Gartner recently released the results of a Sustainability survey that involved 180+ executives of corporations in North America, Europe and APAC, with the purpose of identifying the strategic focus of sustainability programs, emissions reduction approaches and the role of technology.
Without great surprise, data shows that a lot will happen with sustainability in the 2020s: spending on sustainability and related technologies will have stable growth in this decade. The more complex problem is to identify how to spend the right amount of money, in which programs and, more importantly, to align with the company’s strategies.
The relationship between ambitions, goals and technologies
In the report, Gartner focuses on three steps: set sustainability ambition (why you want to implement sustainability initiatives), align goals with ambition (what you want to achieve), and unleash ecosystems with technology (how you’re going to achieve it through technology).
The first one - identifying the sustainability ambition of your company - is surely the critical starting point to deploy effective actions. Gartner identifies three categories where your ambition may fall:
- Compliance - a company decides to publish an annual Corporate Social Responsibility report because of regulations (e.g. listed company) or because of the potential positive impact on the brand perception - in other words, “I do sustainability because I need to (but I’m aware it’s a good thing)”.
- Optimization - a company that wants to manage and reduce risks related to sustainability, uses it as a strategic driver to improve resource consumption and efficiency - in other words, “I do sustainability because while reducing my carbon footprint I can save some money, too”.
- Transformation - a company puts sustainability at the center of its global business strategy or, as a minimum, defines business/product lines directly related to sustainability - in other words, “I do sustainability because I can generate additional revenues out of it”.
Companies typically evolve (well, they have to, it’s part of their survival kit): this means that who goes for Compliance today could position itself in the Transformation cluster in three years, but defining the sustainability ambition of your business is the first key step, as many other choices and actions derive from this one.
In this regard, let’s keep in mind that it’s always a bad idea to lie to ourselves, but even more so when it comes to sustainability: missing coherence and consistency could be painful in the long run. Be open and realistic in defining your company's ambition today, with the awareness that such ambition can be subject to change.
What are the implications of operating in these three categories? I’ve summarized a few key points, along with some comments on how technology can support a company’s journey through each phase.
This category includes those companies that “have to” be compliant with regulatory bodies and policies.
Environmental, Social and Governance (ESG) aspects are not necessarily on top of mind of the Board of Directors, but having meaningful and auditable non-financial disclosure and reporting is needed to attract ethical investors and access money markets at reduced prices. To be fair, the truth is that many organizations voluntarily decide to adhere to some compliance rules requiring disclosure on sustainability policies and metrics, even if not required by any regulatory body (e.g. non-listed small businesses).
In the large majority of cases, companies in this category collect current ESG data to monitor if they’re doing better compared with previous periods, but they don’t set a strategy with clear, predefined targets for their main KPIs.
Gathering sustainability data, both qualitative and quantitative, and calculating KPIs according to the most common standards (e.g. GRI or SASB) in a fully auditable process, is a task that requires the right technology support. I am referring to platforms able to collect, manage and disclose non-financial information - such as ESGeo, a sustainability intelligence solution already adopted by many companies in different industrial sectors to properly manage their sustainability processes. Even if, as already stated, many organizations at this maturity stage don’t have real targets for their non-financial KPIs, solutions like ESGeo provide out-of-the-box benchmarks that help them compare with average and "best in class" (by industry, dimension, geography) to identify improvement areas and inspire responsible behaviors.
Here we find companies that want to improve their efficiency through more sustainable strategies and behaviors. These companies see sustainability as an opportunity, or a driver, to reduce risks and operational costs, and to gain efficiency in resource consumption.
Companies with this ambition usually activate cross-departmental teams to coordinate sustainability programs and initiatives, and define strategic targets for the main relevant issues emerging from their materiality assessment. For instance, energy-intensive businesses are more likely to set carbon-footprint reduction goals or, even better, carbon-neutral targets; while for service companies social aspects like Diversity, Equity and Inclusion could be more relevant and hence drive the setting of their targets.
For organizations in this cluster, sustainability is no longer a “private affair” but involves a larger ecosystem that, at a minimum, includes suppliers (raw materials suppliers, energy suppliers, external recruiters,...) that cooperate to reach the goals set. ESGeo is beneficial for this company segment too because it provides full support in the materiality matrix definition process and has a specific module dedicated to the engagement and tracking of supply-chain players.
To optimize sustainability, organizations make large use of technologies that support the achievement of their targets. For instance, deploying IoT sensors to collect data streams and analyze them with the help of Machine Learning models; creating digital twins of the key components to enhance the efficiency of industrial plants and optimizing maintenance routines, and simulating configurations and interventions to reduce energy consumption.
Through vertical solutions, organizations can not only improve efficiency but also enhance field workers’ safety with clear and measurable social positive effects.
These are just a few examples, but it’s clear that digitization and innovation are crucial in optimizing sustainability. It could be difficult for many organizations to identify the right technologies for their use cases, prioritize enhancement opportunities and define a digital roadmap. This is why digital advisory could represent a critical success factor for many technology enabled initiatives.
Finally, we have those companies that perceive sustainability as a competitive advantage, where the Board of Directors wants to differentiate the business according to ESG principles. In practical terms, such companies have sustainability-led strategies for new products/ services and select suppliers not only on the basis of traditional performance indicators -- like capacity, time-to-deliver or average costs -- but define strict environmental and social operational conditions that suppliers need to fulfill to take part of their end-to-end supply chain.
52% of the Gartner survey respondents are in this segment: this is a further indication that sustainability and circular economy models are becoming mainstream in this decade.
Companies that reach this maturity level are open to participate and promote the development of sustainability practices as a business ecosystem result, where the cooperation between various actors - potentially even competitors - generates sustainable value for the entire society.
A great example of this vision is Open-es, the open platform for all companies playing a leading role in the development of a sustainable industrial ecosystem. Initially conceived by ENI, Boston Consulting Group and Google Cloud, the platform now features 1700+ registered companies from 40 countries and operating in 56 different industrial sectors.
We are also proud to be part of this innovative project with a unique mix of competencies, providing digital advisory through beNIMBL, vertical knowledge on Environmental, Social, Governance topics with ESGeo, and key contributions to the design and implementation of the digital platform with our Cloud Native Solutions Team.
Companies whose ambition is sustainability transformation design their products and services with circularity in mind, managing every single component as potential input to another production cycle, and interpreting sustainability as the opportunity to create new business models and generate new revenue streams. An example is car-sharing and smart mobility, where digital competencies and technology are fundamental to implement effective services - from electric recharge management to UX/UI design and connected products strategies.
Who drives sustainability strategies?
The last aspect I want to bring to your attention is the relevance of the different stakeholder groups depending on the company's sustainability ambitions.
Sustainability compliance is the obvious answer to regulatory bodies pressures, while optimization and transformation are consequences of extended, more complex relationships. Sustainability optimization strategies are in fact often the result of a mix of internal and external inputs, with employees pushing to work for a more sustainable company (employee branding, talent attractiveness) and investors who prefer to fund ethical, sustainable businesses (company brand and positioning). On the other hand, sustainability transformation is the company’s answer to market pressure and client requests to buy goods and services that satisfy not only their tangible inherent needs but also their sense of responsibility as members of a global community.
Gartner asked survey respondents to identify the top three stakeholder groups in terms of pressure and incidence on sustainability initiatives. While employees, regulators and investors obtained very close results, respectively 45%, 46% and 48%, customers scored a 63% that identified them as the clear leading group.
In summary, even for sustainability strategies, the old motto “Customer is King” is still valid.