Sustainability within an organization is emerging as the new imperative for companies, big and small. While large corporations have already pegged sustainability as their key priority, many are now feeling the pressure to commit to finding sustainable ways for profitability and growth. Corporate sustainability is being integrated as a business approach to create long-term value for shareholders, employees, and consumers and to seek responsible, sustainable strategies.
Making Sustainability a Core Principle
Organizations are adopting different approaches to incorporate sustainability into an existing framework, namely – leadership initiatives, stakeholder communication, and identifying the existing data gaps. They are adopting these approaches to conform to elements of the existing mindset while focusing on reshaping their policies, processes, and attitudes toward sustainability principles.
Sustainability presents a larger purpose and new deliverables for companies to strive for. It helps them renew their commitments to organizational goals like efficiency, sustainable growth, and shareholder value.
Aligning Responsible Leadership as a Priority
Responsible leadership implies challenging the status quo and identifying and embracing challenges with an approach to making decisions with courage and humility. With stakeholders expressing their willingness to be bold, organizations are backing them with due diligence. Today, responsible leaders make informed decisions as they know how, or which components fit their organization’s purpose and strategy. By knowing their financials, understanding, and addressing the customer’s needs, and creating a strong impact on other stakeholders, organizational leaders are taking into consideration the essence of their responsible leadership and its impact on society as well as the environment.
Environmental sustainability is a rising agenda for CEOs, and 9% of them have put it among their top 3 business priorities. Leaders from across all sectors are now identifying the interconnectedness of business operations, society, and environmental sustainability and working tirelessly together to create ever-increasing value for all.
As a foundational strategic framework, ESG holds the potential to impact organizational performance and growth. And leadership has a responsibility to articulate and help entrench ESG within the organization to benefit employees, customers, and stakeholders. By aligning values and measures, leadership can incorporate measures to transform their sustainability operations in the face of unprecedented complexity and changes originating both externally and internally in their organizations.
While creating and fostering sustainability in business operations is good for several reasons, chief among them being a sustainable business framework is also considered to be a successful business model.
New research has shown that FTSE 350 companies are linking their remuneration policies and practices within the organization to environmental, social, and governance (ESG) indicators. Major corporations that represent almost 20% of the FTSE 350 are striving to revamp their remuneration practices to address investor concerns about ESG. It also highlighted that more than 50% of the organizations included ESG indicators that are linked to bonus schemes.
Capturing Stakeholder Perspective
Sustainability for an enterprise is more than a token response. It involves contributing to feeding strategies and exploring opportunities inside and outside the organization while setting ambitious goals like initiating the right sustainability efforts throughout operations. As per the 2021 EY Global Institutional Investor Survey, 74% of investors expressed their willingness to divest from companies that present poor sustainability performance, and 90% said they were willing to pay more attention to a company’s sustainability performance.
To contribute to the value flow of sustainability business models, organizations need to expand their knowledge by highlighting the contributions of stakeholders that are also relevant from a sustainable development perspective. It is vital for them to categorize their stakeholders engaged in specific dimensions such as value proposition, value creation, and value delivery. This will enable them to perceive the most significant relationships while fostering stakeholder engagement toward sustainable development.
Diversity is equally critical in sustainability strategy and implementation, especially in its capacity to lead people toward myriad perspectives and design more complex solutions that could be enormously beneficial when introducing new sustainability initiatives.
To lobby internal support for sustainability projects, organizations are championing the need to create and track metrics that resonate with the priorities of internal as well as external stakeholders, such as how they will be empowered to enhance sustainability in the business.
- Operations units: educating them about the efforts towards sustainability to increase efficiency.
- Procurement teams: guiding them on sustainability initiatives to boost their productivity and reduce risks of supply disruption.
- Human resources: designing responsible sustainability initiatives to attract or retain talent.
- Marketing teams: educating them on how sustainability efforts help in bringing value to the brand.
Engineering Organizational Data
Data forms an integral part of how an organization collaborates, tracks, and reports on ESG. By outlining defined ESG goals and identifying the required structure, organizations can determine where that data can be sourced. Today organizations are integrating vast amounts of inconsistent and incompatible data from heterogeneous data sources.
With the growing importance of creating a culture of security, enterprises are implementing new sustainable measures to safeguard data. Organizations are successfully enforcing measures to secure data by bolting on their existing security framework. However, access to organizational data should be carefully controlled and encrypted, and working in the cloud offers tremendous sustainability advantages.
By integrating a holistic approach, organizations can contextualize the accumulated information in the right manner to ensure their data reflects real-time regulatory developments. ESG is becoming a priority for organizations across industries, and through the amalgamation of the will, the right practices, and the right enabling technology, organizations can incorporate new measures to deliver on their ESG promise without falling prey to fast-changing market conditions.
- Corporate sustainability is emerging as a growing concern for investors who are seeking economic profit as well as social good.
- Companies can enhance their environmental sustainability by reducing their carbon footprint.
- With operating sustainability becoming a source of competitive advantage, organizations are unlocking their potential by building strong stakeholder relationships.
- Organizations are setting a clear and compelling vision to strengthen their sustainability DNA by blending the three-stage change cycle of diagnosing, defining, and developing.
- By closing the sustainability and profitability consensus gaps and leveraging more standard frameworks, organizations can deliver greater financial value coupled with positive societal impact.
Shaping a Sustainable Landscape: A Work in Progress
Sustainable organizations are taking to Sustainable Development Goals (SDGs) as their roadmap to foster greater sustainability. These goals are not only focused on the environment but also incorporate greater equality and investing in diversity. By setting a long-term, holistic vision, organizational leaders can set sustainable targets that are well-researched and achievable.
Today responsible leaders are striving to create lasting and equitable value for their stakeholders. New research has highlighted a growing consensus gap between leaders and stakeholders on sustainability performance. This misalignment is blocking the link between driving sustainability and profitability within an organization.
However, organizations must adapt to changing environments and encourage sustainable innovation through collaboration. They must encourage their think tanks to address challenges and potential future obstacles by fostering an environment that offers opportunities to blossom.
(This article is written by Mr. Jayaprakash Mallikarjuna- Head of ESG Services & Data Modernization at SG Analytics- A Global Insights and Analytics company, and the views expressed in this article are his own)