Just like consumers, many corporate decision makers are not sure what to make out of the swiftly evolving sustainability discussion. At first it often seems like just another pressure point or another regulatory chore. Or something that has a steep price tag. Or just a different term for CSR. Some in the C-suite may even see it as a threat to their core business. The better way to look it though is as a new opportunity for growth acceleration.
The three phases of sustainability we’ve gone through
One could argue there were three distinct phases over the last few decades.
The first phase was one where only a small minority – mostly in Western societies – cared about under which conditions their sneakers were made and how much of the rainforest got cut down to make room for cattle farms. This was also the time when many emerging markets started posting amazing GDP growth rates and successfully lifted hundreds of millions out of poverty, which even today feels like a sensible prioritization. In the corporate world, leaders were measured by shareholder returns. So why bother – sustainability seemed like a costly distraction.
The second phase started in the early 2000’s when climate science became more robust and better publicized. At the same time, the rise of Social Media led to a new transparency which facilitated the democratisation of activism. Governments started to pay attention – albeit at different speeds – and companies started to get pressured into reviewing how their products were sourced, and to what degree their production processes where harmful to the planet and people. No longer was child labor acceptable, even if done by a supplier in a distant country. Labels on product from “eco-friendly” to “fair trade” started to slowly change consumer awareness.
We are now entering the third phase. In a way, the 2015 Paris Agreement might have been the trigger event. Governments started to set more aggressive goals – the UK was the first major economy to declare a net zero goal for 2050 – and certainly China’s 2060 goal stopped people in their tracks. We also saw the rise of more and more financially successful activist companies: organizations like Patagonia are not social enterprises, but their commitment to making the world a better place is so strong, that consumers and competitors alike are in awe. Even big corporations like Unilever proclaimed that their purpose-led brands grew faster than the rest of their portfolio. Evidence started to emerge that doing good is not just a cost, but in fact a new way to drive consumer preference.
At the same time, we have seen the Green Premium for major renewable energy sources like wind and solar drop so dramatically that it is already easy to picture the day when they will be the cheaper energy sources everywhere in the world. All of that culminated in a massive surge in both nationwide and corporate goal setting, legal and regulatory changes, a 2020 ESG stock market explosion and new data that demonstrates how much consumer expectations have shifted.
These are the new realities and my recommendations to the corporate world are clear: lean in to create competitive advantage while contributing to solving one or more of the 17 UN Sustainable Development Goals.
Three ways for you to create competitive advantage through sustainability
The competitive advantage gets created on multiple levels, starting with a happier, more motivated employees and the ability to hire the best of the next generation, who is making a commitment to the triple P an important criterion in selecting and de-selecting employers.
Beyond employees, consumers are also ready to act. They desire to adjust their lives to live more responsibly but often they don’t know where to start. This is a huge opportunity for marketers. To close the intention–action gap, the right product and service offers in combination with education (or better edutainment) will lead to better outcomes for the planet, for people and for profit.
The third vector is innovation: I have been inspired by the enormous entrepreneurial energy that has been created by startups in this field, and many MNCs have also created new solutions that give us hope.
Where do companies start their sustainability journey?
While some major corporations are well on their way, many companies are still somewhat stuck with the question where to begin. The journey does not start with marketing – the key steps of materiality assessment, science-based target setting, supply chain interventions, etc. cannot be skipped. A first good step is for companies to not silo off sustainability in any department. A cross-functional task force, which should include marketing from the beginning, is the fastest way to figure out your journey.
As Bain & Company puts it “Sustainability is the new Digital” which can mean different things. For me it means that there is no way around engaging intensely with the subject and slowly moving towards putting sustainability at the heart of your business. Remember, there is no end state nor a perfect score, what matters is to get started, to be earnest and to accelerate once you know your own direction of travel.