The Purpose Business

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Everyone can build a sustainable business – here’s how

The Purpose Business

Rebecca Walker Chan writes on how to start making your business more sustainable. Read on to find out what you want and what you need to do, whether you are the CEO or not.

It seems safe to say, being well into 2020 now, that most companies are NOT operating in a sustainable fashion. In fact, based on the private sector’s approach to the climate crisis and the current state of environmental, social and governance (ESG) reporting disclosures, it seems that perhaps most companies may still not know how to be more sustainable. It is clear that business leaders, particularly Asia-based companies, are not up for the task.

This should come as no surprise though, as it seems many corporate leaders view sustainability efforts primarily as a way to enhance reputations and attract socially aware consumers, employees, and investors and fail to recognize the connection between company strategy, social purpose, and economic value. They really should though, not only for the sake of their company, but their own reputation’s as well.  The Harvard Business Review’s Best-Performing CEOs in the World list ranks the corporate leaders based not only on financial performance but also on environmental, social, and governance (ESG) ratings. With ESG scores increased to account for 30% of the final ranking, HBR provides a clear signal of the relationship between sustainability and success. Only a handful of Asia-based CEO made the list, and three are from Hong Kong, the first one coming as 28th.  It seems that while the world is still awaiting more ESG focused leaders to run sustainable companies, in the meantime, change can be steered from departments other than the C-suite.

while the world is still awaiting more ESG focused leaders to run sustainable companies, in the meantime, change can be steered from departments other
than the C-suite

So, what can you do to make a change towards greater sustainability in your business? Wherever you are in the company, you will have opportunities for change – here’s a guide to help you identify them. Start by taking a look in the proverbial mirror and try identifying where you are currently, where you WANT to be, and also where you really NEED to be.

Current state sustainability analysis: where are you now?

A good place to start is to take stock of not only what your company claims to be doing about sustainability, but how the company goes about it. You can adapt a current state analysis model (such as the As Is To Be method) which would identify and evaluate your company’s current processes to focus on ESG related topics. Not sure on which ESG topics to focus? Your ESG or sustainability (or CSR) report should have that covered in a section on ‘material’ topics.

Next step: Read, yes actually read, your company’s ESG report. Get to know what your company’s top material topics are, and learn how your management and fellow colleagues are managing them. Perhaps there is an already existing initiative that you didn’t know about and could contribute to. Or maybe you’ll realize that it time to push your ideas for adding environmental criteria to the vendor vetting process or for upping the days of paid maternity and paternity leave.

A lot of companies are doing the bare minimum to meet compliance standards and reporting requirements, but studies show that when a company truly adopts sustainable practices, it can lead to great things internally and externally. Employees may become more productive because they see a purpose in what they’re doing, and customers are increasingly choosing more sustainable or eco-friendly options if they are available. This means that it’s well past time for businesses to be making sustainable choices for compliance sake, and move on to seeing sustainability as an area of competitive advantage.

it’s well past time for businesses to be making sustainable choices for compliance sake, and move on to seeing sustainability as an area of competitive advantage

Speaking of, the next step would be to check out what your competitors are doing. They probably have an ESG report too where you can learn about their performance and efforts to ‘do better.’ Look abroad as well as locally. Check out Corporate Knights 2020 Global 100 ranking to see who they consider to the world’s most sustainable corporations. There’s really no good reason that a Hong Kong or Philippines company can’t be as sustainable as a Swedish or American company.

Assessing sustainable growth options: where do you want to be?

Now that you have an idea of where your company stands in the market and internally, it’s time to look forward and assess where it could be. As TPB’s Founder & Director Pat Dwyer explains in her article on responsible growth, understanding the different proactive and reactive drivers of sustainable business opens up new visions and opportunities.

“The reactive drivers are all responses to external factors. Every company goes through some if not all of these drivers and they all should find that each offers a different value to the company. The proactive drivers demonstrate companies taking control of how they use sustainability as a differentiator or value-add to their business.”

Considering where your company could be along the curve will enable you to fully assess how to move past current practices that aren’t sustainable (and don’t be afraid to get expert advice  if this starts to be overwhelming). Some questions you can consider along the way include:

Is protecting our bottom line what matters to us most?Protecting the bottom line makes good business sense, but that is all it is – it should not be guised as a commitment to operating sustainably.

How can we improve our response to risks, particularly climate-related risks?The financial impacts of climate-related issues on organisations are not always clear or direct, and, for many organisations, identifying the issues, assessing potential impacts, and ensuring the material issues are reflected in financial filings may be challenging. Your organisation needs to assess its climate-related risks and determine its response to those issues, only then it can consider actual and potential financial impacts on revenues, expenditures, assets and liabilities, and capital and financing. Get acquainted with the TCFD Recommendations and start reviewing risks related to the transition to a lower-carbon economy and risks related to the physical impacts of climate change.

