Five Actions for Sustainable Business
Establish a Sustainable Business Strategy
Ensure sustainability is central to your overall business strategy with all corporate functions contributing. Measure your progress and report your annual sustainability outcomes at the same level of importance as your financials.
Establish integrated sustainability management across all business areas
Many CEOs have declared that the purpose of a corporation should be to promote an economy that serves everyone. We believe the best-run companies do more than generate profits. They put the customer first and invest in their employees, communities, and the environment. In the end, it’s the best way to build long-term value. The market, in many ways, will punish companies who fail to respond to the urgent need for business sustainability. In a recent survey of 200 top executives of large multinational corporations, 75% said that a well-executed strategy with sustainability at the core drives competitive advantage.
Although many business leaders view sustainability performance as a difficult cost tied to regulatory compliance, it is becoming a strategic imperative that unlocks competitive and growth opportunities. And yet, most businesses have not embedded sustainability into their core strategies. Their sustainability strategy is often a “bolt-on” to their corporate strategy. It’s no longer acceptable to prioritize profits at the expense of sustainability performance, or sustainability to the detriment of profitability.
Sustainability must be rooted in, and aligned across, each of the major business functions, including finance, human capital management, product and service design, manufacturing, supply chain management, and customer experience. Our Insights research showed leaders assigned accountability to 21% more roles across their organizations for actions that improve sustainability performance. CEOs should require functional leaders to establish clear and aligned plans that ladder up to and operationalize the overall sustainable business strategy.
Adopt visible sustainability leadership from the top
The future of business needs to be sustainable, and so does the future of business leadership. There’s an urgent need for business leaders to put long-term sustainability as their top priority. They need to establish their strategies and be visible inside and outside their organizations about their priorities and actions.
There must be a company-wide culture of sustainability to ensure success. Sustainability leaders drive sustainability from the top and make sure that a sustainability mindset permeates the entire enterprise. Establishing and rewarding sustainable leadership demands a fundamentally different approach.
A change in mindset is required in how to identify, nurture, and incentivize C-Suite leaders to ensure holistic sustainability becomes a central operating principle. The SAP Insights team surveyed business executives about sustainability leadership at their companies. These leaders, still in the overall minority, are transforming their companies and achieving better business results than their competitors. The most frequently chosen number one motivator for companies to take sustainability action is CEO and board commitment to sustainability.
These leaders also are directing investments toward innovating and improving their sustainability performance and are more likely to increase those investments. Further, customers and employees are increasingly aware of and passionate about key sustainability issues. Sustainable business leaders should take action to deliver customer and employee experiences that create profitable engagement and loyalty.
Report on nonfinancial performance with the same rigor as financial performance
To achieve integrated financial and nonfinancial reporting, business leaders need the capability to quantify, analyze, and act on real-time data through their end-to-end operations. They then need to report their outcomes comprehensively and accurately to a variety of stakeholders, including employees, partners, customers, regulators, and investors.
Global organizations, like the World Economic Forum (WEF), United Nations Global Compact, Global Reporting Initiative, Ellen MacArthur Foundation, and Value Balancing Alliance, are calling to standardize how companies should report their results and environmental commitments, as well as how they contribute to social equality and economic growth. Companies like S&P, the index that tracks 500 publicly traded U.S. companies, as well as organizations such as Sustainalytics, are helping capital markets evaluate sustainability more seriously as an investment parameter.
Some companies are reporting voluntarily because it helps them reduce risk, attract investors, improve their corporate reputation, or make acquisitions. In the process, they are assessing the models they use to report and are moving from traditional financial reporting, focused on revenue and profits, to a model that links financial and nonfinancial metrics into one holistic reporting framework. They rely on access to data that is high-quality, transparent, consistent, timely, and auditable. Nearly 80% of companies that see sustainability as materially relevant now say measurement and reporting of sustainability data informs their company’s strategy and decision-making.
For the past 20 years, corporate sustainability reporting was largely voluntary but increasing regulation is seeing the balance turn to mandatory disclosures using increasingly standardized reporting frameworks. Much progress has been made, but there is still some way to go in seeing a standardized, globally implemented framework for sustainability reporting. Companies leveraging the power of digital technologies can act now to expand the scope of corporate reporting and drive sustainable business management at scale.