Integrating Sustainability Is Key
Sustainability is a crucial consideration for organisations of all shapes and sizes.
This benefits of embedding sustainability in an organisation are well documented. They include cost efficiencies, reduced cost of capital and greater access to customers and markets. Companies with ESG embedded into their organisation outperform their non-ESG counterparts.
Many companies still struggle to shift from setting sustainability ambitions into driving tangible actions. A recent report revealed that the average target net-zero date for FTSE250 companies had been delayed by 13 months, with like-for-like emissions increasing compared with the previous year.
The Sustainability Paradox
So why don’t the financial incentives of sustainability drive meaningful action?
An important factor is how Sustainability (as a discipline) is established within an organisation.
The table below demonstrates this by comparing Sustainability to Finance as a function within an organisation.
|
Aspect |
Finance |
Sustainability |
|
Maturity |
Well-established discipline in most organisations |
Often not an established discipline; typically managed by a small team or an individual |
|
Accountabilities |
Clear hierarchies and accountabilities |
Variable and often incomplete; e.g. only 37% have a board member responsible for sustainability |
|
Position in Business Model |
Embedded alongside other core functions |
Often siloed from other core functions |
|
Engagement from other business functions |
Integrated into many roles through budgeting, cost control, and profit-driving responsibilities |
Non-sustainability roles typically don’t have sustainability responsibilities or activities |
The Solution: An Integrated Business Model Approach
To bridge this gap, organisations should adopt an integrated business model approach to sustainability. This approach transforms sustainability from a siloed, specialist subject into a lever that enhances the organisation’s overall operations. Key features of an integrated business model include:
- Understanding organisation wide of the importance of sustainability
- Clear sustainability accountabilities at all levels of the organisation
- Inclusion of sustainability considerations in decision making by default
- An intentional “tilt” in the organisation’s products/services roadmap towards sustainability
- Organisation-wide engagement and understanding of sustainability objectives
- Alignment of policy and processes to sustainability integration
- Staff measurement and remuneration linked to sustainability performance
Benefits of Integration
An integrated business model is more likely to drive action because:
- When employees are measured on Sustainability within their role it incentivises them to act.
- Insight into the impact of operating Sustainability on business performance can enhance business decision making
- Cross-pollination between sustainability and non-sustainability activities helps identify risk and opportunities
- Accountabilities can link to those who directly influence outcomes (e.g. procurement professionals influencing supply chain decisions)
Case Study: Ministry of Defence (MOD)
Cala Sustain helped our client the Ministry of Defence implement an integrated business model approach to Sustainability.
The UK Government has a legally binding target to become Net Zero by 2050. It has flowed this obligation to all Government Departments including the MOD.
Defence equipment conservatively accounts for 35% of all UK Government emissions. These are emissions from equipment, platforms and purchasing activities.
The MOD required support to create a carbon reduction plan for all of its activities from its +£200bn spend supply chain.
We worked with MOD to achieve an integrated business model by:
- Building solutions that added value to operational staff beyond carbon reduction
- Integrating processes that provide significant time savings compared to a siloed approach
- Engaging stakeholders to discover and leverage ways to improve ROI from carbon data
We provided a clear set of recommendations along with a roadmap of activities that will enable sustainability to become integral to defence acquisition. Read the MOD Case Study »
By integrating sustainability in to their business model organisations can improve both their environmental and overall business performance.
Sources
https://www.kroll.com/en/about-us/news/kroll-study-shows-stronger-investment-returns-companies-high-esg-ratings
https://www.edenseven.co.uk/ftse250
https://www.edie.net/less-than-one-in-ten-uk-businesses-have-a-large-sustainability-team-survey-finds/
https://www.fmj.co.uk/over-two-thirds-of-ceos-view-sustainability-as-a-growth-opportunity/#:~:text=The%20survey%20found%20that%20the,decarbonisation%20(18%20per%20cent).