Where can we seek some gains in efficiency and cost reduction, while also improving on our environmental performance?Seek out ways of going beyond reducing costs and actively ensuring that any mitigation programs or set targets stay at their optimal levels and are doing more with less.

Are there opportunities from operating more sustainably that we don’t know about?Maybe there is a tax break, reputation facelift, or a gap in the market that could be filled. Better yet, perhaps there are collaborative ways to develop a product or adapt a service that is better for the environment and also forged via a relationship between competitors that perhaps would never have been imaginable in the past.

Do we want to take the lead in changing our industry or specialism? If yes, how do we get in a position to do that?This involves creating an internal culture of changing the way things are done. It is very important to ingrain this in employees and stakeholders because this is what will fuel their own sense of innovation and engagement. Change from the top is an order, but change from within, and across levels, is real organisational leadership. Also, companies that benefit from the business case and value of sustainability have a responsibility of rallying the industry behind them. Going at it alone will not yield optimal results and at the end of the day, consumers will act more responsibly if the industry moves as one.

Using the responsible growth curve should give some clear indicators on where you are performing well, where you are not, and where you can afford to take some risks. The goal is to see how you can ‘capture value’ in key areas such as innovation and new product design, tapping into new customer markets, or making your value chain more transparent and beyond. Keeping in mind that the goal is to get your business where it wants to be, sustainability wise, and this could take years.

Which leads us to the next step; compile all this super useful information and get strategic with it. What good is having all this information you’ve been gathering if you cannot articulate your sustainability ambitions or formulate realistic plans to get there? At TPB, our experience shows that developing a strategy to address the sustainability issues that impact your business will help you see and demonstrate your progress to being a better business in this changing world.

developing a strategy to address the sustainability issues that impact your business will help you see and demonstrate your progress to being a better business in this changing world

Sustainable future-proofing: where do you need to be?

If you’ve followed, and actioned, the recommendations so far, you should have a good idea of where your company stands on sustainability, and where it can potentially go. But where does it need to be?

Imagine 2030, it’s ten years away and full of possibilities. What will it be like to work? Will there even be an office to go to anymore, or will the workplace of the future be entirely different? What about the state of the world? The WEF shared an enlightening article about what the world could be like in 2030, ‘if we get things right.’ Also, in a MIT Sloan Management Review article about mega-trends of the future, Andrew S Winston highlights some key sustainable future-proofing factors that are worth considering:

The will be more of us, and we will be living longer.This means more potential customers, more potential competitors, and opportunities to tap into the ever-increasing ageing population and middle-income market segments.

Most people will live in cities, which will be bigger and most of the world’s megacities will be in Asia.Which implies an increased need to build smarter, adaptive, and human-centric infrastructure and systems that can accommodate food, entertainment, and well-being needs.

Our relationship with technology will be enhanced and with it, we will become more connected but have less privacy.Transparency will improve in many positive ways as a result, but information will also be collected on every person, product, and organisation which has its drawbacks when it comes to personal autonomy and privacy.

Climate change will have already altered much of the natural world, and it will be unrelenting.“Many highly populated coastal areas will be in consistent trouble, as  sea levels rise. The natural world will be much less rich, with drastic to catastrophic  declines in populations of many species  and major to total  losses of ecosystems such as coral. Droughts and floods will stress global breadbasket regions and shift where we grow major crops.  The Arctic will be ice-free  in the summer (this will allow ships to move freely in this region, which is technically good for shorter supply chains but a Pyrrhic victory at best).”

Gen Z will comprise most of the workforceMillennials will be nearing 50, and their world view and expectations from business are already quite progressive and purpose driven.

Now, considering these factors, think about your company in 2030. Will your main products, services or offerings be the same, or do you expect things to change dramatically by then? Will your company even be relevant in this type of world? How will climate change and demographic shifts impact your supply chain, operations, workforce, etc? Will your company be a leader in sustainable development? Another way to look at it, as Mark Kramer suggests in his January 2020 article, Larry Fink Isn’t Going to Read Your Sustainability Report, a fundamental question to ask is, “is the company I work for positioned to thrive in a future world transformed by climate change and financed by investors who care about social impact?” In short, are you heading where you need to be?

a fundamental question to ask is, “is the company I work for positioned to thrive in a future world transformed by climate change and financed by investors who care about social impact?”

It’s having this type of mindset, where future-proofing and considering what the world will actually need in coming years from your business, is what it will take to be considered not only sustainable but of enduring value.

Motivational reading - Rebecca’s recommendations

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