Four keys to mastering sustainability transformations

Moving from the WHY and WHAT to the HOW of sustainability transformations

In recent years, research has focused on separating fact from fiction on transformative sustainability to help executives navigate the risks and exploit the opportunities. Most publications have focused on the WHY and the WHAT of sustainability, but the focus of this article is on the HOW.

Four keys to transformation success

Based on our analysis, we have identified four keys to success:

The first key
Don’t greenwash, but integrate your sustainability efforts into your core strategy and transformation agenda

Almost as old as the debate about sustainability is the discussion of greenwashing. Greenwashing refers to companies’ practices relating to the contribution of their products and operations to their ESG objectives, and especially decarbonisation. Greenwashing represents the opposite of profound integration of sustainability in the core strategy and must be avoided.

Instead of running a set of loosely connected initiatives labeled “sustainability transformation”, companies need to redefine where they will play and how they will win while meeting their sustainability expectations and ambitions.

The degree to which business models are impacted by the various ESG issues and resulting transformation needs of their business and operating model varies between sectors. This drives the risk and opportunity landscape of the company and thus their transformation approach.

The second key
Get your transformation fundamentals right

Moving sustainability from the edge to the core also enables companies to leverage their current capabilities to innovate, transform and execute and harness their existing transformation capabilities. Our survey shows that sustainability leaders succeed by harvesting the business transformation excellence they already have.

1. Revenue before cost: One key determinant of superior long-term success is to drive profitability not by cutting costs but by finding ways to earn higher prices or achieve higher volumes. Our research shows that this fundamental principle still holds true in the age of sustainability.
2. Strong transformation capabilities: Transformation has become a constant. A company’s ability to quickly identify and react to change is an essential source of competitive advantage.

The third key
Strengthen your strategic foresight, ecosystem cocreation and strategy execution

From a managerial perspective many aspects of sustainable business transformation are the same as for prior transformations. But some distinctive differences are required to be successful in this new era.

Central to the sustainability transformation challenge is coping with, for example, the increase in external influences, including supply chain complexity, energy cost, employee and societal expectations. These challenges do not evolve in a linear, unrelated way. Network effects between them drive the need for unprecedented agility and speed.

Sustainable business transformation is not only special due to its complexity, but also because time is running out for humanity to tackle the climate crisis. Companies need to act now to have a chance of attaining their climate goals by 2050. However, acting now will require significant investments in unproven technologies today and these investments will have very long payback periods.

1. Strategic foresight: The sooner an organisation builds up its strategic foresight capabilities and the stronger they are, the more likely is it to turn future, disruptive shifts into success factors in their sustainability transformation. It will do this by prioritising a range of business opportunities which are in line with political and societal needs.
2. Ecosystem cocreation: To address the most pressing sustainability issues in their respective industries and sectors, companies in some cases need to reframe how they think and cooperate with their direct competitors. Benefits from this cooperation include the sharing of risk and investments related to new and unproven technologies.
3. Strategy execution: The special challenge in the context of sustainable business transformation is that companies must not only mobilise their own organisation but also their broader ecosystem. Therefore, the ability to execute in a coordinated way across multiple organisations is a key capability.

The fourth key
Choose your transformation mode based on your starting position

CSOs or equivalent heads of sustainability in organisation have different starting positions. In our Deloitte study, we distinguish between four different execution archetypes:

Forty-five percent of respondents choose the “All efforts unite” execution mode in which a central sustainability team coordinates and integrates the sustainability efforts across the organisation while the initiatives are executed in a decentralised way. This approach is very much in line with the deployment of a chief transformation officer and central Transformation Nerve Centre that we have seen is a key to success in previous large-scale business transformation programs.

It has become a consensus that a wide embedding of strategy and transformation into the organisation is required to make transformation a success.

Looking deeper into our survey data, a valuable insight emerges: one size does not fit all. Most leaders coming from an intermediate maturity level apply a different execution mode. They have chosen to drive their sustainable business transformation by nominating and empowering a strong central lead and team to drive sustainability across the organisation: “the sustainability heroes”.

Therefore, as an executive reflecting on how your organisation is currently pursuing its sustainable business transformation, you should start by honestly assessing your current strategic and transformation maturity. Then, carefully choose the execution mode that is the best fit and invest in a focused way in those transformation capabilities that move the needle.

About the research

Deloitte have interviewed more than 250 executives across all sectors to distil what makes business sustainability strategies so particular and what sets sustainability leaders apart from their peers.

Want more insights? You can explore the full article here.