Are you a sustainability visionary?

Even with the best of intentions, turning a company into a sustainable organization is daunting and may feel like standing at the foot of Everest. That’s what a recent report by Bain confirmed: The Visionary CEO’s Guide to Sustainability.

What I liked about this report is that, after talking to thousands of executives, the authors don’t shy away from the difficult truth: For many companies, sustainability means making radical changes in the way they operate. And it’s an “incredibly difficult balancing act” between classic short-term financial KPIs and long-term sustainability commitments.

Setting the scene: Sustainability is here to stay

The report explains that most executives are now well aware of the importance of sustainability. ‘They get it’. They know there’s no way back and standing still simply isn’t an option either. They’re acutely aware that the world is changing fast. Faster than it used to. 

• Quick climate change effects are already happening and will accelerate
• Natural resources aren’t limitless
• Unethical behavior can make headlines at the speed of light through social media
• And people are more and more conscious of businesses’ environmental and social impact

Whether they act as investors, business partners, employees, consumers, or citizens, they expect companies to be sustainable. All that makes corporate executives concerned about the role they’re expected to play, their own legacy, and the gap between their public and actual achievements.

Practical solutions to sustainability concerns

Now, how to help these top decision-makers?

The good news is that this report brings A LOT of practical key insights and ideas to help businesses and their executives ask the right questions and progress effectively on their sustainability journey. 

The Visionary CEO’s Guide to Sustainability is an impressive 90 pages long, and is a veritable mine of information, looking at topics as varied as:  

• Operations and supply-chain decarbonization 
• Building resilience in business strategy 
• Decoding consumers (spoiler alert: don’t assume Boomers care less about buying responsibly than Gen Z!) 

Just to name a few… 

These chapters act as tools and tips for leaders to implement their vision of their company’s sustainable future. 

Bain’s report also suggests that CEOs and boards should ask themselves three crucial questions when thinking about how to deliver on corporate sustainability.

1. What good are we bringing to the world, and what is our purpose as a company?

Focusing on the purpose of the company – particularly the long-term benefit that it brings to the world – this means looking at the business’s impact on users, customers, employees and communities. (Effectively the social aspects of environmental, social and governance (ESG) management.) 

Asking this question helps to anchor sustainability as a positive choice, focusing on future impact. It also avoids descending into defensiveness and blame, instead helping to foster pride and enthusiasm in positive change.

2. What cost will humanity have to pay for us to grow?

This is a stark question, but one that every business is going to have to face. The report notes that companies are increasingly expected to measure the unpriced (hidden) costs of business activities, or externalities. As the mentality evolves and the regulations follow, businesses will likely have to place a price on these before too long. Better get ready, starting with understanding the full impact of their activities, and how it can be mitigated.

3. What will get in our way, and what will we run short of?

Companies must also be serious about managing climate change risks. Resources and raw materials will become scarcer, and there will be more physical risks such as flooding and overheating. Businesses need to be realistic about where they’re likely to face problems, and how they might address these — including genuine changes in business models and how they run their operations. Again, preparation is key to ensure long term resilience and future performances. 

Companies must draw on three concurrent levers — as ‘and’, not ‘or’

The report highlights the importance of three levers identified by the Intergovernmental Panel on Climate Change (IPCC). These are policies, technologies, and behaviors. The report reiterates the IPCC’s conclusion that these are not either/or options. Instead, all three need to be harnessed for success. It highlights three key issues.

1. The importance of the ‘experience curve’

The experience curve was first put forward by the Boston Consulting Group in the 1960s. In simple terms, it suggests that cost per unit of production reduces as a company gains more experience. However, the relationship is not a straight line: with new technologies, cost will reduce far more rapidly than with older technologies. 

The Bain report suggests that companies should aim to “drive fast down the experience curve” of new technologies. This will enable them to create themselves a sustainable competitive advantage.

2. The necessity of collaboration as a lever in policy and regulatory environments 

Businesses may be in competition, but not necessarily when it comes to developing new policies to address climate change. Companies need to work together to ensure that new technologies are affordable by creating the right regulatory environment. 

Collaboration with both regulators and other businesses will go a long way to addressing climate change challenges.

3. The flexible nature of consumer behavior  

Businesses often seem to believe that consumer behavior is fixed and immutable. However, research over many years has shown that this is not the case. Consumers are showing clear signs of being prepared to pay more for sustainable products. Many are already doing so. 

Bain’s research shows that the ‘sustainability premium’ averages at around 12%, giving plenty of scope for passing on at least some of the cost of new technologies. Interestingly, though, consumers are more likely to pay more when they have personally seen the impact of climate change, for example, in extreme weather events. And since those events are unfortunately forecast to happen more often, we should anticipate consumers’ awareness increase at the same pace.

The challenge of embedding sustainability

The key message of the Bain report is that it is possible to embed sustainability into a business. The trick is to break it down into smaller issues and messages that teams can understand and get behind. 

For example, simply stopping the use of fossil fuels isn’t achievable — at least not instantly. But it is possible to reduce their use by inspiring, encouraging, and challenging teams to innovate in smaller ways. One such simple initiative could be to start selecting greener suppliers, for example. 

Small steps at a steady pace and the peak of Everest may be in sight sooner than you think!