Characteristics of a Sustainable Organization
Neglecting ESG performance might seem plausible in the short term, however, it can severely affect an organization in the long term. A manufacturing company might save costs by not managing the waste it produces but is bound to face criticism from its stakeholders in the long term, resulting in poor reputation and consequent loss of business. Today, businesses are not only evaluated by their balance sheets but also by the overall impact they created on the world around us – the people, the society, and the planet.
However, adopting sustainability as a core value is easier said than done. Despite launching sustainability programs, many organizations have not been able to champion the cause. As per a report by Bain and company, only 2% of the corporate sustainability programs achieve or exceed their goals. The prime question is how does a company excel in the domain of sustainability? In this article, we outline three characteristics that set apart a sustainable organization.
1. Right Sustainability Goals
Strategy Experts across the world have highlighted setting meaningful and measurable goals as a mantra for business success. To set effective sustainability goals, companies have to identify material focus areas that help them leverage their core competencies and maximize their ESG as well as their financial performance. Stakeholder consultation is equally important, organizations need to learn the issues that concern their employees, investors, suppliers, and customers to determine the material issues. Goals are then formulated for each of these focus areas. The next step is to identify the metrics to monitor performance vis à vis the goals, followed by defining a time period for achieving the targets.
The Sustainable Development Goals (SDGs) and the Science-Based Target Initiative serve as a great framework for companies to define the organization’s sustainability goals. A 2019 study conducted by Accenture and United Nations Global Compact, “The Decade to Deliver: A Call to Business Action”, says 95% of the CEOs interviewed are personally committed to ensuring their companies lead on Sustainable Development Agenda.
Unilever is a great example of leading through goal-setting. Through the launch of the Unilever Sustainable Living Plan, the consumer goods giant embedded sustainability in its core working practices and procedures. The 10-year plan laid a framework for action with clear goals and metrics. Today, after a decade, Unilever has been able to shift to 100% renewable electricity and has seen a 96% reduction in the waste sent for disposal. After achieving its goals for 2020, Unilever aims to become carbon positive by 2030.
2. Governance led by the Board
The sustainability plans of a company cannot be actualized without a robust sustainability organization. Companies should integrate sustainability into the existing roles and responsibilities of leaders rather than creating a new sustainability governance structure. While it is essential for the Board and C-suite executives to take charge of the sustainability issues, it is equally important to follow an inclusive approach by making all the departments a part of the sustainability journey.
A best practice is to create a cross-functional Sustainability council that designs, manages, and monitors sustainability programs for integrating sustainability within the value chain. The council can serve as a central connection point that focuses on prioritizing initiatives, budgeting, and reporting ESG performance. Department heads and team leaders should be encouraged to take initiatives and report their success to the Sustainability Council
In 2019, SAP Global was named the most sustainable software company in the world according to the Dow Jones Sustainability Index. The company’s governance framework outlines the responsibilities relating to sustainability for board members, the leadership team, and the regional operational sustainability networks. SAP has also established a Sustainability Advisory Panel, composed of a diverse group of international stakeholders, to discuss how sustainability can be better embedded into SAP’s core business.
3. Technology across the value chain
Technology has transformed business processes and sustainability is no exception. Companies across the globe have adopted technology such as Internet of Things and Artificial Intelligence to tackle environmental, social, and governance issues. Adopting technology also makes the process of performance tracking simpler. The right goals coupled with technology can help companies champion sustainability.
Further, adopting technology can help companies battle climate change and contribute to a low carbon economy. According to the Global e-Sustainability Initiative SMARTer 2030 report, IT-enabled smart grids and energy management systems can potentially save 6.3 billion MWh of electricity and reduce global emissions by 1.8 gigatons carbon dioxide equivalent by 2030.
Costco, the membership-based warehouse giant uses an Intelligent Water management system to monitor real-time water use, detect inefficient consumption, and guide operators to quickly identify and reduce waste. Similarly, Walmart is using technology to promote sustainability across its supply chain. The company has built a digital platform for Project Gigaton that aims to enable the suppliers to reduce their emissions of greenhouse gases. The suppliers are encouraged to set a goal and report the results at the end of each year using the methodology devised by Walmart.
The integration of technology, the right sustainability goals, and a robust governance framework are three essential ingredients of an efficient sustainability organization. Leaving out any of these three elements would result in a lack of accountability, inefficient processes, or difficulty in tracking performance. To know more about sustainability, tune into our webinar “Sustainability during the Covid19 crisis” on 16th July 2020. Click here to register