With stakeholder pressure rising and regulators raising the stakes, industrial companies should not be asking whether a sustainability transformation should be pursued, but how to best leverage sustainability for competitive advantage. What approach will enable better decision-making, improving not only environmental sustainability but also increasing value for all stakeholders? Firms that successfully move from promises into action while defending and creating value will distinguish themselves as leaders.
Here are five concrete actions senior leaders in industrial companies should take as part of a proactive, forward-looking sustainability transformation:
1. Harness digital technology to advance value-led sustainability
Leaders use increased data collection and analysis to improve energy and resource efficiency, and rapidly design and launch greener products. They also embrace tools like digital twins and blockchain to generate a range of sustainability and value creation benefits.
2. Integrate sustainability goals with ongoing transformation efforts
Leaders recognize the necessity of continuous transformation and that sustainability goals should be integrated and aligned with these efforts — from digital transformation to portfolio management and beyond. Leaders are using sustainability as an offense.
3. Incentivize corporate leadership commitment to sustainability
Leaders link executive compensation to sustainability goals and embed sustainability principles into organizational culture and principles from the bottom up.
4. Collaborate with suppliers and customers on sustainability performance
Leaders prioritize sustainability criteria for supplier selection and create incentives for customers to use their offerings in ways that improve environmental outcomes.
5. Communicate sustainability goals and performance to external stakeholders
Leaders create accountability by being transparent about sustainability goals and subsequent progress with external stakeholders. The payoff from successfully assuming this risk may come not only from customers, but also from the capital markets, as investors increasingly seek out companies differentiating themselves on a variety of ESG-related metrics.