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Sustainability Transformation is the Next Frontier
The path to a more sustainable world and a future-proofed business model runs through Sustainability Transformation practices. In this article, learn how to take the first step in the right direction.

Digital Transformation has been a seismic change for companies over the past decade. Some thrived, some just about survived, and some perished. Now, there’s a new change for them to adapt to: the next decade will revolve around Sustainability Transformation, which is underpinned by the technology revolution.

Sustainability has become impossible to ignore. The effects of the climate emergency are accelerating, demand for a more purpose-driven employment culture is rocketing, and customers are increasingly choosing companies that embody sustainable values. 

Most business leaders understand this. Six in 10 say that sustainability has become a high or very high priority for them over the past 24 months.

But can they achieve Sustainability Transformation? To do so, companies must meet employee and customer demands while achieving financial success. If they succeed, their companies will thrive. If they don’t, they will struggle to survive. 

Business as usual is no longer acceptable

The impetus toward Sustainability Transformation is coming from all angles. The majority of companies (54%) say that younger employees are pressing the issue internally, and 49% say that government regulations and guidelines are pressurising them externally.

We are now at a point where the worldis demanding a new model of corporate leadership
Ioannis Ioannou
Associate Professor of Strategy and Entrepreneurship
London Business School

“We’ve seen demands from customers for more environmentally and socially responsible products and services,” says Ioannou. “We’ve seen increased regulation – especially when it comes to environmental issues – by governments, which forces businesses to disclose more about what they're doing on environmental and social issues. We've also seen a lot of social movements and civil societies placing pressure on business to be more transparent. All of these pressures have come together to this point where business as usual is no longer acceptable.”

How companies can take action

So companies need to pursue Sustainability Transformation in order to create a more sustainable world – and to future proof their businesses.

Here’s how to do it.

Measure your progress

An essential first step for companies pursuing a Sustainability Transformation is to set measurable goals. To be most effective, these goals should be equivalent in scope to ESG and the UN Sustainable Development Goals, encompassing social and governance issues as well as environmental ones.

Seb Henbest, Group Head of Climate Transition at HSBC, explains why this is such an important step, especially on things like emissions calculations. 

“The first step is to calculate your own emissions: if you can't measure it, you can't manage it,” he says. “The second thing is you’ve got to have a plan that asks, ‘what might we be as a company in a net zero emissions economy?’ Then I want to see evidence that the plan is being put into action. What are the projects, the pilots, the partnerships, the acquisitions – what are the real things that companies are doing?”

Calculating emissions and tracking them is one part of a company-wide Sustainability Transformation strategy that has a clear mission statement outlining its goals. 

Use technology

Sustainability strategies must align with digital innovation. Investing in key technologies, such as computing, the network, AI, data and security and converging technologies (for example digital twins and sensing technologies), is crucial.

“Technology plays an absolutely integral and fundamental role in Sustainability Transformation,” says Ioannou. “It can take optimisation to a whole different level. Think about energy usage, water management, waste management – all of those kinds of efficiencies. Technology can play a huge role here.

“We also know that without new technologies, there's no way we can get to net zero. Whether it’s carbon-capture technologies, which are still in their very early stages, or electric vehicles, or new types of aeroplanes, or new types of ships, the options are endless. The way we build our cities in the future will rely on new technologies.”

Tie sustainability to the wider business 

In order to fully embrace Sustainability Transformation, the company’s financial and non-financial KPIs will need to be tied to its success – because sustainability outcomes and business outcomes are linked.

“This is the moment to engineer what is essentially a new industrial revolution, and that filters down all the way through the organisation,” says Henbest. “One of the important parts of this is to take this bucket of things we call ESG from being just a feel-good thing to being in the core business.”

This is not just a moral imperative

As Henbest says, Sustainability Transformation is not just a ‘nice to have.’ It can drive positive business outcomes.

Our survey shows that most of the organizations that are leading in Sustainability Transformation believe their activities have improved value for their shareholders, employees, customers, environment and society, and have positively affected financial measures such as revenue, profit and market capitalisation. About four in 10 say that improving sustainability increases the value of their brand, products and services.

And Sustainability Transformation can drive new market segments, according to Ioannou.

“Changing preferences and changing market conditions also create opportunities,” he explains. “Look at the market for electric vehicles, solar panels and plant-based diets. There's huge potential not only for job creation at the level of the economy, but also for growth and business opportunities at the corporate level.”

Some companies still see sustainability as a compliance cost, but the rewards are considerable for the ones that see the opportunity. This is a mindset shift that will enable these businesses to carry out a successful Sustainability Transformation.

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