The Case for Integrating Sustainability to Your Business Model and Strategy
During the Leaders’ Summit on Climate in April 2021, leaders of major economies pledged to take aggressive actions to combat climate change, including commitments by:
United States: Pledged to reduce emissions by 50 percent by 2030 from 2005 levels and achieve net-zero emissions by the year 2050.
Canada: Pledged to reduce emissions by 40 to 45 percent by the year 2030 relative to the level of 2005 and achieve net-zero emissions by the year 2050.
European Union: Adopted the European Climate Law which establish targets to reduce emissions by at least 55 percent by 2030 compared to 1990 levels and achieve net- zero emissions by the year 2050.
Japan: Pledged to reduce emissions by 46 percent by the year 2030 compared to the level of 2013 and achieve net- zero emissions by the year 2050¹.
Public actions also reflect that sustainability matters more than ever for citizens, and therefore for consumers. According to a BCG survey conducted in May 2020 across various countries, 90 percent of consumers are equally or more concerned about environmental issues since the COVID-19 outbreak². Consumers are also increasingly taking into consideration sustainability when buying products and services. According to PWC’s 2020 Canadian Consumer Insights Survey, 49 percent of Canadians are buying more from companies that are conscious and supportive of protecting the environment³.
Although sustainability is gaining momentum, it is often missing in a company’s strategy. According to BCG’s Sustainability Report, 90 percent of executives think that sustainability is important, but only 60 percent of companies incorporate sustainability in their strategy and 25 percent in their business model². There is still a long way to go for businesses in regards to sustainability.
Four Pillars to a Sustainability Strategy
Inspired by the United Nations’ Roadmap for Integrated Sustainability, here are four key elements of a successful sustainability strategy:
Compliance: Companies need to understand how they are generating emissions. With many reporting frameworks available and firms specialized in measuring emissions, it is becoming easier to address and measure. With knowledge and data about their emissions, companies can set reduction targets to specific areas that are responsible for the greatest emissions.
Optimization: In line with those targets, companies can begin adapting their operations. The first steps that are generally taken include using energy, water and raw materials more efficiently, switching to renewable energy and materials, and improving waste management processes.
Market differentiation: As sustainability will require important changes in the long run, businesses need to rethink how their business model will evolve to meet those targets. Innovation in product design, operations and supply chain may be required. A firm could, for example, work with its suppliers to incorporate recycled inputs in the supply chain without increasing the cost.
Communication: Companies need to communicate transparently about sustainability. Disclosing emission levels and reduction targets through available frameworks is a good way to communicate effort towards sustainability. Furthermore, informing stakeholders about measures taken to reduce climate impacts can enhance the employer’s brand, as sustainable businesses are becoming increasingly attractive places to work, particularly amongst younger generations.
Many well-known companies have recently committed to take action towards tackling climate change. Here are a few examples of how they plan to reduce their environmental impact.
Adidas has committed to reduce both its own and its suppliers’ greenhouse gas emissions by 30 percent by 2030 compared to 2017, and to achieve climate neutrality by 2050 through:
Improving water efficiency and quality throughout its operations and supply chain.
Increasing the use of sustainable materials in its production and work towards closed-loop solutions. In May 2021, Adidas developed a prototype of running shoes with the lowest recorded carbon footprint, made with fewer components, and using low-carbon materials..
Working closely with its suppliers in various ways to increase energy efficiency in its manufacturing processes⁴.
In July 2020, Apple has committed to becoming 100 percent carbon neutral by 2030. The company was already carbon neutral for its corporate operations. By 2030, every Apple device sold will have a net zero climate impact. To achieve this, Apple has a roadmap with a series of innovative actions, including:
Low carbon product design: Apple will increase the use of low carbon and recycled materials, innovate in product recycling and design products to be as energy efficient as possible. This objective also implied the development of a robot that disassembles recycled iPhones to recover key materials such as rare magnets and tungsten while also enabling recovery of steel.
Energy efficiency: Apple will identify new ways to reduce energy usage at its facilities and incentivize suppliers to make the same transition.
Process and material innovations: Apple will tackle emissions through technological improvements of their processes and materials needed for its products⁵.
As sustainability continues to gain momentum, companies need to play their role in the global climate crisis. A strategic planning exercise could help you facilitate a transition towards a sustainable business model, regardless of where you are in your journey.
BCG. August 2020. Sustainability Matters Now More Than Ever for Consumer Companies
Forbes. May 2021. Adidas, Allbirds Partner on Lowest-Carbon-Footprint Performance Sneaker Ever Created
United Nations Global Compact. Roadmap for Integrated Sustainability.
Forbes. February 2021. Why Corporate Strategies Should Be Focused on Sustainability
Roland Berger. March 2021. Four Key Elements of a Successful Sustainability Strategy