Driving sustainability into the core of the business model

Stage 1: Determining the new mission and vision (unconstrained view) – and baselining performance today

 

The start point of the assessment is to understand the current position and level of maturity. This requires a hard look at the progress made to date. This should leverage core documentation, for example, SBTi, ISSB, TCFD, TNFD, etc, the sustainability strategy, net zero targets, a view of the portfolio projects and the associated funding that is going to be applied to sustainability. This is the used to review progress that has been made, and the successes that have been achieved.

 

Off the back of that work is a review of the vision and mission of the organisation, what it is that the business delivers, from feeding and clothing people to providing them with transportation, energy, etc. We then need to review how what we currently do is going to change as we move into a sustainable future. This needs to be a critical review of everything from product demand to fundamental changes in the products and services offered. 

 

We then look at how the planetary impacts will change everything from raw material production through to impacts on production centres and supply chains - reviewing the key future business risks from sustainability perspective - creating a revised risk register for the business with sustainability built in at the court. This enables us to review how and when those impacts will apply to our business, looking at the solutions in a multidimensional way from social impact through t0 cost of carbon.

 

We then apply wicked problem techniques to bring together the elements of the sustainability picture to create a holistic approach. This will not be a hard and fast strategy in the same way as we do short-term business planning, but more of a view of potential inflection points/market triggers and how that will then impact the business. What we’re looking to do here is to create a plan that can be then used to flex as the market itself changes. This will also determine the difference between reactive and proactive approaches looking at how we can use sustainability to create competitive advantage.

 

We will be using everything from competitive analysis through to pricing approaches to model out how the business may change over time and the sources and uses of funds. This will create the framework that can be applied to the incremental and more structural changes in the business. At this point we have created a view of effectively the art of the possible for the business and the high-level path for how to take that business and deliver with sustainability at the core.

 

Stage 2: Plan development - Developing the delivery portfolio

 

The focus of the planning approach is to develop the plan in detail for the coming few years where the market development is easier to predict. What we’re looking to do here is put together a robust and radical approach to sustainability delivery that can be applied today. This will also help us to ‘learn as we go’ as the changes are applied. We will also look at longer term elements, inflection points and have an outline view beyond the next few years that we firm up as we move forwards.

 

What we’re looking to do at this point is to develop a view of the types of projects that we want to deliver, from incremental change to more radical changes in the products, services and business that we operate. This needs to be a careful balance because we may find for the incremental components that there is a law of diminishing. What we’re looking to do is to drive change in a way that makes our current approaches more sustainable and then recognises the inflection points to shift our business to a different course, with sustainability built in at the core. 

 

The next step is to turn that portfolio into our robust plan incorporating core elements of business as usual. Even with projects that don’t have sustainability at the core, we need to build in sustainability in order that we don’t miss opportunities or create legacy that we then must unpick. Examples of this would be building out CRM systems, ensuring that we are building in the mechanisms to track and price carbon water, chemicals, social impacts etc into the core of our business performance. The last step is pulling together a portfolio which is costed, with a robust set of business cases that we can then take for financial approval and implementation in the business.

 

Stage 3: Determining the organisation readiness and building the sustainable business structures.

 

Up to this point, the approach taken is one that blends, wicked problem solution development and strategy with financial planning. We need to move beyond the pure strategic into the operational and delivery. This needs to cover the core fundamentals of business operations from governance to skills development.

 

Starting at the top of the organisation, we need to determine how we change the way the corporation runs in building sustainability into delivery. This starts with building sustainability into the finance system and governance approach, with some view of the cost of carbon, cost of social components, cost of biodiversity loss, etc. Redesign should include everything from changing investment committees and their approaches and building sustainability into performance targets and renumeration at all levels of the business. 

 

We should also include elements such as external reporting and the broader shareholder relationships to change the cadence of discussions (for example move away from a quarterly reporting cycle) and what is being reported to shareholders.

 

We will then review the skills and capabilities of the organisation. We need to ensure that we have the resources, both financial and in human terms, needed to deliver the changes. Not only do we need to build the capabilities within the sustainability function, but we need to build sustainability skills into all elements of the business across the entire line management. Auditing what is currently there, what the plans will require in the future, whether to build, buy or borrow the skills, and then creating a plan in order to deliver all of the above is an essential step in sustainability delivery. Through this we will develop a robust review of the operating model and organisation structure applying the new sustainability business strategy approach to that structure and then understanding where the potential exposures are going to be and the methodology for resolving it.

 

Stage 4: Driving delivery and measuring progress

 

The final step of the approach is then to get into the delivery phase. With techniques around agile delivery etc. we have many of the tools that we need to drive rapid change, leveraging incremental approaches where we can learn from delivery as we go. One of the key elements that we will need to consider is that the new sustainability business model will be the bluring of the boundaries of the existing business. With elements such as energy management, supply chain optimisation, operational delivery etc. we will be getting more involved in the day-to-day operations of partners, suppliers, regulators, etc. We will need to get a better understanding of how to work across organisation as well as working with our own and create robust approaches for determining the split of costs and the benefits that the sustainability changes create.

 

The final part of the process will be setting up the approach of tracking how we’re delivering against the plan. Much of this will be classic performance management and project management, with an element around border risk/change management that needs to be incorporated into delivery. While overall this looks very similar to a normal strategy plan, because of the highly variable nature of many of the sustainability factors that are going to impact the business, a more iterative approach to managing delivery will also be needed. There will be a need to constantly review and course correct the sustainability approach as the broader market changes.

 

This will require a shift in how strategy is delivered with a robust risk management approach being applied on top of day to day management in order to ensure that we understand any major changes that will impact performance as and when they occur.