Zeroing in: Data-driven sustainability strategy for a climate-altered world
Over the next decade, sustainability is going to become central to corporate strategy. Current and future climate events mean that preparation and planning for a changing world are now essential. The businesses most forward-thinking about sustainability are already developing new opportunities that give them significant advantages, and the faster an organization develops its capabilities, the more fresh opportunities it will be able to develop.
"Companies that don’t adapt (to zero-carbon economies) will go bankrupt without question"
Mark Carney, then Governor of the Bank of England, July 2019
Many CEOs are recognizing the trend towards sustainability as being important to strategy. 99 percent of CEOs from companies with annual revenues over $1 billion believe sustainability will be important to the future success of their businesses. Ignoring sustainability is not an option.
In September 2020, wildfires across the western states of the United States threatened many cities including around the headquarters of the world’s leading technology companies in Silicon Valley. For the first time, many of the world’s highest-paid employees became climate change refugees. If there is anything likely to catapult sustainability into the heart of the strategic agenda for all industries, it is these leaders setting policy in their own organizations and the fear of further climate disruption from those who depend on their services. Wildfires in these states are a seasonal reality which has been growing steadily more intense over the past several summers, but this is the first year that the fires have caused a possibly existential threat to the west coast’s technology ecosystem from Silicon Valley to Seattle.
We are very likely to see a politically-led rapid economic rebalancing, leading to a globalized low-carbon economy, at some point in the near future. When a massive global economic shift occurs, it favours the organizations that have prepared – and the impacts of global climate change are expected to be significantly larger and much more permanent than the impacts of COVID-19. In December 2019, insurance giant AXA accelerated its commitment to climate change, stating that a “+4°C world is not insurable” and that “unsustainable businesses will become un-investable and uninsurable businesses”. Many businesses have started to identify the impacts of climate research on their long-term interests.
There is a historical disconnect between the inexorable pace of climate change due to the lack of collective action from governments, and the short-term interests of businesses and their boards. The compounded effects of short-termism and government inaction have led to inertia in climate action and a growing build-up of social and political pressure. The World Economic Forum’s top 5 global risks in 2020 were all climate-related: extreme weather, climate action failure, natural disasters, biodiversity loss, and man-made environmental disasters. Infectious diseases (such as COVID-19) came ninth on its league table of global risk in the 2020s; climate action failure was rated significantly riskier, at second. The pressure from climate science and increasing climate impacts will mean that the shift to a low-carbon economy when it comes will be a rapid, not a slow, transition.
Most organizations have until now focused on and reported a limited and broad set of data to identify their own emissions and climate impact. Better and more comprehensive data is needed going forward for both planning and mitigation purposes. Data has a significant role to play in helping organizations and countries to understand their future in a warming planet, and to develop climate-friendly future legislation and opportunities.
Sound data strategy consists of the capture, connection, analysis, and contextualization of data in order to create actionable information that informs decision making. Organizations that place the development of these capabilities at the forefront of their strategy will reap the benefits as we move into a low-carbon world.
Global organizations must begin to understand their own carbon emissions and impacts on climate – and also those of their customers and supply chains. As a low-carbon world emerges, it will likely become a societal requirement that companies become good citizens too, by moving towards working only with suppliers who share verifiable data around their emissions and providing their customers with verifiable information around emissions data as well.
The stages of organizational sustainability transformation
To achieve the transformation that makes sustainability a key part of strategy, an organization must do more than simply gathering and distributing data or setting future targets that become impossible to hold anyone to account for. It relies on first recognizing that long-term sustainability is rarely a large part of the current business strategy conversation at any level of an organization, then centralizing sustainability through regular, clear, and consistent reporting. This is often a multi-year process, but a necessary one given the wider global changes, the emerging low-carbon economy and the accompanying societal changes.
People are at the heart of the move towards corporate sustainability. People must deliver sustainable evolution, moving departmental conversations about employee retention and reputational impact towards executive discussions about product choice and change. This is by no means a simple change and requires planning, forethought and permission.
Moving the conversation beyond the next quarter or the next election (although they are important) is the way to make an organization sustainable over the long term for the good of society. It is this conversation and its outcomes that will separate those who are building sustainable organizations, resilient and prepared for the impacts of climate change, from those who will be unprepared and lose out in the coming years.
- Putting sustainability at the centre of corporate strategy is essential preparation for a future climate event and opens up fresh business opportunities
- A sudden shift to a low-carbon world will likely be a politically led, rapid disruption for which few businesses are prepared: COVID-19 has been a wake-up call for napping enterprises
- There’s a historical disconnect between the inexorable pace of climate change and the short-termism of boards, which has compounded inertia
- Data has a significant role to play in helping organizations understand their future in a warming planet, and to develop climate-friendly future offers
- Sound data strategy consists of the capture, connection, analysis and contextualization of data in order to create actionable information to guide decision making
- Global organizations must understand their own carbon emissions and impacts on climate, and also those of their customers and supply chains
- People must be at the heart of sustainability evolution, moving departmental conversations about employee retention and reputational impact towards an executive discussion about product choice and change