Creating Sustainable
Enterprise Strategies that Stick

Creating Sustainable
Enterprise Strategies that Stick

May 2021:

Creating Sustainable Enterprise Strategies that Stick

Business leaders who aren’t treating sustainability as a strategic issue are playing with fire.

Sustainability issues are shifting the business environment. A study by CDP found that some of the world’s largest companies report the climate risk to their businesses is about $1 trillion, and these same businesses value climate change-related business opportunities at about $2.1 trillion. Enterprises must recognize sustainability is no longer a political issue. Rather, it has become a business imperative that’s critical to long-term success and continued competitiveness.

Tae Yoo, senior vice president of corporate affairs for Cisco, says businesses have a large role to play in addressing the world’s most pressing environmental issues, in part because of the disruption they cause by polluting the atmosphere and depleting Earth’s natural resources. “While running a business successfully means delivering profit-driven results for our customers, partners, employees, and shareholders, success can only be achieved if we actively engage and work with our stakeholders to solve the most daunting sustainability challenges,” Yoo says. “Sustainability, business opportunity, and accountability are intrinsically linked.”

Because there’s no one-size-fits-all sustainability strategy, it’s up to each individual business to discover how it’s going to integrate sustainability into its core operations and culture. It takes an all-hands-on-deck approach to truly become a sustainable business—all employees, from the top to the bottom, must not only buy in to messaging but also invest in the success of a company’s sustainability efforts. But how can an enterprise set itself up to walk the walk and not just talk the talk?

The Two Sides of Enterprise Sustainability

Mick Dalrymple, director of university sustainability practices, senior sustainability scientist, and deputy sustainability ops officer at Arizona State University, says climate change is a crisis, and crises create both risk and opportunity. On one hand, he says companies should ask, “What supply chain risks for the company are growing?” On the other hand, he says they should also be asking, “How can the company capitalize on regenerative products and services?”

Olaf Weber, professor at the University of Waterloo’s School of Environment, Enterprise, and Development, suggests most businesses address sustainability to reduce business risks. “Businesses are driven by markets and by institutional pressure, such as regulations,” he says. “We need both to push sustainable business. Most companies are not proactive, but they will follow sustainability regulations. I think proactive corporate sustainability is quite overrated. It does not exist very often. Most of it is a response to outside pressure.”

However, reducing risk is just one half of the enterprise sustainability equation. Rebecca Duff, senior research associate at the University of Virginia Darden School of Business’s Batten Institute and coauthor of the forthcoming book The Decarbonization Imperative: Transforming the Global Economy by 2050, says risk and opportunity are like two sides of the enterprise sustainability coin. “On the risk side, no matter what industry you are in, climate change will impact your business,” she says. “Disruption to supply chains, resource scarcity, and property devaluation are just a few examples. The longer companies wait to invest in sustainability measures, the more expensive it will be to shift business models and priorities and navigate the impacts of climate change.”

Top Three Benefits of Enterprise Sustainability

Why does sustainability need to be on business leaders’ priority list in 2021?

Here are the top three reasons, according to Todd Moss of Syracuse University.

  1. Improved brand reputation
  2. Reduced costs due to energy efficiency
  3. Increased competitive advantage

On the flip side, there is opportunity in early action. Duff says, “We are seeing investors, consumers, and job candidates choosing companies that are making bold sustainability commitments. At this point, sustainability plans are no longer novel; they are required to stay competitive.” Duff says a significant shift from current practices to clean technologies and systems across sectors must happen in the next 30 years. “Global companies are in a unique position in that they are able to influence multiple stakeholders—from politicians to investors to suppliers to consumers—in industries and around the world,” she says. “Businesses play a key role in this needed shift.”

Creating a Strategy and Making It Stick

Companies that aren’t assessing the climate risk are playing with fire, and companies that aren’t assessing the opportunities of sustainable business practices are missing out. So how do businesses create a sustainability strategy? And how do they make it “stick”?

Brian Tippens, chief sustainability officer for HPE, says businesses need to realize that sustainable practices are critical to long-term success.

Climate business opportunities calculated at $2.1 trillion for nearly 225 biggest global opportunities.

Source: CDP, Major Risk or Rosy Opportunity:
Are Companies Ready for Climate Change.

In developing a sustainability strategy, he says: “In order for a sustainability strategy to influence core business activities, the company must first understand their most material risks and opportunities. This should include innovating efficient and responsible technologies that minimize the adverse impacts of IT, as well as applying these technologies to accelerate solutions to pressing social and environmental challenges.” At HPE, Tippens says a commitment to sustainability has led to increased innovation, reduced regulatory uncertainty, and strengthened investor confidence.

