4 Easy Steps to Develop a Corporate Culture of Sustainability

Management needs to make sure that the strategy of the company and the sustainability efforts are aligned. At The Center for Sustainable and Inclusive Business, often we see divergence, which of course makes the sustainability efforts fragile, lacking real commitment and prioritization. But there are many good examples. One such example is Unilever’s Planet Positive initiative, designed to give more than the company takes from the planet through plans to protect and regenerate 1.5 million hectares of land, forests, and oceans by 2030. Unilever says that is more land than it already uses to grow the renewable ingredients included in its beauty and personal care product range. And by 2025, the company says any plastic used in its packaging will be recyclable, reusable, or compostable.

Many of today’s leading companies in sustainability, like Nike, Coca-Cola, Telenor, IKEA, Siemens, and Nestlé, have stepped up largely as a consequence of a crisis. Oil giant Shell, already the focus of activist protests over drilling in the Arctic, faced boycott calls due its purchase of cheap Russian crude oil after Russia invaded Ukraine. Shell rapidly backed down and said it will exit all its Russian operations and write down up to $5 billion as a result.

All companies struggle with quantifying the return on their sustainability investments. With regards to compliance this is a straightforward issue. With regards to areas of competitive advantage, however, companies need to link sustainability to a business case. But the ones that do form a relatively small group.

In the latest McKinsey Global survey, respondents were asked whether their companies track the impact of ESG programs on various stakeholder groups. The biggest percentage among those stakeholder groups, 51%, was for considering the impact on board directors “entirely or to a great extent”. This reinforces how important boards are in collaborations with key stakeholders such as NGOs, governments, and international organizations.

We see that collaboration is also critical for efficient sustainability practices, particularly in solving crises and in shaping broader solutions. MIT/BCG data showed that 67% of executives see sustainability as an area where collaboration is necessary to succeed. Finally, and most importantly, engage the organization broadly: One good example of engagement is Salesforce, a company so committed to making every employee and department accountable to sustainability that it recently enshrined it into its core values.

Now that sustainability is part of its DNA, the company can leverage its full might to advance climate action and further operationalize sustainability across its entire business.

With these steps in mind, are you ready to make a difference and uncover the competitive advantages of becoming a sustainable, purpose-driven business? IMD’s Sustainability Programs, both on campus and online, will allow you and your team to build industry connections, join a powerful community, apply the latest research, and access exclusive tools. This includes IMD Sustainability Signals, a new resource that helps you identify and navigate global indicators and trends that will impact your business. 

With the support of faculty, coaches and peers, these programs guide you throughout your organization’s entire sustainability journey, from setting the foundations of change, to building a long-term road map that embraces sustainable business models which future-proof your organization and benefit society.

In Leading Sustainable Business Transformation, you’ll build your smart roadmap for a sustainable business future across three days live virtual, five weeks online, and three days on campus and IMD. For those unable to join us on campus, Winning Sustainable Strategies is an online program designed to help you integrate sustainability in your strategy so you can maintain your competitive edge.

You know that sustainability is an imperative for your business, but the real challenge is knowing how to transition from commitment to action, successfully navigating the intricacies of this complex transformation. You’re ready to discover opportunities for sustainable business models in your industry and beyond, learn best practices, and harness the latest capabilities to embed sustainability at the center of your business. 

One example of this transformation is the growth in Chief Sustainability Officer appointments resulting from a real business imperative, not just a trend. You and your board may find yourself asking, does your company need a CSO? More and more companies are appointing this position to facilitate the evolution of their business and drive efforts to meet sustainability goals. The role can even be a steppingstone to CFO, but it may become obsolete, or “biodegradable” as Xylem CSO Claudia Toussaint describes it, as responsibility shifts to all senior executives.

Natalia Olynec is the Head of Sustainability at IMD, where her work focuses on research, program development, strategy, governance, reporting and advisory. She has followed the growth and development of sustainability leadership where in the past, certain commitments and appointments were often rightfully criticized as window dressing or greenwashing. But now sustainability is a core element of many companies’ business strategy. The expansion is also partly the result of external pressure – from investors, customers, employees, regulators, and other stakeholders. Companies are having to answer increasingly probing questions about ESG risks and opportunities, particularly from institutional investors. The most high-profile example is BlackRock CEO Larry Fink’s annual letter, in which he regularly urges companies to pay increased attention to ESG considerations. We’ve partnered with the World Business Council for Sustainable Development (WBCSD) to equip future leaders for sustainable business transformation, but this is just the tip of the iceberg.  

Here’s the business case for why all businesses should embrace sustainability. In the latest McKinsey Global Survey, 83% of C-suite executives and investment professionals believe that ESG programs will generate more shareholder value in five years’ time than they do today. Companies with high ratings for ESG performance enjoyed average operating margins 3.7 times higher than those of lower ESG performers, according to Accenture’s research on responsible leadership, and shareholders routinely receive higher annual total returns with ESG-focused organizations, outpacing poorer ESG performers by 2.6 times.

Just like with any strategy there is no “one right solution” on sustainability. The best solution depends on the ambitions and stakes at each company. Here are some practical recommendations for management teams to take. 

But before we begin, transparency is a pre-condition. You cannot judge without transparency, simple as that. Transparency builds on the idea that an open environment in the company as well as with the community will improve performance. The only way for companies to accomplish transparency is through open communications with all key stakeholders built on high levels of information disclosure, clarity, and accuracy – as well as an openness to recognizing faults and improving practices.

You’ll also need to address compliance, which often relates to regulations in waste management, pollution, and energy efficiency as well as human rights and labour responsibility. According to the 2021 EY Global Institutional Investor Survey, 74% of institutional investors said they were more likely to divest from companies with poor sustainability performance, while 90% said they would now pay more attention to a company’s sustainability performance when making investment decisions.