Accelerating sustainable transformation
Sustainability is a growing force for change. But while executives recognize its potential to shape business reinvention, they believe there is a trade-off with profitability. This reinforces today’s narrow focus on short-term financial results.
This makes it more difficult to justify integrating considerations of environmental and social impact into corporate decision-making.
Is the perceived trade-off between sustainability and profitability a material concern – or just a myth?
Business leaders are conflicted. 98% of CEOs believe it is their role to make their businesses more sustainable, but 58% see sustainability locked in conflict with growth.
Working with 140 World Economic Forum next-gen leaders, we identified five headwinds stopping organizations from embedding sustainability – complexity, cost, speed, reliability and practicality.
We tested these with 280 senior executives—the results: They associate pursuing sustainability with being relatively slow and more unreliable, but see sticking to ‘business as usual’ as more complex and more costly. This creates tailwinds that strengthen the case for sustainable transformation.
Next-gen leaders call for three updates to the traditional business case to integrate environmental and social impact into corporate decision-making:
Our research shows that 70% of executives agree with the next-gen leaders. Yet, they say that traditional decision-making norms, like minimizing costs and delivering strong quarterly returns, remain critical. 67% view these as still being important for developing sustainable business models.
Fusing these three new decision-making criteria into the traditional business case emerges as the key to unlocking sustainable value at scale.
If the updated business case is the compass for sustainable transformation—tech and talent combine to form the engine.
Companies should start by building a strong digital core: a continuous process which leverages cloud to incorporate new technologies across three interoperable layers: infrastructure and security, data and AI, applications and platforms.
These tech-powered capabilities have the potential to unleash waves of sustainable innovation by reducing fear of failure and shortening 'time to value'.
Cloud computing: Bring supplier data closer to the organization, giving leaders a much deeper understanding of ESG impact across the value chain.
Data analytics: Find relevant patterns in data; for example, linking greater diversity with innovation, employee engagement or improved customer satisfaction.
Digital twins: Use twins to monitor and reduce operations such as industrial waste and water usage, improving resource efficiency.
Digital platforms: Incentivize customers to record their use and disposal of products. Leverage data to measure and track impact, and to inform product improvements.
Immersive technologies: Help communities understand benefits of infrastructure projects. e.g. virtual reality that shows an area once the construction work is complete.
Smart contracts: Boost accountability in downstream processes such as recycling management.
Technology, however, is only one part of the puzzle.
Companies must embed sustainability into how they innovate by creating a culture in which people are empowered – even expected – to become sustainable innovators. They must build capabilities, such as a more precise understanding of challenges, bringing diverse collaborators together and more immersive prototyping. This requires helping their people adopt new processes, technologies and ways of working.
Updating your decision-making norms and investing in new technologies provides a blueprint for change. We advocate a three-step process outlining how organizations can profitably embed sustainability: