Some 40 million mattresses are thrown away in Europe every year, with around half ending up in landfill because polyurethane – the material used to make flexible foam – can produce hazardous chemicals when incinerated.
To try to make it easier to recycle polyurethane waste, specialty chemicals company Evonik has developed an innovative hydrolysis process that recovers the raw materials to produce new mattresses. But to get this approach adopted and move towards a circular economy concept for mattresses, Evonik must work with other system actors – from the suppliers of raw materials to retailers and customers – to create new steps in the value chain to first collect the mattresses, and then separate the materials before the hydrolysis process can be applied.
While many companies have taken steps to reduce their own impact on the environment, the above example illustrates that companies can’t spearhead systemic sustainability initiatives on their own. To achieve lasting and significant change, firms will have to team up with multiple stakeholders. This article will discuss three ways to create systemic sustainability transitions.
Over the past 15 years, corporate sustainability has increasingly become part of mainstream business practice as firms issue sustainability reports and investors and consumers pressure organizations to pay more attention to their environmental and social impact. More recently, studies have shown that investing in sustainable ESG practices can lead to financial benefits, from a lower cost of debt and equity to better share price performance. There is also evidence that being more efficient at using resources (be it energy, water, or waste) is a strong indicator of superior financial performance. On the other hand, some executives are still somewhat skeptical about these financial benefits and put off by the upfront investment needed.
In the next phase, organizations must look beyond their own footprints (the negative impact of their operations) and handprints (positive benefits, such as the products, services and technologies that reduce the environmental impact of their customers) to figure out how, as part of multiple stakeholder coalitions, they can contribute to sustainable transitions that address society’s complex challenges.
The most important belief that needs to be debunked is that a single system actor can change the world on its own. The first step in moving towards a systemic approach is to identify the right stakeholders by mapping them by initiative (See Figure 1).
Each of these stakeholders can play a different role in the implementation of sustainability initiatives. Research-related actors such as universities and technical institutes often act as knowledge brokers, while societal groups like the World Business Council for Sustainable Development can play the role of process facilitators. Other stakeholders may be change agents – this is often the case of the younger generation, as illustrated by Greta Thunberg. Supply chain partners or companies might act as problem solvers, while public authorities can play the part of policy actors. By having multiple actors playing active roles in sustainable initiatives, this increases the likelihood of co-ownership and the success of a sustainable transition.
The second step involves taking action. Here, I explore three approaches:
No matter the industry, increasing investment into new technology or infrastructure can create the foundation for disrupting existing technology and contribute to more systemic change. Take the example of transport, where electric cars are displacing the combustion engine, or power generation, where solar and wind energy are replacing fossil fuels. But this can also happen within any given industry, for example, the chemical industry contributing to a polymer that will increase the lifetime of lithium batteries. What corporates can do to help these niche innovations is to change the criteria for any new business development initiatives internally by increasing the environmental requirements for each innovation initiative.
But this might not be enough. One challenge for innovations is that they need to be protected since they are a potential threat to mainstream players. While initially the product might have a lower performance level or higher costs, it quickly becomes clear that it has the potential to disrupt the existing product or technology if given enough time. One solution is to nurture these disruptive innovations in small networks of actors beyond the corporate or research context through stakeholders such a public authorities, NGOs, or user support, which will increase the likelihood of adoption. A small group of actors leads to an ever-increasing network supported by communication that changes the perceptions of users. In addition, there might be “windows of opportunity” such as large customers wanting to adopt an innovation, or pressure from legislation to accelerate the change – Germany’s law to phase out new cars with combustion engines by 2035, for example – that will enable a niche innovation to become mainstream (see Figure 2).
The second approach involves actively participating in institutional policymaking. Take the example of the European Green Deal. In December 2019, the European Union presented a commitment to reduce EU emissions to net zero by 2050 by focusing on 50 policy measures with legally binding targets. The four key target areas were (1) becoming climate neutral by 2050, (2) protecting humans, animals, and plants by cutting pollution, (3) helping companies become world leaders in clear products and technologies, and (4) ensuring a just and inclusive transition.
The EU invited companies to collaborate in setting these policies, resulting in 2,600 interest groups actively engaging in the Green Deal’s agenda. Besides interest groups, firms can influence policy directly by or gathering information, meeting officials, participating in public hearings, or actively suggesting policy recommendations. The Green Deal also led to greater demands for transparency. Legislators and investors called for a standardized methodology for sustainability reporting with trustworthy data. This allows organizations to better communicate the long-term value of their investments and avoid being accused of engaging in greenwashing. The International Sustainability Standards Board, which was announced in November 2021, is such an outcome of the demand for more transparency. Leading up to the implementation of this board, firms are able to provide their input towards the reporting requirements. Without actively engaging with public authorities in the process, an opportunity is missed.
The third pathway involves leveraging exogenous events as “tipping points” – be it a recession, war, or climatic events such as floods or wildfires. Through these exogenous events, existing normative rules of behavior are questioned, and this can be used as an opportunity. Rules and artefacts shape stakeholders, and since rules are not just written in policies but also embedded in the heads of actors, working on perceptions of what “appropriate rules” might be will help to shape the actions they take. Workers, for instance, are becoming more vocal and shaping firms’ agendas by going on strike. Deloitte’s Global Gen Z and Millennial Survey shows that millennials demonstrate higher loyalty to their employers when they act on sustainability practices. Codification of new expectations through scripts shaped among stakeholders can lead to the adjustment of expectations. The Global Knights 100, a ranking of the world’s most sustainable companies, is an example of a formalized codification of expectations. As the acceptance of these expectations increases and is socialized among actors over time, new norms emerge – and by actively working on shared expectations of rules and routines through communication, stakeholders can adjust their representations. It is therefore the role of firms to actively engage in communication of new rules and norms and leverage “moments of crises” to shape stakeholder expectations.
What role are you playing in helping to advance multi-stakeholder sustainability initiatives? Are you truly engaging multiple stakeholders to shape the agenda of your sustainability initiatives? And are you actively investing in, lobbying for, or catalyzing these initiatives?
Evaluate where you stand with respect to multi-stakeholder co-ownership on a 1-4 scale:
Evaluate where you stand with respect to level of action-orientation on a 1-4 scale:
Your evaluation of your current practices should provide you with an answer as to whether you are truly invested in multi-stakeholder systemic transition management by engaging in multiple actor sustainability practices that implement niche innovations, lobbying and catalyzing (Figure 3).
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