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It’s code red, but in climate change and broader sustainability terms, we knew that already. Business and political leaders must rapidly change their approach to sustainability across environmental, social, and governance (ESG) factors:
We’re publishing this short report on the heels of the latest IPCC (Intergovernmental Panel on Climate Change) report that outlines just how severe the situation is. The following sections also present some of the preliminary themes of our sustainability services ecosystem mapping study, and continue our build up to COP26, the 26th UN Climate Change Conference of the Parties. We examine the global context of sustainability and how leaders can move toward joint business and sustainability outcomes through roadmapping, data, strategic goals, and mindset within that global context, whether you’re ahead or behind the sustainability curve.
The reality is governments need to commit to net-zero mandates and ensure their businesses follow suit. In addition, businesses must make sustainability a priority; their customers, employees, and investors care, and their leaders must take responsibility in this new era of business.
The forced embrace of change as we emerge from the pandemic has had some positive impact on “pure capitalism” ideals. We have seen a big boost in profit-with-a-purpose philosophy, with enterprises ingraining initiatives like sustainability and diversity into enterprise-wide goals instead of solely focusing on standalone corporate social responsibility (CSR) initiatives. In Exhibit 1, the majority of major organizations across the Global 2000 are centering investments in emerging technologies to support initiatives around sustainability. We expect many employees to choose employers that stand for important values beyond profit. CEOs’ personal views will become increasingly important in setting the tone for their organizations as people increasingly look to leadership for purpose and motivation.
Sample: 800 Global 2000 enterprises
Source: HFS OneOffice™ Pulse Study, 2021
A decade after the IPCC outlined the need for the planet to reach net-zero emissions by 2050 (for a [50:50] chance at keeping post-industrial-era global warming below 1.5 degrees) its latest report says nothing overwhelmingly new. However, the IPCC paints a starker picture in 2021 of just how much trouble we’re in if we don’t move now and move quickly. It also gives more confidence—although it’s still a long shot—to what we can achieve by meeting the 1.5-degree goal. In short, we can avoid further and catastrophic climate and ecosystem meltdown. The scale of the problem makes the solution approach obvious: Rather than firms and policymakers taking sporadic individual actions (even if useful and well-meaning on their own), they must collaborate and work toward reaching net-zero and progressing toward all 17 UN Sustainable Development Goals.
COP26, November’s pivotal UN climate summit, is widely accepted as a critical milestone toward reaching the goals of the 2015 Paris Agreement; it will bring change across industries, geographies, and all levels of policymaking. However, regardless of what happens at COP26, businesses and the service and technology providers developing sustainability services and solutions can plug into these international networks to spread best practices, made even more urgent by how far behind businesses and governments are in meeting net-zero by 2050. These providers’ solutions, covered in the ecosystem mapping study referenced above, in combination with a host of technology, center largely on the following three areas: building and implementing roadmaps, data, and reinventing strategic goals and organizational mindsets.
Whether you’re a business, policymaker, service provider, NGO, or industry body: Start with the global context of reaching net-zero by 2050 (ideally before…!). Break this journey down by industry, geography, etc. and figure out how these individual roadmaps affect each other and come together. Speaking of roadmaps…
Roadmaps get bad press sometimes by being overused by consultants—but very simply, they measure where you are now, identify where you need to go, and plot a course to get there. You must apply cost and time estimates and interim goals to your course, as roadmaps are a critical tool in aligning sustainability with desired outcomes and the global context. If every government and business moved along a roadmap toward a goal of net-zero, in theory, we’d be on target for achieving net-zero on time. Of course, that’s much simpler said than done, but it’s not impossible; it’s beyond critical that we make net-zero happen.
Sustainability services providers are so important in this effort, not least from the data perspective. Sustainability services is the most important ecosystem that most people will have never heard of. It will be critical in helping businesses and governments plan and meet their sustainability goals via strategy, technology, and ongoing managed services. The ecosystem, however, remains fragmented and undefined. HFS is currently mapping this ecosystem, so stay tuned over the coming month and beyond.
Measuring the starting point for an emissions roadmap is not easy. Data issues plague enterprise sustainability initiatives; many are coping with non-standard manual reporting processes. Some enterprises have come to grips with their Scope 1 (direct, for example, from burned fuel) and Scope 2 (indirect, for example, from purchased electricity) emissions, but Scope 3 emissions (throughout supply chains) are a challenge for all. Controlling Scope 3 emissions is far beyond the capability of most businesses right now, causing a headache for regulators.
But measuring and monitoring sustainability metrics is not just about reporting, and therein lies one of the key incentives for business sustainability. It’s a win-win-win for the environment, people, and business performance. For example, real-time data on environmental performance can feed day-to-day and high-level strategic decision-making in areas like operational improvement, assessing customer demand, wider process efficiency, and company culture.
On the other end of the roadmap is the goal. Strategy consulting is seeing a boom as enterprises increasingly set the most ambitious targets possible. With that strategy, businesses can also realize a win-win in sustainability. It’s not a nice-to-have or a cost or regulatory burden, but an opportunity to build a better business on all fronts—including financial. It’s critical to consider ESG components together—sustainability must incorporate environmental, social, and governance (including economic) factors to work.
Far too many businesses are stuck in a legacy mindset that sustainability is a “nice-to-have” and a tradeoff with financial performance. This mindset is changing; however, every service provider to date in our ecosystem mapping study confirmed that despite leading businesses being very vocal about sustainability and its business benefits, there is a long tail of businesses that are either still getting to grips with their strategy and roadmaps or don’t recognize the potential business benefits at all. Our separate take on enterprise sustainability data shows it becoming a priority; however, leaders are still grappling with numerous other efforts competing for attention.
The shining hope within sustainability services is that service providers know how to make things happen, and they plug into ecosystems and spread best practice. They can do this in the private and public sector and significantly influence and work with governments, which all need to set net-zero and other sustainability goals to respond to political pressure or legal commitments like the Paris Agreement (and whatever COP26 leads to). The COVID-19 pandemic is showing businesses and their service providers that change is possible and how best to make it work after years of stifled digital transformation work. Sustainability and digital and business transformation are converging. Truly native sustainability is no longer about stand-alone strategy; see our detailed take for more on this.
If you’re behind the curve on sustainability, measure your starting point, set net-zero and other sustainability goals, and get moving on a roadmap. To do so, you’ll probably need help from a service provider for strategy, delivery, technology, data, ongoing support, and change management.
If you’re ahead and have goals and roadmaps in place, we guarantee there’s still more to do. Get involved in as many networks as possible and bring best practices. This is a competitive advantage, especially for service providers. Sustainability is a win-win for business and ESG performance, offering clear value for enterprises—even if you ignore the avoiding-catastrophic-climate-meltdown part of the equation.