Andrew Hoffman, professor of sustainable enterprise at University of Michigan’s Ross School of Business/School for Environment and Sustainability, says business leaders must first look at their business environment and figure out what’s driving the need for sustainability—is it regulation, consumer demand, cost of capital, or operational efficiency? “Try to figure out where the pressures are that make sustainability a business issue,” he says. “You can make this about ‘doing the right thing,’ but if you really want it to stick, then it should have a business imperative behind it.”

Source: CDP, Major Risk or Rosy Opportunity: Are Companies Ready for Climate Change.

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Hoffman says from there, businesses must find people inside the company who can champion sustainability. “The CEO can make a strong statement that this is important to the company but then empower people within the company to act upon it,” he explains. “You want to get the people behind this. They have to buy into it. Just to have an edict from on high that says you must do this without connecting it to people’s individual rewards or motivation for coming to work is going to be a slow-go, but if you want to tap that potential of your employees to really focus on these issues and find creative ways to address them and advance the end interest of the company, then you’ve hit the sweet spot.”

On a scale of one to 10, one executive Hoffman has worked with said getting senior leadership on board with sustainability is an 11. “You really need to get visible statements from the C-suite, and then from there, connecting sustainability goals to rewards is so important and powerful, and that really has to come from a more senior level of the corporation,” Hoffman says. “And then, can you set up some programs to educate your workforce on it? Explain to them how it fits with your business strategy, because that’s the key.

 

215 biggest global companies report almost $1 trillion at risk from climate impacts with many likely to hit within next 5 years.

Source: CDP, Major Risk or Rosy Opportunity:
Are Companies Ready for Climate Change.

Whenever I hear a senior executive say they are doing this because it’s the right thing to do, I always think, ‘OK, now I want the real reason.’ Because if you’re going to convince division managers or line managers that they need to do this, they need to feel that it’s going to impact their bonus at the end of the year (or) their division’s profit and loss statement. You’re going to have to do better than just ‘it’s the right thing to do.’”

Kareem Yusuf, general manager of AI applications at IBM, reiterates that enterprise sustainability is no longer just a corporate social responsibility issue. “(Sustainability) is a business imperative and one that is pushing organizations to reassess their priorities and practices,” Yusuf explains. “Business operations and supply chains have been disrupted by factors such as climate change and dwindling natural resources. At the same time, governments, employees, and customers are also demanding new levels of enterprise accountability. With so much changing, we all must rethink our operations as we navigate this new landscape and the many challenges we now face. Most importantly, though, it’s a matter of doing our own part to safeguard our planet and our future.”

Technology is often a critical part of how enterprises pursue sustainability, achieve new levels of transparency and accountability, and measure their progress toward sustainability goals. Technologies under the IoT (Internet of Things) umbrella help companies that have pledged to go carbon neutral reduce their carbon emissions. The IoT is also playing a role in how companies track their progress—for instance, using sensing instruments to measure emissions—and how they manage and analyze all the data they’ve gathered to turn it into actionable insights. Blockchain technologies are also helping businesses create operational efficiencies and transparency in supply chains.

Source: CDP, Major Risk or Rosy Opportunity: Are Companies Ready for Climate Change.

Companies must focus on prioritizing their needs and then understanding how leveraging technology can help them address those needs. “(At IBM,) we believe that a sustainability strategy can be approached through the lens of climate risk management, electrification, energy and emissions reductions, resilient infrastructure and intelligent operations, and sustainable supply chains,” Yusuf adds. “And that in this context, leveraging technology like AI (artificial intelligence), cloud, the IoT, and blockchain, companies can focus on meaningful operational transformation, whether it’s improving efficiency, driving decarbonization, meeting environmental regulatory requirements, or better managing resource consumption.”

IBM itself recently committed to achieving net zero greenhouse gas emissions by 2030. That was a bold step forward for the company, and Yusuf says it also helped align employees around what IBM is prioritizing as a company and how it is entering the future. To make a strategy stick, Yusuf says businesses must focus on the transformation of actual business processes and operations—only then will sustainability be more than just “another thing” and become a core part of what gets done every day. “This is critical to ensuring a sustainable practice that is ingrained in how (businesses) think and make decisions,” he adds. “Approaching sustainability in this way, along with governments, employees, and customers continually holding us accountable, will help prevent us from losing sight of our goals and the lasting impact they will have on the world.”

