
- New markets: In our ever-changing society, new products and services are developed to serve evolving consumer demands. A sustainable strategy can help businesses get a head-start on sustainable product development. This will ensure they can take advantage of new markets and segments when they open up.
- Better brand: Consumers are more and more motivated to interact with sustainable companies. A corporate sustainability strategy will create credibility with consumers, who are becoming better informed all the time. This should lead to an improved brand image, which reflects positively on the entire company.
- Access to finance: Banks are putting more pressure on unsustainable companies looking for financing. Recent research from Addelshaw Goddard has highlighted this. They found that “eighty-four percent of finance providers say they won’t offer services to companies that lack a clear net-zero strategy.”
What are the steps to creating a strategy?
There are four important steps to creating a corporate sustainability strategy.
Step 1: Identify key focus areas for sustainable success
No two companies are the same. A sustainability strategy should be tailored, taking into account the future trends, challenges, and opportunities businesses are facing in their field. Different aspects of sustainability will be relevant for different businesses and each company will have a different environmental, social, and economic impact. Factors such as company size, industry, location, and operations need to be considered to help frame the overall strategy.
In order to select the topics that a company should focus on as a priority, to create real sustainable value, we advise clients to complete an (SDG) Materiality Assessment. Materiality helps to identify and prioritize the topics that matter most to both the business and its stakeholders.
An issue is considered material if it impacts the business in terms of growth, cost or risk and if it is deemed important to the company’s stakeholders. The latter includes customers, (potential) investors, partners, (potential) employees and society at large.
For example, human rights and labour issues may be more relevant for businesses in the fashion industry. Whereas talent and development targets may be more important for construction firms, which are facing a war on talent.
A great example of a materiality matrix is shown below. This highlights the material issues for D’Ieteren Immo:
Source: D’Ieteren Immo - Sustainability Report 2019
Step 2: Develop a clear vision for your company’s future
So now you have figured out what issues to focus on to create sustainable value. The next step will be to create a clear vision for the future. Creating a long-term vision for sustainability is important. It gives direction for long-term company growth and development. This will help the corporate sustainability strategy to prevail even through management changes or changing economic conditions.
To help set a company vision, we recommend taking guidance from the UN Sustainable Development Goals (SDGs) framework. The SDG’s are a comprehensive set of sustainability goals that are credible, impactful, and universally acknowledged.
There are 17 SDGs that seek to address urgent environmental, political, and economic challenges facing our world. Companies could potentially align to all SDG’s, but the materiality matrix would help you highlight the areas to prioritise.
For example, a company in the fashion industry could focus on these four main areas:
- Goal 8 - Decent Work and Economic Growth - The fashion industry employs ~ 60-75 million people, 80% of which are women. Because of the size and reach, the industry has the opportunity to lift people out of poverty by creating decent and safe jobs for everyone.
- Goal 6 - Clean Water and Sanitation - The transition to more sustainable fashion will require innovations in water use and the prevention of pollution. These could include innovations in water usage efficiency, use of sustainable chemicals, and safe industrial processes for water treatment. Microfibre pollution is also an emerging area of focus.
- Goal 12 - Responsible Consumption and Production - Waste is a huge problem in the fashion industry. Every second, the equivalent of one garbage truck of textiles is landfilled or burned. Sustainable clothing companies can take advantage of this opportunity to promote sustainable materials, better recycling, and reuse.
- Goal 13 - Climate Action - The industry is responsible for 10% of annual global carbon emissions, more than all international flights and maritime shipping combined. This presents a huge opportunity to become climate action leaders.
Aligning to these SDG’s would ensure a transition to becoming a sustainable fashion brand. This would help a company distance itself from issues in the industry such as labour abuse or wasteful production. For more insight into sustainable fashion, check out the BoF Sustainability Index.
Step 3: Translate the vision into actionable targets and KPI’s
The next step is to assess what needs to be done to make the future vision a reality. The vision will be translated into actionable targets. When creating targets, we typically recommend the S.M.A.R.T. goals framework:
- Specific – e.g. reduce carbon emissions from employees commuting by 50%
- Measurable – e.g. goal can be measured by employee commuting surveys
- Attainable – e.g. can be achieved by incentivising employees to cycle to work, use public transport, or participate in car-pooling
- Relevant – e.g. employee commuting accounts for a significant amount of Scope 3 emissions
- Time-Bound – e.g. targeted achievement by 2030
It will also be necessary to set Key Performance Indicators (KPIs) to measure progress towards targets.
Step 4: Implement the strategy
One of the most critical steps will be implementing the strategy.
Targets are translated into actions and milestones for target achievement will be set out. Our approach is to create a comprehensive roadmap for strategy implementation. This can then be reviewed and refined on a regular basis.
It will be important to engage your stakeholders regarding your company’s new sustainability vision. The primary focus should be the three key stakeholders - customers, investors, and employees. For example, customers will be interested in targets and goals regarding the sustainability of the products they purchase.
Communicating about a company’s sustainability vision can be done through a number of different methods. The main way companies do this is by publishing an annual sustainability report. Other forms of communication could include paid advertising, press releases, or a dedicated website.
Whichever method is used, it will be important to communicate on 'the good and the bad'. Show where you still have some work to do, not only what is going very well already. Companies such as Patagonia have been a leading example of honest and transparent sustainability communication.
Examples of corporate sustainability strategies
Some companies will be just starting out in the development of a sustainability strategy. Others may be looking for guidance to improve on an existing strategy. Whichever the case, it's always good to review best practice examples from companies that are leading in the area of sustainability. This will help to create a benchmark for developing your own strategy. It can also inspire new ideas in your company regarding sustainability.
We have worked with many companies that are at the forefront of sustainability. Below we have provided some examples of sustainability reports we have co-developed with our customers.
D’Ieteren Immo: 2019 Sustainability Report
“We have the ambition to become a sustainable real estate company and a pioneer in the transition towards a liveable and sustainable society through innovation.
Futureproofed helped us in translating this ambition into a company-wide strategy for sustainable value creation.
They guided us through an intensive bottom-up trajectory with external stakeholder consultations and interactive workshops that resulted in a clear set of priorities, targets and KPIs to follow up on our progress.” - Paul Monville, CEO
DEME Group: 2020 Sustainability Report
“With a strong focus on renewable energy, we try to be a frontrunner in terms of sustainable development.
Futureproofed has been our external advisor in this journey, and has been able to both enrich the trajectory, but at the same time challenge us throughout.
They have done external SDG assessments on our main projects and tenders, using clear and objective metrics. It has made our thinking much more quantifiable, and that is to our opinion the road to a more sustainable company.” - Luc Vandenbulcke, CEO
CFE Group: 2019 Sustainability Report
Ready to work with Futureproofed Business on your Sustainability Strategy Trajectory?
The team at Futureproofed Business can assist you to develop your corporate sustainability strategy based on a systemic approach and an intensive trajectory, creating sustainable value for your organisation and the society at large.
For further information, get in touch with Stephanie Van Breedam or learn more about our Sustainability Strategy Trajectory.
Stephanie is our resident expert in Sustainable Development Goals, with a background in international law and human rights. She supports our clients in their move to sustainable business strategies and a low carbon economy, and is an experienced keynote speaker. Stephanie is also an avid cyclist and loves to socialise with friends.
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