Sustainability as the Guiding star for Corporate Strategy

Sustainability has been hovering on the fringes of corporate policy for a couple of decades, touching, but not underpinning, business strategy – an approach that’s prompted accusations of ‘greenwashing’ where companies’ real-world commitment falls short of their reporting rhetoric.

Today, though, sustainability has moved beyond nice-to-have status to become a corporate imperative, as shareholder-primacy gives way to stakeholder pressure for ethical reform, heralding fresh opportunities for organisations looking to thrive in an altered world.

Climbing the corporate agenda

The good news is that more corporations than ever are appointing Chief Sustainability Officers (CSO).

The Financial Times recently reported that the number of CSOs across Fortune 500 companies in 2020 grew to 95, an increase of more than 200 percent on 2011 numbers – a metric that, according to FT columnist and Learning Xchange panel host Pilita Clark, is set to rise further as organisations grapple to keep pace with the scale and pace of change.

With increasing interest in environmental, social and governance (ESG) reporting criteria, pressure from investors for greater sustainability may be seen as the main impetus for this flurry of corporate activity: the 2020 GIIN annual impact investor survey estimated the current value of the impact investing market at USD 715bn.

It’s not just investor interest – or even government and regulatory influence – that’s driving momentum, though. All stakeholders – investors, suppliers, employees, communities and consumers alike – are starting to demand greater transparency, action and accountability from their corporations.

If businesses want to secure preferential access to human capital, while expanding brand loyalty among their customer base, there’s little doubt that they’ll need to prioritise positive action on sustainability issues – or risk losing the advantage to others who will.

Ayla Bajwa is Head of Group Sustainability and Impact at DP World. Speaking as part of Headspring’s Learning Xchange panel, Ayla confirmed that action on sustainability has become part of a larger value chain issue:

‘We definitely take a multi-stakeholder approach to our sustainability strategy. Our customers and our partners are asking us questions in relation to ESG risk factors which requires us to become more efficient and public in our reporting and serves as a great gap analysis.

‘Our employees are also challenging us – they know that not only are we doing the work, but that we’re committed to continuous improvement.’

It’s a sentiment echoed by Jocelyn Phelps, Program Director of Leadership and Organisation Development at Société Générale and Learning Xchange panellist, who spoke of the impact of stakeholders on corporate sustainability policy:

‘We know that people are looking at us and saying, “what do you finance?” and “what countries are you involved in?”. We have to understanding shifting client requirements and respond to a much longer feedback loop.

‘By building better networks and becoming more connected, we can make sustainability a continuous thread that goes through all the work we do.’

Centring sustainability at the core of corporate strategy

No organisation can be truly sustainable unless its principles are embraced at board level.

In its 2020 plea for corporations to step up progress on sustainability, the World Economic Forum called for directors to demonstrate ‘commitment, collaboration and strategic direction’, encouraging them to ‘connect with stakeholders within the business and the wider ecosystem, to pursue sustainable practices that fit into the business strategy and achieve positive outcomes for the long term.’

Business leaders will certainly need to take a holistic approach if they are to embed sustainability throughout their organisation, but company-wide strategic alignment is crucial.

Jörg Eigendorf is Global Head of Communications and Sustainability at Deutsche Bank. Jörg emphasised the importance of a united strategic vision in implementing a sustainability strategy:

‘Sustainability has to be cross-divisional. You need to tap into the whole company if you want everybody to get engaged. Eventually, our goal must be that the whole bank is sustainable – and lives sustainability.

‘And that means right now we have to move it into the core of every business decision.’

Sustainability and Government Affairs Director at Canon (EMEA) and fellow Learning Xchange panellist, Peter Bragg, spoke of the value of a strong reporting chain and cross-organisation delivery:

‘Access to top decision making is crucial – as sustainability lead, I’m only one step away from the chief exec.

‘We’ve moved away from the idea that a single sustainability team can do everything. Instead, we’re occupying a much more strategic and decision-making function with the actual delivery sitting at business-unit level.’

Turning policy into practice

Transitioning to a more sustainable business model will certainly involve disruption: the bigger the challenge, the more disruptive the process.

But, in a rapidly unfolding landscape, ‘playing it safe’ by following regulations and mitigating risk is unlikely to unlock the biggest rewards. Doing the bare minimum may even represent a greater risk as businesses battle to gain a competitive advantage.

Conversely, a more radical reinvention – one that involves a complete re-think of strategy – could be the key to long-term success.

Forward-thinking leaders should seize this opportunity to build a culture of sustainability across their business ecosystem, nurturing the stakeholder relationships that will empower change and playing a critical role in formulating and communicating the strategies needed to effect it.

Rooting these changes deep within the organisational DNA isn’t without cost, but it will deliver handsome rewards: those companies that get it right on sustainability can look forward to growing a business that not only thrives in the uncertain times ahead but that is also a force for good in the world.

Panel: Sustainability as the Guiding Star for Corporate Strategy