Strategy creation is a logical process, leading to a clear executable implementation plan
Insights. Aspirations. Targets. Actions.
Sustainability is a planned journey with long-term goals and incremental targets and milestones.
The complexity for firms comes from the definition of sustainability, which means meeting our own needs without compromising the ability of future generations to meet their own needs. So a sustainability strategy has to consider the environmental, social and economic all taken together to find lasting prosperity.
While these future goals can be politicised, our work focuses on the indisputable strategic rationale for taking action now and putting plans in place that are in the best interests of your firm today.
The process to create a sustainability strategy draws upon the established strategic frameworks used in strategic planning.
Sustainability can be considered as a strategic pillar within a broader business strategy, but its far reaching implications for the firm will become apparent as we evaluate together the route forward. As such, the importance of tying sustainability back into the broader business strategy will become clear.
Sustainability strategy development can be led by exploring a firm’s responsibility to the environment and people, but invariably the firm will be held accountable by ESG regulation or voluntary disclosures. This means the requirements of these regulations and disclosures will always in part drive a sustainability strategy, which can surprise executives with pre-held views on corporate responsibility. Rhizome consultants are used to explaining how the three drivers of strategy – risk, reward and responsibility – interrelate and the useful purpose disclosures serve to set expectations, benchmark best practice and ensure focus is on the big picture and material issues.
Creating a sustainability strategy has four steps to success:
Understanding and insights: identifying the opportunities and risks to address
First up will be a check-in on understanding to ensure that sustainability has the same meaning for all involved in the strategy creation process. We will introduce the SASB® Standards that are designed to identify the sustainability issues most relevant to firms by sector. Additional global sources of information will come from the UN Sustainable Development Goals and the World Economic Forum Global Risks report. This leads to the discussion of materiality, its importance to sustainability and double materiality assessments. The most concrete aspects of any sustainability strategy will be the requirements from regulatory compliance. Thereafter the drivers are market analysis and competitor actions, corporate aspirations including employee demands, and alignment with existing corporate purpose and values.
Goals & Aspirations: setting the ambition
What does the firm aim to achieve based on the insight findings? We will focus on mitigation of ESG risk, gaining reward from long-term competitive advantage and addressing the firm’s responsibility to people and the planet. These aspirations (or vision of success) and goals should be broad but supportable and actionable (i.e., will stand up to the the challenge of “how”?). We cover the traditional “Where to Play?” and “How to win” especially for evaluating the opportunities for competitive advantage. We also consider goals such as to be regulatory compliant or competitive with peers. For some firms, aspirations will go beyond sustainability and into having positive impact. The ambition and these goals must align with broader business strategy.
Defined outcomes & targeted impact: defining our action with measures of success
The outcome is the tangible product or measurable change that occurs as a consequence of pursuing the goal. For instance, a broad goal of being known as a firm that values responsible and sustainable business practices, can be evidenced by voluntarily reporting the UN Global Compact or specific UN SDGs, or for funds becoming EU SFDR Article 8 or 9 rated. For competitive positioning it could be setting science based emission reduction targets, or achieving a ratings in CDP or EcoVadis. Examples in the S&G of ESG include setting representation goals in management and securing ISO27001 (information security management). For competitive advantage it might be innovative new product development or supply chain management targets. The outcomes and impact that are selected need to be measurable and time-bound.
Capabilities & Organisation: addressing the “how” and ensuring accountability
To be viable, the sustainability strategy must be executable. What capabilities does the firm need to have in place to deliver the plan? What organisational governance structures, tools and people skills do we need for success? Getting into this detail informs the likely costs to deliver the sustainability strategy and the transformational change required. It is the moment to consider priorities, timing and road-blocks. Does the long-term sustainability strategy link to a mid-term strategic plan and short-term delivery plan that can be implemented?
The highlight of AMBITION, ACTION and ACCOUNTABILITY mirrors the Transition Planning Taskforce disclosure framework, widely recognised within the sustainability community as best practice and a robust framework for transition planning. While specific to the transition to a low-carbon economy, this framework is universally appropriate to strategic planning and, furthermore, a transition plan should also consider the impact on people and a just transition.
Highlight:
Sustainability Sector Segmentation
| ENVIRONMENT | SOCIAL CAPITAL | HUMAN CAPITAL | BUSINESS MODEL | GOVERNANCE & RISK |
| GHG Emissions | Human Rights | Labour practices | Procurement | Business ethics |
| Energy management | customer data security | Health & safety | Supply chain | Board leadership |
| Water management | Product safety | Equity, diversity, Inclusion | Product design & lifecycle management | Compliance & regulations |
| Waste management | Product labelling | Employee engagement | Innovation | Competitive behaviour |
| Air quality | Customer welfare | Employee wellbeing | Resilience to physical & transitional risk | Risk management & reporting |
| Nature impacts | Community relations | Cybersecurity | ||
| Biodiversity impacts |