Sustainability – A Challenge for Businesses

Capitalizing on sustainability requires businesses to re-frame their strategic perspective and systematically operationalize it into clear metrics and concrete actions that crucially create value. This poses a significant challenge for companies but also offers new opportunities for organizational development. While change might initially feel threatening, with appropriate strategies and effective management in place, it can bring momentum to organizational transformation and, ultimately, new business opportunities. Companies that are responsive and start preparing now can build themselves an early competitive advantage. Sustainability has recently experienced an evolutionary leap and has entered the heart of public discourse across generations and societal groups. Even at the peak of the COVID-19 pandemic, the climate crisis seems equally essential to deal with, and people expect the eventual economic upturn to not be at the expense of climate protection. Common though significant, three challenges you have to overcome.

• • Re-framing sustainability strategy to shift emphasis from risks to opportunities

To take advantage of opportunities and effectively manage risks, companies must place sustainability at the core of their business model and examine its future viability closely. This appears to be primarily understood in the business communities, where companies state that sustainability is an essential factor for long term business success. However, the key challenge is identifying developments that will decisively influence current and future growth and set a clear strategic direction. The current global economic situation means that the dynamic change is overwhelming and complex. Therefore, companies need to re-frame their strategic perspectives and build effective management structures and mechanisms to streamline and channel corporate sustainability commitment into clear metrics, concrete action and measurable performance.

From an environmental point of view, isolated actions risk resulting in improvements in one dimension that are at the cost of others. From a business point of view, companies may be slow to anticipate – or miss altogether, the critical developments, risks or opportunities deriving from areas that are not their current focus.

• • Facilitating corporate transition towards sustainability

Companies need to implement targeted actions once the risks and opportunities of sustainable change have been identified through strategic re-framing. This process can be categorized into four different states.

1. 1. Doing known things in new ways to increase operational and eco-efficiency. Here, corporate sustainability improvement primarily builds on process enhancements and investment inefficient technologies such as waste avoidance, energy and resource efficiency.

1. 1. Exploring new areas with new methodologies to promote effectiveness and achieve absolute improvements and targets such as carbon neutrality. This can be increasingly witnessed in the private sector, for instance, in connection with carbon target setting. In this phase, sustainability measures aim to decouple operations from environmental impacts or product and service redesign.

1. 1. Seeking to trigger sustainable innovation, transforming their core business and generating new sources for revenues and growth in parallel to the known company.

1. 1. Actively striving for a capitalization on sustainability as a driver for market differentiation and competitive advantage by creating entirely new business models.

It is vital that companies include the up-and downstream components of their value chain in their sustainability decisions. The shift from an isolated view on an individual stage to an integrated perspective is essential. In doing this, value for both the company and its socio-ecological environment can be created and captured.

• • Effective operationalisation and management of corporate sustainability

Even when a company follows a clearly defined strategy, it often meets challenges and barriers when implementing it into their daily operations, from both companies specific and external perspectives. One frequently observed barrier is a lack of capacity and resources, which is typically dependent on the level of top-management commitment. Without management support, sustainability action will never become an integrated part of a company’s general value creation process. On an operational level, companies can use various tools to systematically break down strategy into concrete action. However, numerous tools have emerged in the last few years in circular economy, sustainable supply chains and sustainability performance monitoring. In addition, the progress of the digitalizing management process has brought new tools and applications, particularly in sustainability data gathering and management. Choosing the right tool is not always easy. Summary To summarize, businesses need to take sustainability seriously as a critical driver of fundamental societal and industrial transformation. However, in doing so, a shift is necessary from seeing it mainly as a business risk towards early identification of opportunities for innovation and development- to ensure survival and growth in an increasingly competitive and accountable operating environment. Sustainability is already a management task in many companies, and with effective platforms for change and experience readily available, companies are well prepared to tackle these challenges.