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Sustainable transformation
Sustainability is a highly relevant topic with a substantial impact on businesses and their
Stronger consideration of sustainability in society, economy and environment has led to a major rise in responsible investments. More and more governments and institutions are pledging to back a United Nations campaign aiming for net-zero greenhouse gas emissions, thereby affecting how companies do business.
Being a sustainable company means to understand and actively manage the environmental, social and governance (“ESG”) impact along your value chain, and ensuring that your company’s business model will remain viable in the future. The United Nations 17 Sustainable Development Goals provide a framework and guidance for this. Companies need to focus on those aspects which are most important to them.
“As far as sustainability is concerned, many companies still rely too heavily on regulatory compliance. This aspect is certainly vital to keeping a licence to operate. But it’s important to move beyond: integrating sustainability into a company’s strategy, operating model and day-to-day processes makes it possible to unleash the full potential that sustainability offers for value creation. That’s why sustainability should be discussed in the boardroom of every company.”Ruirui Zong-Rühe, Director, PwC Strategy&
CEOs need to understand the five imperatives of this new economic order and act now
- Sustainability is non-negotiable for a company’s licence to operate and is a C-level topic.
- A company’s ability to create value in the future depends on how well ESG criteria are integrated into the corporate strategy.
- The ability to access capital on competitive terms in the future increasingly depends on a company’s ESG performance.
- Investors and other stakeholders are increasingly demanding transparent, reliable information on ecological and social aspects, and on the progress made by a company in achieving the goals set.
- Companies will have to take credible strides in living up to their sustainability goals – otherwise they risk suffering a major dent in their reputation.
A holistic approach is necessary
It takes a holistic approach to integrate sustainability within all aspects of a business – and a tailored strategy for every company. Companies currently find themselves at completely different points along their ESG transformation journey, dealing with manifold issues and challenges. But they all have one thing in common: to successfully transform themselves into a sustainable company requires a holistic approach to their strategy, operating model and management system. In addition, companies need to focus on a set of functional aspects depending on their strategic agenda.
Your situation
Strategy: shape the new reality
Your sustainability agenda must not be isolated from your business agenda: your corporate and business strategy should be closely interwoven with your sustainability strategy. Place a clear focus around a selected set of highly relevant impact areas – leveraging the SDGs – and describe how your focus areas create value – for you and for your stakeholders. Three things form the foundation for setting priorities, laying out a clear roadmap and communication within your company and to outside stakeholders:
- Integrate sustainability within an authentic story about how you create value
- Define your ambitions
- Set clear and tangible objectives
Operating model: put theory into practice
So you have set out your strategic agenda. But how do you translate it in concrete steps for implementation, integrating it into your day-to-day activities? That’s a practical challenge many companies are struggling with. Sustainability has to be embedded within an existing organisational structure. For instance, the board could form a sustainability committee, or another body with respective focus. To measure and steer progress, existing processes and metrics systems can be used or new ones need to be established. Efforts to accomplish sustainability goals must be evident within the organisation and translated into performance targets and incentive systems for (senior) executives. You can also leverage your corporate culture and implement sustainability into your framework for employees, processes, risks and technologies.
Steering, reporting & assurance: show the world your true face
You need to be able to demonstrate the credibility of your sustainability agenda and your progress with reliable, consistent and meaningful data. Investors and other stakeholder groups are increasingly calling on companies to provide such data, and are assessing that data with an increasingly critical eye. The right non-financial indicators need to be selected to serve as a basis for regular assessment and effective steering and reporting on the sustainability agenda, and the quality of the data behind those indicators needs to be improved through internal controls and standardised processes, and integrated into dashboards. These elements form the basis for consistent, trustworthy and authentic communication with the relevant stakeholders.