SUSTAINABILITY IS THE NEXT TRANSFORMATIVE WAVE OF THE COMPANIES - HOW ARE YOU PREPARED?
Sustainability actions in companies have in many cases been driven by compliance. Regulatory requirements or de facto standards guide companies, but simultaneously also customers, partners and investors are looking at companies sustainability actions.
Leading companies have established a "standard" that other companies are looking as a measuring stick for their own sustainability efforts. If this trend truly drives companies efforts forward with good enough speed, it's all positive. However, just following others keeps the companies by this new transformational force or give the first mover advantage to competitors.
When evaluating sustainability efforts and opportunities beyond the compliance one of the first questions is naturally the business case or ROI. Are there measurable business reasons why we should invest in sustainability more than the regulation or de facto standards require or more than our closest competitors?
Categorizing sustainability benefits
As a starter it is beneficial to find a way to categorize the different sustainability benefits. For that purpose we have created a framework where sustainability benefits are analysed with two factors:
- Tangibility - how concrete the benefit is, how easily the benefit can be measured and valued?
- Time to release - how long it does to realize benefits from actions or investments?
Using these factors we can use following benefit categorization:
1. The quickly realized tangible benefits are "DIRECT BENEFITS"
2. Benefits in the middle ground are "TACTICAL BENEFITS"
3. The most intangible and long-term benefits are "STRATEGIC BENEFITS"
Often business cases concentrate on direct benefits (and costs) only, since by definition they are concrete and easily measurable. Since sustainability is not a one-time investment but rather a transformational force impacting companies into the foreseeable future, one needs to investigate also the more intangible or longer-term benefits to understand the full picture.
GETTING BEYOND THE DIRECT BENEFITS - HOW TO USE TACTICAL AND STRATEGIC BENEFITS?
Due to the transformational nature of sustainability - it is impacting most if not all areas of company's operations.
There are lot of potential benefits which are not easy to quantify directly nor obvious with a short timescale. Instead of immediately diving into complex life cycle analysis or cost-benefit analysis methodologies, there is a reasonably straightforward way to approach many tactical and strategic sustainability benefits using a value creation - value capture model.
The basic idea is to investigate how a certain action adds value to a stakeholder (value creation) and then how this added value could be used to increase your revenues or profits (value capture). Using this approach, we get three main steps:
1. Stakeholder Value Proposition
2. How Value Proposition benefits your own business
3. Capture the added value
When sustainability benefits are analyzed using the above tangibility - time-to-realise-framework as a starting point, companies can gain better understanding of the business impact and opportunities derived from their sustainability actions. This gives better possibilities to analyze how to be a leader and not just a follower in the sustainability transformation.
SUSTAINABILITY IS THE NEXT TRANSFORMATIVE WAVE FOR COMPANIES
Based on the ESG (environmental, societal, and governmental) factors and the market signals, it is fair to say that sustainability is becoming the next transformative wave after digitalization and data transformation.
Before, it has been considered - at least for some company's - a "trendy" strategic theme to set targets upon. It has also told a positive narrative to the players within the company's ecosystem and added brand value. However, it has become evident that words become worthless without tangible actions towards those set targets.
What is your company's role in the sustainability ecosystem?
Our framework is looking at the sustainability holistically from inside to out the company, including the sustainability efforts of the company's external partners and shareholders.
1. The inboud ecosystem
In the inbound ecosystem, we consider to be included for example the following internal company stakeholders, that are in the core of defining the company's sustainability state and vision.
Example parties in the inbound ecosystem:
- Manufacturing
- Supply chain and procurement
- R&D
- Ways of working and employee actions
2. The outbound ecosystem
Includes stakeholders that set requirements and use company's sustainability state in their own decision making.
Example parties in the outbound ecosystem:
- Customers
- Investors
- Regulators
- Business partners
- Media
Data-Driven Sustainability
In our data-driven sustainability (DDS) model we levegare real data from your ecosystem to build sustainability transparency and insights. These insights are further turned into business value and new business opportunities - like any other business development idea.
Have your ever considered to have a sustainability development roadmap beside - or even merged - to your business development roadmap? The time is to act now to become a leader rather than a follower.
References
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