What is a sustainable company?

A company’s actions, behaviour, goods, and services are all determined by a thorough awareness of the environmental and social context in which it operates. As a result, it operates within well-understood environmental and social constraints and reflects societal expectations. It also assures that it has a neutral or beneficial influence on the environment and society.

What is a sustainable business strategy?

The mechanism for transforming an unsustainable organisation into a sustainable one is a sustainable business strategy. Such a strategy should lay out a path that will allow the company to continue operating as a going concern in the long run (at least 2 decades).

The following essential aspects are required to deliver a strategy:

• Taking into account the strategic context: recognising the global and local sustainability challenges that may have an influence on the company. Getting a handle on the most important (material) concerns that need to be addressed.
• A strong concept of sustainability: a picture of the company’s long-term goals in light of significant environmental, social, and economic developments and pressures
• Action plans are being developed: a strategy for achieving that goal that includes actions and plans that are likely to succeed.
• Timescales: a timeframe that corresponds to the stated trends in material environmental and social issues
• Reporting and communication: internal and external stakeholders with clear, meaningful, and consistent signals displaying authenticity, transparency, and progress

Why focus on strategy?

Whether a company is publicly traded or seeking funding from private investors or banks, it requires a strategy to attract investment. The translation of a company’s capabilities and market positioning into a series of activities to be carried out over time in order to fulfil specified business objectives is known as strategy.

In essence, investors and funders examine a company’s strategy and assess its capacity to execute it. They then make a determination as to whether or not that firm is a good investment candidate (i.e., whether or not it will provide the requisite “return on investment”) within the time frame specified by the investor.

For everyone who wants to make a move toward more sustainable corporate behaviour, company strategy is a must-focus area. Investment drivers will solely focus on narrow financial performance, not reflect and reward sustainability activities, or adapt to the demands and intentions of society, if a company’s strategy does not feature, or represent, a company’s commitment to delivering more sustainable business practices.

The challenge of truly strategic sustainability:

While most major corporations recognise the importance of sustainability, many nevertheless struggle to balance environmental and social concerns with financial concerns.

The ability of sustainability practitioners within firms to articulate the case for sustainability as a driver of business practise and strategy is at the centre of this debate. While many organisations have formed CSR, environmental management, and sustainability programmes, they are usually developed in tandem with the development of mainstream corporate strategy. As a result, they have little influence over the company’s direction and decision-making.

What areas do practitioners struggle with?

Professionals working in the field of sustainability encounter a variety of difficulties:

• Focus: At the operational rather than strategic level, implementation activity (i.e. what corporations actually do) tends to focus on the control of sustainability impacts and risk. As a result, efforts can be small-scale, and the advantages gained from these actions are not explicitly stated, perpetuating the idea of sustainability as a side problem.
• Ownership and management: While most firm sustainability reports include words from the CEO or Chair, and some will also include statements like “sustainability is in our DNA” (have a look), most business choices pay little or no attention to sustainability, unless all other factors are equal. Furthermore, sustainability will always remain an add-on to the normal business of business until people with a sustainability responsibility are explicitly equipped with the authority to create and implement strategies.
• Planning and strategy: The notion that sustainability practitioners should be proficient in the use of traditional corporate strategy and planning tools has been around for a long time. However, business school professors continue to promote the use of Porter’s Five Forces (and related) as sustainability tools, as if they were the sole inventors of a fantastic new pre-sliced dough-based baked edible product. However, there is a significant point to be made here: relatively few people who are responsible for corporate sustainability are also involved in mainstream company planning and strategy formulation. Even fewer are skilled in the application of standard business management tools and processes to data analysis. As a result, while firms may be investing heavily in these projects, sustainability remains a secondary, or parallel, issue in the strategic direction of the company.
• Timelines, liabilities, and expenses: Sustainability initiatives are frequently linked to issues of company risk, particularly regulatory and reputational threats. However, many organisations’ usual payback times are often too short to detect clear sustainability price consequences over longer time horizons. This suggests that, while the long-term ramifications of environmental and social trends are evident, the corporation is having difficulty translating them into risk and costs in the immediate term.

Overcoming barriers – developing sustainable strategy:

There are several initiatives that sustainability and CSR practitioners can take to ensure that sustainability is viewed as a true strategic issue:

Step 1: Identify and agree on the major (priority) concerns that present the organisation with strategic threats and opportunities.

Step 2: Determine the company’s objective; where does the company intend to be on the corporate evolution scale?

Step 3: Understand how your company’s strategy is currently being developed and whether sustainability problems are being considered as part of strategic planning and product development.

Step 4: Determine the processes that your firm uses to handle strategic change. What works, what doesn’t, and why is this so?

Step 5: Assemble a list of strategic possibilities and challenges posed by sustainability issues, as well as other strategic business issues that affect strategy.

Step 6: Ensure that key external stakeholders are engaged in order to reach a broader consensus on what is important to whom and why.

Step 7: Develop replies to any significant strategic concerns that are consistent with and supportive of your firm’s competitive stance.

Step 8: Create a clear overarching strategic vision that takes into account social, environmental, and economic factors.

Step 9: Begin making the investment case to management and investors. Sustainability provides obvious financial and risk benefits, which are likely to be found in one or more of the following areas:

• Capital performance is directly impacted: Wherever possible, sustainability improves efficiency and lowers costs.
• Effects on the risk profile of the stock market: where effective risk increases the chances of stock price stability and growth
• Influence on the evaluation of shareholder value drivers: Investors examine the management of risks that may have an impact on the company’s potential to create shareholder value.
• Intangible worth: These refer to’soft’ aspects that do not appear on corporate balance sheets, such as leadership, transparency, intellectual capital, human capital, workplace organisation, and culture, and account for a major amount of overall company value. In terms of reputation, brand value, trust, and stakeholder interactions, sustainability plays a vital role in intangible value.

Sustainability is a key corporate concern:

Sustainability issues provide clear structural obstacles to the continuance of business as usual in the long run. Sustainable strategies are a way of reducing an organization’s overall risk profile by mitigating, minimising, and planning out potential defects that could obstruct long-term corporate performance.

Assessment and interpretation tools and approaches for the strategic implications of sustainability for organisational success are either well developed or can be generated by adapting regularly used business management techniques. Understanding sustainability as a transformational engine rather than an operational issue, as well as conveying the financial consequences of sustainable behaviour to investors and markets, are significant difficulties for businesses.