A clear sign of the maturation of the sustainability field—the environmental, social and corporate governance initiatives by which organizations seek to achieve excellence today while providing for the needs of future generations—is that it is increasingly considered a driver of growth, innovation and competitive differentiation. One stumbling block, however, is the fact that sustainability strategy is often developed in isolation from overall corporate and business strategies.
The chief strategy officer is well placed to overcome such planning siloes—to work with the CEO, COO, CFO and other top executives responsible for strategy to better integrate sustainability into the company’s larger strategic picture and then drive more effective implementation. The chief strategist’s experience with analytics and financial assessments is especially important, as relatively few companies at this point are able to clearly pinpoint how sustainability considerations can directly affect the future value and cash flow of their businesses in terms of revenue growth, cost reduction, brand and reputation.
Chief strategy officers can help challenge their chief executive officers and corporate boards to incorporate sustainability issues into the overall vision and goals of an organization. In this way, all those responsible for strategy can work together to achieve sustainability-related business goals over the short, medium and long term.
The new strategic implications of sustainability
Changing forces of supply, demand and regulation resulting from sustainability considerations require companies to reflect on new strategic capabilities and questions.
Accounting for environmental costs. Relatively few of the environmental costs of business, such as pollution or waste, are being effectively priced into current products and services. This situation is changing, driven by consumer pressures and an evolving regulatory environment, and strategists need to have a view of both the pace of change and its impact. Total costs must be considered, as well as where and how such costs will be factored into existing supply chains and operations.
Understanding evolving expectations of stakeholders. A range of environmental and social considerations are becoming increasingly important as strategic inputs, in part because the power of social media amplifies the potential impact of individuals, independent pressure groups and other non-traditional stakeholders. It is vital that chief strategy officers understand how the expectations of consumers and other stakeholders are changing—and what the implications of those changes could be on industry economics.
Balancing collaboration with competition. Business leaders are hardwired to compete wherever possible; in most cases, markets work best when this is the case. With sustainability, however, a more collaborative approach can provide access to much-needed complementary capabilities. The chief strategy officer can help find a sensible balance between when to collaborate and when to compete.
With regard to each of these implications, strategy leaders are well placed to guide the discussions and to demonstrate how sustainability can be a possible source of both competitive advantage and shared value—doing business in a way that can benefit both the company and society.
Six key strategy questions raised by sustainability
Beyond these implications, sustainability also raises other considerations that can affect corporate strategy and its execution. Accenture believes that the following are especially important questions to be considered.
1. To what degree can our business growth be decoupled from our resource use? Many observers predict that a more resource-constrained environment is looming for global business. This prompts the need to consider how future growth can be achieved without necessarily requiring a corresponding rise in resource use.
One scenario discussed in an analysis from the United Nations Environment Programme indicates that, based on current trends, global annual resource extraction will triple by 2050. Strategy leaders need to give voice to the business implications of such developments and can help their companies be proactive. As Unilever’s chief executive officer Paul Polman has noted, “Those companies that wait to be forced into action, or who see [sustainability] solely in terms of reputation management or corporate social responsibility, will do too little too late and may not even survive.”
2. What new business opportunities could be captured from a proactive shift in our business model? Another critically important role for strategy leaders involves asking what new opportunities sustainability presents to their business. The most obvious example has been the move by many companies to capture new markets—from renewable energies to electric vehicles to other clean technologies. Siemens, Schneider Electric and General Electric are some of the most well known in this regard, with each generating multibillion-dollar businesses over the past decade in new, sustainability-related market niches.
3. How is sustainability changing the ecosystem in which our company operates? New business models that incorporate sustainability opportunities often involve more complex ecosystems of companies, partners, customers and governments. Companies need to under-stand how the value chain of their particular industry is changing as a result of sustainability, and what those changes might mean for the competitive landscape. This understanding can be the foundation for pursuing a range of alliances and partnerships.
For example, to expand into the electric car marketplace, automaker Renault established a strategic partnership with Better Place, an electric vehicle services provider, to roll out automated battery-switching stations in several countries.
4. How will any shift in strategy affect our underlying organizational roadmap and resource allocation? Any change in strategy needs to be accompanied by a practical roadmap that defines where and when resource allocation needs to shift in terms of capital, people, supply chains and other factors—while minimizing risk. Relatively few companies today fully incorporate sustainability into their corporate roadmap. Strategy leaders are well placed to correct this, highlighting alternative paths to action and how each might change the overall course of the organization.
In many regions, the consumer goods industry is leading the way in terms of changing the overall organizational roadmap to fully integrate sustainability and business strategy. Brazilian cosmetics and personal care company Natura, for example, does not think in terms of a stand-alone sustainability strategy, but rather a business strategy that is also sustainable. Natura measures success according to a “triple-bottom-line” analysis:
- Economic results: Superior products that drive high profitability.
- Social responsibility: Support for almost 1.5 million independent Natura consultants who sell directly to 90 million consumers.
- Environmental responsibility: Ecological sustainability in support of biodiversity and sustainable sourcing of ingredients.
All investment projects that Natura evaluates must pass these triple-bottom-line thresholds.
5. How involved should the strategy team be in implementing sustainability within the business? Developing a strategy is only half the role of a chief strategy officer; execution is the other half. Indeed, from a sustainability perspective, implementation can often be the toughest part of the process. One challenge is overcoming internal resistance to new objectives and new ways of working. Although individual business unit leaders will drive their relevant aspects of implementation, the strategy team must closely monitor progress and ensure that operational decisions fit within the broader strategic context.
6. What does sustainability mean for the interplay between members of the leadership team? As the importance of sustainability as a strategic issue grows, the relationships between the chief strategy officer, the chief executive officer and the chief sustainability officer will become more important and will need to be clarified depending on a company’s particular circumstances.
The sustainability area commonly lacks proven financial and analytical approaches that ensure alignment with the core business and that support measurement of outcomes. In this regard, the strategy executive’s ability to provide impartial and detailed analytics can help. However, organizations must be clear about the chief strategy officer’s role—whether it is to act primarily as a sounding board or to be a more active participant.
Conclusion: Sustainability as a part of core strategy
Sustainability is not a sideline initiative; it must be a core part of the overall corporate and business strategy. A sustainability strategy raises questions that demand a deeper analysis of the future: What are the likely scenarios that will play out? What do these mean to investments and operations? What are competitors doing? Where should a company focus its strongest efforts?
In all these areas, the chief strategy officer, working with others at the top of the organization responsible for setting and implementing strategic goals, has a vitally important role to play.
This article is excerpted from “The Sustainable Organization: The Chief Strategy Officer’s Perspective,” part of Accenture’s “Lessons from Leaders” series. www.accenture.com/csoperspective
About the authors
Shawn Collinson is Accenture’s Chief Strategy Officer.
Bruno Berthon is managing director, Accenture Strategy and Sustainability.
Peter Lacy is the managing director of Accenture Sustainability Services in the Asia Pacific region.