4 Critical Considerations for Developing Your Sustainability Strategy

I recall sitting down with a Sustainability Director a few months back who was talking about the need to grow his business across Europe. When I asked him which areas he was targeting, his response was,

“Everything, we will go after anything we need to.’

It was an awesome company. It was growing. It was young. And, it was forward leaning, but they didn’t have a strategy, and it was starting to affect their ability to grow across Europe. The famous quote by the strategy guru, Michael Porter came to mind,

"The essence of strategy is choosing what not to do." — Michael E. Porter

It’s not uncommon to come across amazing people and companies who haven’t thought about strategy.

Strategy is a thinking, creative activity - as well as a planning one - and often when we’re stretched, or fighting fires we don’t have the capacity to think strategically.

Yet, it’s crucially important.

And to note, there’s also an opportunity cost associated with everything that you do, so going after anything and everything, all at once is going to be less fruitful and definitely chaotic.

Instead, focus your time on developing your sustainability strategy.

Begin by understanding where you are on your sustainability journey, and the sustainability ambitions that you have for your organization. Your sustainability strategy should be aligned with your wider organizational business strategy, and must also be supported by targets to meet ESG goals.

But where do you even start? This article looks at the 4 critical areas to look into as you start to develop your sustainability strategy.

It includes:

🌳 Looking Externally at Your Environment

🌳 Looking Internally at Your Organization’s Culture and Capabilities

🌳 Defining a Roadmap with Time and Targets

🌳 Choosing the areas in which to Focus

Externally at Your Environment

A crucial part of any good strategy, involves needing to look at what’s happening external to your organization and why. Thinking externally about your environment will help you think about where you fit currently within your wider market, and where you want to be in relation to your competitors. How ambitious do you want to be with your sustainability initiatives? And, why do you want to implement sustainable initiatives? What will it help you achieve as a business?

This TED Talk by Martin Reeves helps you to think about your approach to your strategy in relation to your environment.

Sustainability is a growing focus for organizations - although with recent elections it’ll be interesting if it continues to grow at the same rate. The graphic below, taken from the MarketLine Strategy Survey Report, from 2022 shows planned investment by organizations based on geography. It shows that, globally 80% of businesses are planning to increase investment to support ESG initiatives in the next five years. Where you invest that capital and how you invest that capital will be fundamental to how successfully you see a return.

Internally at Your Organization’s Culture and Capabilities

Any sustainability strategy that you develop should align with and take cues from your overall corporate strategy. But any sustainability strategy that you look to implement also involves looking internally and factoring in change.

Once you have an idea of where you want to go, you also need to think about how much change is needed to reach your ambitions? Are you an organisation that really welcomes change? Change is tough, particularly with large, mature organizations.

I recall discussing sustainability years ago to entrenched middle management at an engineering company, and was met with crickets. And I mean crickets! 🦗It was such an alien concept, and so I can only presume that is was met with confusion and a lot of behind the scenes googling. Simply put the culture for change didn’t exist, and it’s middle management were stuck in BAU.

But it’s not just entrenched middle management that stifle change. Resistance to sustainability initiatives can come from the top - the board - who are naturally more focussed on maximising short term returns. So, taking time to formulate how you will sell your strategy to the executives and the board, and everybody else in your organization will need to be factored in.

Change and culture aside, you’ll also need to look hard at the skillsets, capabilities, and the capacity you need to get to where you want to go? Starting to identify those, and factoring in how important they are will help you develop a robust strategy.

But, also note that strategy is nothing, without strong execution…

Time and Targets

Any strategy worth its salt will have specific targets and a roadmap associated with it. This not only involves setting objectives, targets and KPIs, but also making people accountable to make sure key results are achieved. Many sustainability issues lean on science, and well, science makes people nervous. Finding champions that understand the science behind sustainability, and can convey it in a way to drive the roadmap will be key to realizing strong execution.

Once you’ve setup your objectives and targets, and understood where your gaps are it make sense to develop your roadmap taking into account the priorities for your organization. You can’t do everything at once!

So, which areas should you focus your sustainability strategy on?

Focus

Every organization is different, and operates in a differing context. So, deciding which areas to focus on to drive your sustainability agenda will vary across organizations. That being said, sustainability encompasses much of below, and most organizations will seek to improve efforts across the following ESG Framework, of Environment, Social and Governance:

Environment

Data from the same Marketline report showed that a lot of organizations focused their Sustainability or ESG efforts around the environmental cornerstone of ESG - the leading cornerstone of effort.

This is partly driven by the amount of funding that is pushed into environmental adaptation, and mitigation as well as regulatory reporting which is helping to focus thinking around ESG risks, dependencies and impacts. But, it is also down to organizations recognising environmental climate change to be a large threat to their future operations.

The environmental pillar focuses on:

🌦️ Climate Change

💨 Pollution

🍃 Biodiversity and

⛏️ Natural Resources

(More recently, in 2024, we are seeing a growing increase in focus around nature-based solutions and biodiversity, supported by funding, and instigated by the reporting requirements of the Task Force on Nature Based Disclosures). For more information on the key sustainability trends for 2024, see our 5 Trends article here.

Social and Governance

The other two cornerstones are social and governance, encompassing the following:

Social: Human Rights, Diversity, Equity, Inclusion and Belonging (DEI-B), Health and Safety, and Community Impact

and

Governance: Corporate Structure, Risk Management, Corruption and Bribery, and Ethics

You’ll see that both the Social and Governance cornerstones receive far less attention from organizations than their Environmental counterpart, generally speaking. (Although, note that this varies across geographies, with Japanese firms choosing to place higher efforts on governance). Despite this, encompassing aspects of both the Social and Governance cornerstones into Sustainability strategies will help your organization see better sustainability performance as well as ESG ratings performance.

It’s also worth noting here that for any sustainability strategy to effectively take hold across an organization, strong governance is needed across the business. Governance helps to ensure that people across the organization, at all levels, are held accountable to their targets and so governance mechanisms should be designed in.

Conclusion

We see more and more companies seeking to embed sustainability strategies across their organization. In large organizations these can be set at parent company level, but are often implemented ad-hoc. Other organizations are yet to implement them. Regardless, we see that in the next few years this will become an integral part of doing business. And, understanding the drivers behind your sustainability ambitions and who you are as an organization will help you focus and flex your efforts across the differing cornerstones that form the foundation of your sustainability strategy.

If you already have a sustainability strategy, I can review its maturity within your organization. If you’re yet to develop a strategy, I use the ESG Framework above as a foundation for thinking about, and developing your sustainability strategy, and run assessments with you to understand your sustainability motivations ahead of setting a direction.

My approach is collaborative. I prefer to partner with forward leaning executives to discuss ambitions, and identify potential sustainability gaps. And, I take a holistic approach, looking externally at the global, macro environment, the sector in which you operate and looking internally across your organisation from leadership right down through the ranks.