Why sustainability and profitability are not mutually exclusive
With consumers and organisations alike beginning to listen to the plea of scientists over the catastrophic impact of failing to act, the issue of climate change has been edging up the business agenda for some time now. While seemingly unrelated, the disruption caused by the Covid-19 pandemic has created a seismic jolt across businesses - underlining the need for a stable and sustainable future.
Companies rocked by the pandemic will now unwittingly need to face another upcoming ‘Black swan event’ which, according to Benjamin C. Halliburton, is a moment in time that researchers and scientists have warned about for decades.
With climate change having the potential to disrupt businesses models and consumer behaviours; if implemented correctly, strategic transformation will allow for organisations to alter existing business models and become positive change agents, while still achieving their growth objectives.
We have outlined three key factors businesses should consider when planning sustainable strategic transformation:
1) Joint focus on positive impact and growth
Organisations need to shift their focus to align attention equally across both impact and growth. We have seen that this is no longer a pioneering act, but a fundamental for businesses to thrive within a progressively green society. Recent research shows that through choosing sustainable options 64% of organisations have increased revenues – highlighting that the move towards a sustainable future is already underway, and the benefits are already being seen.
By centering themselves on purpose and impact, organisations are offered a lens to better consider and deliver their motives – which is replicated across the rest of the business model. Through assessing the impact of the organisation on the people, community, and the environment – resilience is internally built to climate change and even societal changes – such as those that were felt with the pandemic.
By also focussing on growth, organisations can adapt to the changing environment and community around it while still increasing its profitability. This helps organisations evolve business models through strategic transformation and implement sustainability throughout the value chain to drive forwards value for the customer and meaningful change.
1) Driving green growth at scale
To become a sustainably responsible organisation, businesses need to go beyond open-ended carbon-cutting pledges and one-off initiatives towards embedding sustainability from strategy to business model. This will enable companies to scrutinise all aspects of their organisation: identify inefficiencies and reduce waste while building relationships with customers and suppliers with a similar purpose.
We need to push for an understanding that sustainability does not act as a blocker but as a great enabler: it is possible to create large-scale organisational change while growth is targeted across the business model. We can look at the transformative strategy of large multi-national corporation Unilever as one such example.
In 2010 Unilever launched a strategy for achieving sustainable business – namely the ‘Sustainable living plan’. As opposed to being a CSR plan, Unilever’s strategy created an independent set of actions which sought to achieve greater visibility of the value chain and so drove positive change across it. As a result, Unilever successfully altered customer and employee relationships, championed efficiency and minimised wastage. It is a great example of how, through ‘looking inwards’, from strategy to business model, companies can make constructive and lasting change.
3) Creating a transparent promise
Any company can make a promise to sustainability. However, unless the promise made is transparent, measurable, and built within to an organisation’s culture, it is not only unlikely to change anything, but also runs the risk of alienating increasingly knowledgeable customers. A promise is no longer enough. Companies need to make ambitious goals, that are calculated and deliverable, and likely require honesty, leadership commitment and include visible metrics.
This means that sustainability and business strategies must exist hand in hand to recalibrate 'purpose’ to be at the core of the transformation, for this will be key to creating business models built on empathy and environmental awareness. This should serve both the environment and the needs of the local communities. There is a need for businesses to strive to be fit for the future while also to be part of the solution.
Looking to the future
With the irrefutable growing evidence of climate change, organisations need to reconfigure the way that they operate and become both economically and environmentally sustainable.
As discussed, organisations need to create competitive, future-proofed business models that can thrive within an equal and environmentally friendly society. This should occur from the inside out, through dissecting value chains, creating a transformation programme centred on both impact and growth, married with carefully considered and visible metrics.
We no longer live in a world where growth and impact can be considered separate, as without sustainability – neither can exist. The choices we make now will shape the future of the economy; businesses ought to strive for strategic transformation – as it is a decision they cannot afford to miss.
Sophia Ambrono, Innovation and Strategy Consultant, Strategic Transformation and Paul Dixon, Vice President, Capgemini InventCapgemini