From Reporting Compliance to Operational Excellence: Treat Sustainability Just Like Any Other Strategic Imperative
We have entered an era where corporate sustainability is no longer optional but – some would say once again – a fundamental business imperative. Most companies have come to sustainability through reporting, and for many this is still too often perceived as a compliance necessity, separate from traditional management functions. But reporting is just a gateway to a company’s sustainability journey, because to create real value—both for the company and society—sustainability must evolve from being a peripheral activity to being integrated into every aspect of the business model.
Apply the Classic Operating Model Concepts
To operationalize sustainability, corporate leaders can leverage tried and tested operating model concepts:
- People: Embed sustainability in all staffing levels, from the boardroom to the shop floor, ensuring it influences decision-making at every level.
- Incentives: Develop compensation structures that reward sustainable practices, incorporating internal carbon and biodiversity pricing tools to align personal incentives with corporate sustainability goals.
- Processes: Integrate sustainable practices into all business processes, such as resource usage, procurement, manufacturing, risk management, and people management.
- Technology and Data: Leverage technology to improve efficiency, reduce inputs and waste, and collect data that can be used to actually manage sustainability practices.
Corporate executives know this model well. When it comes to integrating sustainability, it’s not just about deploying people, processes, and technology to sustainability in isolation, it’s about embedding sustainability into all people resources, operating processes, and technology choices. In other words, responsibility for sustainability considerations becomes business-wide, and is no longer sequestered into a separate, standalone ESG or CSR department. A sustainability mindset has broken down the departmental silos.
Integrate Sustainability into What You Do
Redefine Products and Services
Companies should redefine their products and services around sustainability considerations, spurring innovation that ultimately generates revenues and ensures the business’ long-term resilience. In this sense, sustainability should be seen as a risk management tool and a strategic opportunity to innovate and differentiate in the market.
Articulate Corporate Purpose
Ultimately, companies should seek to articulate their corporate purpose, which was recently defined by the British Academy as “to profitably solve the problems of people and planet, and not to profit from creating problems.” Another way to address the question of corporate purpose is to answer the question: is the world better off because your company is in it?
Integrate Sustainability into How You Do It
Set Tone at the Top
Leadership commitment is crucial in integrating sustainability and sadly lacking in many cases. The board and senior management must believe and make clear that sustainability is an integral part of the company's strategic objectives. This commitment should be communicated clearly and frequently, creating a culture where sustainability is valued at every level of the organization. It should also be accompanied by appropriate resource allocation to implement the processes mentioned above.
Assign Shared Responsibility and Accountability
The transition from compliance to business integration involves shifting the responsibility for sustainability from specialized sustainability mid-level managers to senior business leaders across the entire C-Suite, from Finance to Operations, Risk Management, Legal and Compliance, and Human Resources. Sustainability must be woven into the daily fabric of business decisions, impacting everything from procurement to product design, employee incentives, and investment strategies.
Educate and Upskill
Educating and upskilling the entire workforce, starting with the board and senior management, is critical to operationalizing sustainability. Training programs should start with the mindset shift necessary to integrate sustainability and cover the implications of sustainability for different roles and how each employee can contribute through their own function. This empowers employees to make informed decisions in their day-to-day responsibilities that align with the broader corporate sustainability strategy.
Leverage the Digital Transformation
Digital technologies such as artificial intelligence, blockchain, and the Internet of Things (IoT) are revolutionizing how companies approach business. They can also operationalize how they integrate sustainability. These technologies can optimize resource use, reduce emissions, and ensure transparency in supply chains, making sustainability efforts more effective and measurable. Of course, technology is not a magical solution; it can enhance, but not replace the processes mentioned above.
Collaborate with Peers
No single company can achieve significant sustainability goals in isolation. Collaborative efforts across supply chains and industries are essential to tackling large-scale environmental challenges. By partnering with other businesses, companies can address systemic barriers, share knowledge and resources, and collectively move the proverbial needle in the right direction.
Challenges and Barriers to Integrating Sustainability
While the integration of sustainability into corporate strategies offers numerous benefits, it is very difficult to accomplish. The single greatest challenge is overcoming resistance within the organization—changing mindsets and longstanding practices— and convincing stakeholders accustomed to traditional methods to do things differently or to do different things. In some cases, the misalignment of expectations of those in positions of power is, quite literally, petrifying. Financial constraints are often an immediate barrier, as initial investments in sustainable technologies and processes can be substantial. This may be compounded by the lack of clear metrics for measuring sustainability performance and outcomes, or the lack of direct immediate financial repercussions to necessary sustainability-related decisions, which makes it difficult to track progress and demonstrate results. Addressing these challenges requires a committed leadership, a clear strategic vision, and a new and different set of skills, knowledge, and expertise, which reside largely outside the organization today. It also requires an (imperceptible) shift in perception of what to value and to assess or measure.
Future Trends in Corporate Sustainability
While stakeholder expectations and best practices will continue to evolve, there is no going back on the paradigm shift towards sustainability-driven business practices. We can expect more, not less, regulations that will change corporate behaviour at scale. Robust and clear(er) disclosure obligations will hold companies accountable to governments, capital providers, business counterparts, consumers, and other stakeholders. At the same time, we encourage companies to embrace the spirit of these regulations and push beyond a mere compliance exercise. Otherwise, the misalignment may prove fatal.
In the End, it’s People Who Drive Change
In their position, corporate executives have the power, and therefore the responsibility, to drive this change. By repurposing the operational model that they know and use to prioritize sustainability, they can lead the way in transforming business practices that can support a sustainable future.
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About the authors
Peter van Dijk is the Chief Sustainability Officer at Canada’s Forest Trust Corporation and a strategic advisor to early-stage companies specializing in nature-based solutions and artificial intelligence. With a robust career history, Peter has held senior roles as a Partner at EY and PwC and Senior Vice President of Finance at Sun Life Financial and TD Bank.
Marie-Josee Privyk is an ESG Advisor and Founder of FinComm Services, providing individuals and companies with sustainability reporting information and advisory services. Marie-Josee is an experienced capital markets practitioner and Ex-Chief ESG Innovation Officer of a leading ESG data management software company.