Sustainable Transformation: Key to a Company’s Development

By Gunika Gouri

The term, ‘sustainable transformation’ is often confused with a company’s Environmental, Social, and Governance (ESG) impact. However, such is not the case. Sustainable transformation is a term that is very vast as a concept and encompasses many attributes. It primarily aims to serve as an umbrella term for all that a company is trying to do to increase its impact, for the better, in the world. Thus, it may include anything ranging from a company’s endeavours to create a better working environment for its employees to using environmentally friendly goods as intermediate goods. On the other hand, the ESG impact of a company is largely focussed on three specific domains, as the term suggests. Within this, things such as a company’s take on climate risk management, workplace safety, and risk management may be included. 

In the past, many companies have failed to comply with their promises of sustainable transformation. One such example is Netflix. The business model of Netflix is unsustainable as it ventures into overly ambitious projects and then brings them to a halt after a mere season or so. By wasting so much time, money, and other resources on such projects only to not see them to completion, Netflix is highly unsustainable at its core. Further, their app interface promotes the usage of the internet which in turn contributes to collective digital traffic and subsequent energy usage, and since fossil fuels provide electricity globally, more internet usage leads to higher daily emissions. 

That being said, the purpose of this article is to explore how companies can continue to maintain the viability of their business models all while ensuring that they continue to grow and transform, sustainably. 

In current times, sustainable transformation for any organisation has become a dire need rather than a mere choice as 62% of executives consider this to be true and another 22% think that it will be in the future. 

Seth Goldstorm, a Senior Partner at Mckinsey, says that there are four steps that a company must take in order to attain sustainable transformation. Firstly, any organisation needs to see the initiatives it can take to attain success in its endeavour to achieve sustainable transformation. Subsequently, maintaining a structured process to track the implementation of such initiatives is the key. Secondly, an organisation’s business talent must be accessed and further trained to better their skill-set, which would also prove to be beneficial to the organisation. Further, a company should also focus on its growth and not just cost reduction. Lastly, and most importantly, healthy culture in terms of dealing with all its stakeholders must be maintained within an organisation as only that can drive the process of sustainable transformation of a company. 

Many industry leaders, by having taken a step in the right direction, are setting examples to showcase the initiatives that spearhead the process of sustainable transformation. One such industry example of the same has been set by Nike and Adidas. Herein, Nike is focussed on reducing waste and minimising its footprint and Adidas, on the other hand, has created a greener supply chain and targeted specific issues like dyeing and eliminating plastic bags.

While it can be understood that companies are well aware of the need for sustainable transformation, they often fail, at least in part, to fulfil their originally set commitments. The same was indicated by a survey conducted by Bain. Herein, out of 300 respondents, only 2% of the companies expected to achieve or exceed the sustainability goals that they had originally set. 

It is vital that companies set realistic targets for themselves and meet them if they are to truly be the torchbearers of a sustainable transformation in present times. For this, there are many strategies that a company may follow in order to realise such a goal. 

Firstly, at the most fundamental level, the management of a company needs to ensure that the strategy of a company aligns with its sustainability goals. If it fails to do so, naturally its endeavour to attain sustainable transformation is likely to fail as this leads to the absence of commitment as well as prioritisation of the goal set.

Next, the company in question must also address matters of compliance that might range anywhere from regulation in waste management and pollution to human rights and labour responsibility. Studies also suggest that failure to maintain compliance also dissuades investors as recent BCG/MIT data shows that 44% of investors are sceptical about companies with poor sustainability performance. Thus, to keep its business model viable, at least in the changing times, it is necessary that a company meets these criteria of sustainable transformation as well. 

In order to assess and quantify the return a company can manage to garner on their sustainability investments, companies can link sustainability to a business case. The same can be done in several ways. One such example could be by remodifying a product as environmentally friendly and then assessing the profits gained on the same and comparing it to profits gained in the sale of the older version of the product. 

A vital factor that forms a supporting pillar of sustainable transformation is transparency. Transparency continues to be a pre-condition for assessing and improving sustainability practices as, without it, the steps being taken by a company towards sustainable transformation cannot be judged. Transparency can be established by having thorough, open conversations with all the stakeholders involved by providing them full information, clarity, and accuracy regarding all matters.

Lastly, it is important that the Board of Directors of a company are engaged and play an active role towards sustainable transformation. According to a survey conducted by MIT/BCG, 86% of the respondents think that the Board should be actively involved but only 42% of the same do. Boards are often of vital importance when it comes to forming a collaboration with key stakeholders such as NGOs which makes them one of the most important drivers of sustainable transformation.

Thus, through this article, we have been able to assess the key role that sustainable transformation plays in a company’s growth and development. Furthermore, it is important that organisations, big and small, draw inspiration and follow the footsteps of those organisations that have already managed to attain sustainable transformation, at least at some level. Finally, in order to make sustainable transformation an attainable feat for all organisations, big and small, the meeting of the recommended strategies are likely to produce favourable outcomes.