In Pursuit of “Integrated Strategic Sustainability”

3 weeks ago

Upon attending a recent, high-profile sustainability conference, two very distinct topics were continually raised by all those in attendance: The need to fundamentally change the way businesses operate with respect to their impact on the world, and frustration with the rate of change that is actually being realized.

To be clear as to the demographics in attendance, the breadth of companies and sectors represented was astounding: a plethora of global qualifications, knowledge, and expertise. Yet they were united by the common realization that we all need to change our business models to lessen our impact on the planet.

However, with the aforementioned sentiment concerning rate of change, it became obvious that many of the sustainability initiatives being discussed had become disconnected from the core business. Aside from being the right things to do, how do water-use, waste minimization or greenhouse gas intensity, for example, tie back to operational and financial goals? Do the metrics of success, in sustainability terms, tie back to the core business key performance indicators (KPIs)?

I specifically remember a line from one C-Suite executive I spoke to who put it this way:

Sustainability, true sustainability rather than what many of us currently refer to when we use that term, must be tied to corporate strategy. It has to be tied to the business operation and put in financial terms that companies, investors, and other stakeholders can all understand.

So, what if a corporation’s sustainability group was integrated within corporate strategy? What if sustainability initiatives were part of the corporate planning process? If you incorporated the words “sustainable” or “sustainability” into your organization’s vision and mission statements, would they tie back to your current sustainability initiatives? Would you think differently about your company’s mission or vision as a result?

Popular strategic frameworks, such as SWOT, PESTEL or Porter’s Five Forces, are frequently used to understand the competitive landscape and to help set strategy. However, by applying a lens of sustainability to them, they highlight where sustainability needs to be fully integrated into business operations, and they often flag opportunities to create competitive advantage and differentiation from your industry or sector peers. For example, answering “how do we sustainably compete for profits” will materially impact the Porter’s Five-Forces analysis and output.

Integrating sustainability into your strategy group’s frameworks of choice, enables identification of sustainability initiatives that will materially benefit the core business. Furthermore, the process highlights the business metrics and KPIs required to track sustainability project performance. With a sustainable strategic intent thus defined, candidate sustainability projects can be prioritized as part of an impact-adjusted-return analysis—a process that compares financial returns to the normalized impact that disparate sustainability projects generate.

Sustainability initiatives prioritized according to impact-adjusted-returns

Tying sustainability performance back to business performance improves transparency and accountability throughout the organization and greatly facilitates communication with external shareholders. I believe the concept of Integrated Strategic Sustainability is critical to an organization’s success. It connects the dots that so many sustainability practitioners have drawn on the corporate roadmap, hoping that their good work is appropriately recognized and understood. It’s part of the “how” that Larry Fink failed to, in my opinion, properly address in his recent letter to CEOs.