Five practical ways to step up your sustainability transformation
With the first month of the year already passed, and while anticipating the imminent sustainability reporting requirements, one of the most important 2023 resolutions for C-suite leaders refers to ensuring that their business becomes more “future-proof” through integrating sustainability into their core operations.
According to Mazars’ Sustainability Transformation Framework, asking yourself the below questions can be an effective first exercise to understand your progress and also to add some new action plans to your company’s “to-do” list.
Have you identified the areas where your company can bring its biggest contribution?
One of Mazars’ most recent studies, “Mazars C-suite Barometer”, showcased that a significant number of C-suite leaders (29%) who already prepared a sustainability report, encountered one main challenge: they had difficulties in prioritising what to include in their report.
A practical way to overcome this barrier is to understand what truly matters for you as a team, from senior management and employees to external stakeholders, and identify the points where your contribution can be the highest.
How can you do that? By performing a double materiality analysis and including the following:
- Financial materiality, which focuses on the issues that internally affect a company’s financial performance and its ability to create economic value;
- Impact materiality, which focuses on the external impacts of your company’s operations, such as impacts on communities and the environment. These would include the company’s contribution to air and water pollution, for example, or its emissions of greenhouse gases (GHGs) that add to global climate risks.
This analysis enables you to identify your company’s impacts, stakeholders’ expectations, risks, and opportunities, to be able to further focus your actions on the top priorities for your company. By default, the stakeholders will be interested to read about the emerging priorities, as these are based also on their recommendations.
Did you manage to define who should drive the sustainability transformation for your business? Is there a core team or one dedicated person?
“Senior management must drive sustainability” and “Sustainability is every employee’s responsibility” are the most popular statements spoken in the last period.
Do you think that what those statements mean in practice is clear for the people in your company? For example, is it clear how a BoD member should contribute to the sustainability journey? What is the CEO’s role in this process? How can the CFO contribute?
What about middle management?
In this process, one hidden gem that often doesn’t get the attention it deserves is the onboarding of the middle management in the sustainable business transformation. Because the core business happens at this level and the pressure of the operational KPIs is felt the most. Therefore, the middle management must understand “what’s in it for them?”. The answer is straightforward: the expectations from clients, senior management, and other stakeholders and the impact on their operational KPIs, if they do not also embark on the journey (practically the business sustainability risks and opportunities at the level of the unit they are in charge of).
Therefore, when it comes to such a complex topic as sustainability, clarity is crucial. Clarity about what is expected from every single team member, from all the hierarchical levels. This clarity is often driven when having committed sustainability champion/s with enough formal and informal power to lead the transformation. But ultimately it comes from embedding the sustainability objectives into every team member’s objective and even into their remuneration. Currently, one of the strongest signals that a company is serious about its sustainable transformation is when its BoD and Senior management remuneration scheme are linked to the sustainability objectives.
Are your short-term corporate objectives connected to your sustainability journey? Are they perceived as ambitious enough for your market?
The story starts with the commitments, the “why” and the “what” of the sustainability journey.
As with all business objectives, these need to be realistic, but also set high enough to inspire. A crucial element in every transformation project is the sense of urgency for the transformation. On the other hand, sustainability is a long-term project so how can we create urgency in our day-to-day business?
One way is by setting intermediary targets (short-term, medium-term, and long-term), which are truly followed up and taken seriously. For example, with an ambition to be net zero by 2050, is it clear what should be achieved this month, year, next year, or in the next five years, to be sure that the company is on track to keep its promises?
Are you and your stakeholders happy with the speed with which you make progress?
With all the challenges that come with the everyday job, and the turbulent times that we are living, how are you making sure that your sustainability action plans are implemented?
The lessons learned from the latest transformation and more precisely the digital transformation, are also key for a successful sustainability transformation. But often the sustainability task force leader is different from the one driving the innovation/ project management programs. Therefore, it could be useful for the two leaders to share insights on different areas:
- What change management methods worked and could be applied to ensure achieving the sustainability objectives?
- How can the interest and enthusiasm for this initiative be maintained in long term?
- How to identify the low-hanging fruits?
Another crucial point is to internally reach the same understanding of the definitions, calculation methods, and interpretations for the Sustainability Key Performance Indicators. Otherwise, the risk is for different departments to draw different conclusions for the same questions and when looking at the same results.
What is the best way for your company’s stakeholders to get a full and accurate picture of your sustainability journey?
Like Peter Drucker said, “What gets measured gets managed”, and better reporting doesn’t just measure sustainable value creation, it incentivizes and helps power it.
But for this to work, stakeholders should be able to trust the published information. However, with the subjectivity cloud surrounding sustainability, the non-financial data accuracy issues, and the lack of comparability, they can become skeptical. Therefore, any type of third-party assurance can help promote a better degree of confidence.
In conclusion, as with any transformation, sustainability is a journey, so the important part is for you to be happy about your company’s progress each time you ask yourself the above five questions. At the same time, the key is to always keep in sight the “destination” of your journey, which in this case means that sustainability should become part of your company’s purpose, values, and cornerstone of business strategy and decision-making.
By producing a sustainability report, you will engage effectively with stakeholders and demonstrate the existence of a responsible business strategy. Achieving this enhances trust, reputations, and stakeholder attraction and, when tied to financial lending, can reduce capital costs.