Todd Moss, department chair, associate professor of entrepreneurship, and faculty director of the Sustainable Enterprise Partnership at Syracuse University, says a key part of creating a successful sustainability strategy is making sure leadership walks the walk—and by this, he says he does not mean that executives should just go out and buy Teslas. Rather, Moss says businesses can: “tie sustainability performance to overall performance objectives, relax financial performance targets when qualitative benefits from sustainability are clear,

Potential value of sustainable business opportunities almost 7 times the cost of realizing them ($311 billion in costs, $2.1 trillion in opportunities.)

Source: CDP, Major Risk or Rosy Opportunity:
Are Companies Ready for Climate Change.

create official positions related to sustainability within the C-suite with supporting staff, and hold internal events that promote and highlight sustainability ‘wins.’”

Moss believes internal and external transparency of sustainability targets creates accountability. “So, when targets are not reached, it gives executives the opportunity and responsibility to account for the results and recommit to reaching targets in the future,” he says. Arizona State University’s Dalrymple similarly says transparency is key to success in creating enterprise sustainability strategies. “Communicating shortfalls and lessons learned and how those shortfalls are going to be addressed goes a long way in showing commitment to employees and an acknowledgement that this is complex, but that the company is determined to figure it out,” Dalrymple explains.

For sustainability to stick, an organization must also have clear goals that are periodically updated to reflect the knowledge and experience gained over time. Mark Milstein, clinical professor of management and director of the Center for Sustainable Global Enterprise at Cornell SC Johnson College of Business, says these clear, periodically updated goals, along with clear metrics for tracking progress (with the understanding that those metrics will improve over time), and making sure all employees within the organization understand, are incentivized, and are held accountable for the role they play in helping the firm achieve its goals are all critical to a successful sustainability strategy.

However, Milstein points out that sustainability should really be more than just a strategy. “Over the past 30 years, we have seen examples where either top-management vision and goals around sustainability or employee-based innovative ideas to achieve sustainability goals have failed to gain traction across the organization,” Milstein says. “The best companies understand the value of setting a strategy at the top, then empowering employees throughout the company in a way that encourages everyone to contribute to organizational success. The goal for managers today is not to set a ‘sustainability strategy’ but to recognize that an organization’s strategy is going to be shaped by the social, environmental, and economic trends in the market. That is, sustainability is the context in which all organizational strategies have to succeed or fail. If employees—from the CEO to the part-time hourly worker—do not see that link, it is not just a matter of buy-in; ultimately, everyone will be working at cross purposes from one another for the long-term success of the company.”

A Call to Action

Sustainability is becoming a priority for enterprise leaders across industries and markets for reasons of risk avoidance as well as the desire to take advantage of new business opportunities. Milstein says better late than never. “Frankly, sustainability should have been on business leaders’ priority list more than a decade ago, let alone in 2021,” he explains. “At this point in time, long-simmering issues which fundamentally threaten to undermine the global economy, including climate change, inequality, social and environmental justice, species and habitat loss, and ecosystem degradation have become acute. The impact on organizations’ supply and value chains have become undeniable to the point that a business leader who isn’t considering sustainability as a strategic issue is either myopic or intentionally ill-informed.”

The University of Michigan’s Hoffman says we’re in a period of rapid change, and he points to the last presidential election in the U.S. as proof. “If you look at the election last fall, climate change and environmental protection rivaled jobs in the economy as most important to the public,” he says. “The market is changing rapidly for business reasons and companies that are not paying attention, who still see this as a political issue, who are still questioning whether climate change is real—they’re missing out. The market is moving. It will move without you.”

Cisco’s Yoo says to solve global issues, it will require a lot of collaborative effort. “There is no question that we are in unchartered territory, and it’s going to take true collaboration and coordination amongst all of us—companies, government, nonprofits and NGOs (non-governmental organizations)—to overcome both near and longer-term sustainability challenges,” she concludes. “As climate change continues to be one of our biggest global challenges, now is the time for businesses to act and combine financial decisions with the implementation of sustainable solutions that enable people, communities, and the planet to not only survive together but also thrive together.”

Transcription

Peggy and Christian Auty, partner, Bryan Cave Leighton Paisner, and leader of BCLP’s U.S. Global Data Privacy and Security Team, talk about data security and data privacy. He says the attack surface is vast and there are 50 different data breach laws in the United States—one for each state.

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