Three keys for a sustainability-focused operating model
Adopt a top-down approach that reimagines the operating model to implement sustainability initiatives in a profitable way.
13 MINS READ
The sustainability advantage
Some businesses choose sustainable practices because of ideological beliefs and values, others do so to comply with regulations and ecosystem pressure.
By adopting sustainability practices, businesses can eventually bring in value and realize benefits that include:
Projects a “doing good” image and improves reputation by showing their commitment to environmental protection, social justice, and good governance. Customers, especially those from Gen Z, are more environment-conscious and willing to pay higher for sustainable products. Moreover, a sustainable, healthier work environment attracts employees of the right caliber, reducing stress and improving employee morale.
Access to capital
Improves the company’s position to raise funds from venture capitalists, private equity, debt, and equity markets. Interestingly, market participants are increasingly focusing on sustainable investing, which looks at companies’ ratings in sustainability and balances risks with potential returns.
Operating efficiency and risk management
Utilizes and conserves resources properly for efficient, streamlined operations and reduced operating costs. Moreover, sustainability can also mean self-sufficiency or stability in the long-term. Organizations can mitigate risk through good governance and business practices that can, for instance, limit climate vulnerabilities or avoid social conflicts.
Protects the environment through regulations enacted by an increasing number of state and federal government agencies. The European Union (EU) is at the forefront in making key changes in sustainability legislation and regulations. This will affect businesses like International Sustainability Standards Board’s (ISSB) Sustainability Disclosure, the EU Taxonomy’s Climate Delegated Act, Sustainable Finance Disclosure Regulation (SFDR), and Corporate Sustainability Reporting Directive (CSRD). Businesses need to adopt sustainability best practices that will enable them to adhere to regulations and guidelines.
global consumers are willing to pay more for sustainable products.Simon-Kucher & Partners
trillion ESG assets, a third of global assets under management, by 2025.Bloomberg Intelligence
ESG services engagements will require a managed services component by 2025.IDC Prediction
Beware of challenges
Beyond doubt, weaving sustainability in an organization’s DNA offers exponential benefits. However, implementing a robust sustainability program has multiple challenges and complexities involved.
Some of these challenges that organizations face today include:
Reimagined operating model
Adopt the right strategy, tactics, and approach to overcome challenges in implementing sustainability programs.
To effectively embed, drive, and extract value from sustainability, it needs to be imprinted in the organizational DNA. This calls for reimagining the operating model and will require executive and operational ownership, sound governance, and reporting of regulatory compliance. By doing so, organizations can successfully weave sustainability in their operating structure and deliver desired results.
1. Establish a solid foundation with leadership alignment, vision, and governance
Executive sponsorship is the key to successfully governing, executing, and measuring sustainability.
2. Leverage change management and data observability as enablers
Implement a change management program to effectively manage and track all sustainability initiatives. Throughout, the aim must be to:
Sustainability-related data is mostly maintained in silos for each function or use case like carbon accounting, supplier audit, or life cycle assessment, making it accessible to specific users, and creating barriers to information sharing and collaboration across functions. Data quality often suffers due to inconsistencies in data that may overlap across silos, making it hard for business leaders to get a holistic view. To address this, establish a robust and business-aligned data strategy for efficient management and utilization of data, simplified data integration ETL, reduced technology and data management costs, and common data standards and policies.
3. Drive execution based on sustainability value drivers and track results with digital solutions:
Reimagining the business function embeds sustainability throughout the organization. Each business function is empowered to meet their share of the goals. This entails identifying sustainability value drivers and digital solutions that enable them, SMART KPIs to track and measure efficacy, and the digital technologies to implement these solutions for each business function. Figure 3 represents this construct for a manufacturing organization:
A three-step approach
Let’s look at three steps that are crucial to reimagine the business function construct.
Step 1: Identification and prioritization of sustainability initiatives
Identify sustainability initiatives aligned to the organization’s strategy and vision. While each industry requires contextualized initiatives, there are several initiatives that span across industries as shown in figure 4. For example, the BFSI industry can adopt specific initiatives like sustainable lending, sustainable investing portfolio, and additionally adopt cross-industry common initiatives like water management, transportation optimization, and green data centers.
Step 2: Implementation of digital technologies
Once identified and prioritized, leverage various cloud and digital technologies (individual or combination) to implement these solutions.
Offer effective prediction capabilities that can reduce greenhouse gas (GHG) emissions and carbon footprint by detecting energy emission reductions, predicting extreme weather conditions, and identifying greener transportation networks.
Enable data collected using smart sensors and meters in factories, office buildings, equipment, and transportation to be monitored and analyzed for optimized energy usage in buildings, predictive maintenance of equipment, and reduced emissions in transportation.
Provide data from sources like web, social media, biometrics, and machine-to-machine that can be leveraged to identify patterns, extract insights, identify process inefficiencies, and determine consumer sentiment. This enables organizations to gain a competitive advantage and take sustainable, positive actions.
Moreover, enterprises can exit data centers and migrate their IT infrastructure to hyperscalers like Amazon Web Services (AWS), Google Cloud, or Microsoft Azure, which have their own sustainability targets, indirectly enabling enterprises to reduce their carbon footprint.
Step 3: Tracking of SMART KPIs
Define metrics to track sustainability initiatives, including:
These metrics help track the results of implemented sustainability solutions and report them through interactive dashboards for real-time visibility and improvement or tweaking of the solutions. What’s more, enterprises can calculate their carbon footprint and manage reports efficiently with environmental, social and governance (ESG) reporting services from hyperscalers like Microsoft Sustainability Manager, Google Cloud Carbon Footprint and AWS Customer Carbon Footprint Tool.
Truly sustainable enterprises need to be profitable.
It’s time to move beyond the headlines and symbolic initiatives. Sustainability needs to be embedded into enterprises’ daily operations and driven through a reimagined operating model. This offers a practical way for them to ensure compliance and realize operational efficiencies, while building a strong brand image.