Towards impact-driven sustainability

We are at a tipping point on key planetary boundaries and social inequalities. The sustainability challenge is one that requires collective solutions. How we create sustainable business models and transition towards a sustainable global economy are key questions.

A company's board of directors is increasingly required to consider climate change, resource scarcity, and inequality when examining the role of business. The topic must be constantly top-of-mind and executives must come to expect that the board will be under pressure to scrutinise sustainability.

At the same time, investors, regulators and other key stakeholders want to know that corporations are not just supportive of regulatory efforts, but function as active partners and co-creators of solutions.

In response to these mounting pressures, the overwhelming majority of companies continue with familiar approaches to sustainability, treating the ever-increasing social and environmental demands as peripheral obligations to be addressed by a put-together disclosure effort. Sustainability often has become a knee-jerk reaction.

How can companies move away from environment, social and governance (ESG) white noise, beyond a checkbox disclosure-based approach?

To truly embed sustainability in strategy, there is a need to review resource and capital allocation decisions with purpose. This, in short, requires a fundamental shift across every dimension of the business. These are complex issues, requiring integration of environmental, economic and social value into core business activities, with clarity in terms of trade-offs.

We have seen a dramatic increase in the use of ESG information. One of the challenges in assessing progress and recognising companies that are getting it right is how wide ESG actually is.

While climate change is climbing up board agendas, investors recognise that it is not the only issue. There are wider risks from negative impacts on the planet, people and society. How do companies focus on the things that matter and provide stewardship to prioritise ESG metrics in capital allocation decisions?

There is also the problem of moving goalposts - as you meet one standard, a new one emerges. Companies often see their ratings shift if they begin addressing sustainability issues in new ways or if a significant ESG controversy arises, which can indicate a management gap.

One way to address this is to have a deep understanding of the industry and its context, including the key uncertainties. It is no longer enough to approach sustainability as a small portion of strategy. An inclusive stakeholder-focused approach is fundamental for the change that is needed. Only a handful are choosing to embed sustainability into the very DNA of what they do. Without reference to stakeholders, sustainability strategies will continue without an actual anchor.

Sustainability needs to be not only seen as managing risks and creating opportunities but fuelling the purpose of the organisation. There must be in place structure and process to promote diversity and inclusivity while maintaining product stewardship. At the end of the day, to move on targets, including the ambition to decarbonise with structure and at scale, there must be vision.

Over the course of my work, I have been privileged to witness what happens when leaders and teams discover their higher purpose, and in doing so, focus on how to create connections that flourish. Such leaders shine a light and deeper energy into their work and outcomes. The organisation then gains real meaning, especially in developing a sense of collective conscience built on trust and integrity. One of the reasons for sustainability to continue to be seen as peripheral is when the focus is only on targets and metrics. These are fundamental markers of progress but they are means. The end is to drive purpose.

Stakeholder engagement supports this purpose and unlocks organisations to the circular economy and a better way of calibrating the relationships between markets, customers and natural resources. This is the biggest opportunity to transform production and consumption in this era.