As the impact of climate change becomes more pronounced and social inequality grows, customers, investors and other stakeholders expect companies to take responsibility. A well-founded sustainability strategy will allow you to adopt the right mindset to take concrete action. How do you get started? Michael Wagemans, Head of Sustainability at KPMG, explains.
"Sustainability has moved from the periphery to the heart of business operations in recent years. The old corporate social responsibility (CSR) concept felt like an obligation and was mainly focused on 'giving something back to society'. Those two days of voluntary work a year are a good start, but there is room for improvement. Companies are now realizing that sustainability has a broader scope and can provide a strong business case. Acting sustainably propels your company forward. But of course, you have to be able to see opportunities and seize them."
"Right now, we are in the perfect storm: over the past three years, sustainability has become such an urgent issue that it has triggered a change in business leaders," explains Michael.
"We’ve identified three main arguments. Business leaders realize that sustainability contributes to efficiency: do they use electricity and water sparingly, and limit their waste? If so, this not only has a positive impact on nature and society, but also on their bottom line. And if they get it right, they also strengthen their topline, because they can also tap into new customer segments and markets with new and sustainable products and services. At the same time, companies are finding that sustainability also has a positive impact on a number of less tangible value drivers, such as reputation and the attractiveness of the company as an employer,” in Michael’s view.
"The perfect storm towards more sustainability is facilitated by stakeholders who expect more from companies," Michael continues. "Consumers are increasingly buying consciously from organizations that act in a sustainable and transparent way - they are even willing to pay more for products and services that are in line with their own values. Regulation also plays a key role - just think of the European Union's Green Deal ambition to be climate neutral by 2050."
"Sustainable investment is also on the rise among major players and individual investors. The financial world - especially lenders - realize that Environmental, Social and Governance (ESG) leads to better results. Anyone who wants interesting credit terms is therefore best advised to invest in sustainability. Asset managers and pension funds, for example, are increasingly asking companies to communicate transparently about climate-related risks. And the traditional banks are also jumping on the sustainability bandwagon. But, organizations should not limit themselves to climate actions. Other themes, such as biodiversity, corporate governance and social inclusion, will increasingly also be top-of-mind for investors and shareholders in the future."
"In addition, we are seeing greater commitment throughout the value chain of companies. Both upstream and downstream, there is more transparency and traceability, as well as demands on ecology, working conditions and energy consumption - down to the level of the coffee and cotton plantations. Young workers in particular expect their employer to take an active stance on issues that are important to them, such as diversity and inclusion. But corporate activism is also complex, because you have to navigate between different, sometimes conflicting interests. So companies should dare to move beyond the volunteering and donation programs they've launched in the past."
"All of these elements together ensure that sustainability will be high on the corporate agenda. Companies are becoming convinced that sustainability has added value and that a strategic and long-term approach is the best and only way forward," Michael adds.
Consumers are increasingly buying consciously from organizations that act in a sustainable and transparent way - they are even willing to pay more for products and services that are in line with their own values.
"It’s not enough to simply build the business case for sustainability. Companies must move from awareness and understanding to strategy and action," according to Michael. "That starts at the top of organizations, with business leaders and managers internalizing the sustainability story. They need to get the right message out and do what they say: practice what you preach. What’s the key to success? Communicate, communicate, communicate. Managers must seize every opportunity to explain why they are organizing certain actions based on the company's mission and vision - and they must clarify the consequences of those actions for stakeholders. Moreover, employees must be given the opportunity to make their own suggestions, act sustainably and launch sustainability initiatives. Organizations must therefore put a strong emphasis on training, engagement and development."
"Sustainability therefore goes beyond simply participating in the typical Sustainability Week. It is a strategic issue that is relevant for all parts of an organization - from HR to R&D. Change is never obvious, but it's now that it has to happen."
"A sustainability policy starts with setting the strategic agenda and priorities," says Michael. "It comes down to choosing those ESG themes that have the most impact on your business and through which you as an organization can generate the most impact. A number of elements play a role: the type of company, the sector in which the company operates, the expectations of stakeholders and the ambition of the management. A sustainability strategy can never be a one-size-fits-all. You have to graft it onto the specific characteristics and unique context of your company."
"Innovation plays a key role here. I like to think of it as ‘innovability’ - a ‘smart’ contraction of innovation and sustainability. It is through innovation that sustainability typically happens in a company. Take Coca-Cola for example. In their innovation center - where new products see the light of day - sustainability is present from the beginning to the end of the innovation cycle. Sustainability is, today, as important as quality and cost efficiency."
"Finally, you also need to measure your ESG performance. To do so, companies can look to the United Nations' Sustainable Development Goals (SDGs) or other internationally recognized frameworks for guidance on how to set goals, define actions and follow up on progress. Interestingly, at KPMG, we see a lot of companies taking time to develop their own unique roadmap to support and implement the sustainability strategy in line with the business strategy. By making that choice they demonstrate that they take sustainability seriously."
Sustainability goes beyond simply participating in the typical Sustainability Week. It is a strategic issue that is relevant for all parts of an organization - from HR to R&D.
"Every organization that takes sustainability seriously is served by a sustainability officer," affirms Michael. "The sustainability function plays the role of a lighthouse and guidepost by defining the strategic sustainability agenda and developing an action plan with various stakeholders in the business. In the best case scenario, they have a direct line with the CEO, who links up directly with the board of directors. In such a setting, sustainability will really make an impact in the organization."
"Sustainability lives within the entire company. As a business leader, you can't just drop your sustainability ambitions on your employees out of the blue; that doesn't work," Michael says. "Just as all employees should be given room for innovative initiatives, there should also be room for sustainability," he says.
"Employees need to be given the right tools and opportunities to take initiative. Because no matter how you spin it, sustainability has to live in every corner of your company. If you have a cast-iron sustainability plan, but your company restaurant uses plastic on a large scale, the picture is off. What products or services do you provide - and how are these created? What options do employees have in terms of mobility solutions? How do you engage with customers and recruits? Push your ambition through to everything you do as a business. Success is much more likely if you do so, especially when you also provide a meaningful platform for your employees to take action on sustainability challenges and opportunities."
Are you looking to articulate your organization’s sustainability ambitions and express them in tangible goals, targets and KPI’s? If so, you are embarking on a valuable, but also complex, journey. Let KPMG's sustainability and ESG experts assist you. Their many years of international experience will help you seize opportunities and swiftly tackle the big and smaller challenges associated with sustainability. You can also count on the expertise of iPropeller - a Belgian B Corp certified sustainability consultancy - that collaborates with KPMG to support businesses as they navigate the complexities of their sustainability journeys.
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