THE SUSTAINABILITY SERIES

Article 3 of 5

In the last two articles, I discussed the challenges faced by organizations in adopting the Sustainable Development approach. In this article I will discuss the first and foremost thing that an organization should do if they are willing to address the challenges and embark on the journey of Sustainable Development.

This article will reflect the importance of an effective and realistic Sustainable Development Strategy and the critical elements that should be kept in mind for it to be a successful one.

In the next article I will discuss some of the low hanging fruits that organizations can pluck to start their Sustainable Development journey.

Why a Sustainable Development Strategy?

I believe for the organizations that are embarking on this journey of Sustainable Development the foremost step is to define an effective and realistic Sustainable Development strategy to reap the full scale of the underlying opportunities. In fact, without a concrete Strategy the concept of Sustainability ends up as a short term marketing gimmick that neither resonates with customers nor with the business over a long period of time.

Elements of Sustainable Development Strategy

In the past, I have helped few organizations develop their Strategy and in the process I have learnt that the most important aspect of a successful Strategy is to ensure that it extends to all the stakeholders of the business including Board room, investors, employees, vendor partners and the customers. Further, an organization should consider all the following critical elements while chalking out a comprehensive and a successful Strategy:

1.Establishing the strategic context

Organizations while performing risk assessment often ignore the macro trends reflecting the dynamic economic, environmental and social risks and opportunities. This is one of the fundamental problems that should be addressed before an organization develops a Strategy.

Further, an organization should, in consultation with the relevant stakeholders including investors, employees, NGOs, customers, consumers, industry experts and the board members, develop a list of material (priority) issues that are expected to impact the business and/or the stakeholders. These material issues should reflect both risks and the potential opportunities in the short term as well as the long term.

2. Vision Alignment

Once the material issues are identified, it is important for an organization to retrospect and redefine its Vision encompassing the agenda of Sustainable development. This will ensure that an organization believes in the concept, understands it is long term and the agenda is elevated in governance, with direct oversight and accountability of the board.

3. Robust Action plan

Once the Vision is set in line with the identified material issues, it is important to have a robust action plan. The action plan should clearly define the goals against identified material issues, the areas of intervention (both short term and long term), the stakeholders responsible to achieve the goals and clearly defined and agreed timelines. In fact mature organizations also add ESG related KPIs for all the stakeholders to ensure the focus is not diluted.

Regular dialogue between stakeholders plays key role to reiterate the understanding and ensure that all the efforts are being put in the right direction. Otherwise the priorities of individual departments quickly take over.

It is equally important to ensure that while many modifications can be made to have a Sustainable Development approach the investment required for the identified interventions are justified by more than ‘this is the right thing to do’. The transition process and realization period of the returns (Economic, Environmental, Social and Governance) in certain projects may be long but clear understanding amongst the stakeholder is important.

Furthermore, I have realized that the things that separate Sustainable Development leaders from others is agility, openness to change and collaboration. This is important because most of the interventions for sustainable development run across industries, need a collaborative approach and innovation to ensure economically feasible implementation.

4. Resource allocation

Sustainable development is a journey rather than a destination. If an organization is looking to make incremental progress, it needs a continual focus. That is especially true in the early stages, when there may be smaller projects that get completed, then next ones need to start. Therefore, keeping momentum on the sustainability journey takes effort and an organization needs to have a dedicated team who can own the responsibility.

Further, viewing sustainability as a cost center is damaging and indicates that your focus is only on compliance and value protection and not on where the real/significant risks, impacts or opportunities may lie. Hence, it is important to include a sustainable development lens in the business decision making process and work towards reaping its benefits.

5.Sustainable Supply Chain

No matter how good your own performance, supply chain shortcomings can hinder the expected outcome as sustainable development cannot be achieved with a supply chain that is not in sync with the organization's strategy. In fact, for some of the organizations, especially textile and apparel, most of the risks and opportunities for Sustainable development lie within the supply chain.

“A number of sweatshop scandals were highlighted in the recent past blaming some of the most prominent brands in the apparel sector for unethical practices including child labor, violation of minimum wages amongst others within their global supply chains. Eventually, this led to reputational damage, and a financial hit for the brand owners.”

This is reiterated by the diagram illustrated below (adapted from “To whose profit”) that indicates that the largest environmental and social impact from a product occur up and downstream of the operations

Therefore, it is important to ensure vendor partners are also on boarded the Strategy and the organization collaborates with them on a continuous basis. Ideally, organizations should develop a Code of Conduct (COC), inclusive of environmental and social requirements, for the supply chain and a mechanism to check that the COC is being followed.

6. Communication and Reporting

Lastly, transparent, clear, meaningful and consistent communication with internal and external stakeholders is important for success of the Strategy. As discussed in the previous article this actually plays a key role in the transition process.

This helps an organization measure and benchmark their economic, environmental, social and governance performance and build trust among their stakeholders, which in turn directly impacts the bottom lines.

Further, Investors too are increasingly correlating better financial performance with better ESG (environmental, social and governance) performance and expect organizations to periodically and transparently communicate their ESG performance. The investors are continuously using the ESG data from different platforms to gauge overall performance of an organization.

All the above mentioned elements are equally important and complement each other for a robust and successful Sustainable Development Strategy. An ESG lens to the decision making process allows all the projects / initiatives to assess the potential ESG risks and opportunities and the value that can be created for all the stakeholders and not just shareholders.

I strongly believe that any organization that understands and is committed to reaping the benefits of Sustainable Development will emerge as the leader in the 21st century and will create a market barrier for competitors that will only grow with time.

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