Sustainability has arrived at companies! Really? Yes, because they are aware of the pressure to act on climate change, human rights and the like. And no: many companies are hesitant and fail to integrate sustainability into their business strategy. Ultimately, it is about sustainable (long-term) existence. A truly strategic approach to sustainability creates demonstrable financial added value. And vice versa: no sustainability management or sustainability management that is only focused on compliance destroys money. So NOW is the right time to tackle the sustainable transformation - strategically and in a way that creates value!

Sustainability - contribution to economic success

Using sustainability for economic success - this is supported by the constantly rising expectations placed on companies by customers, investors, governments and civil society. However, many companies do not yet have a strategic answer to the sustainability issues that affect them, partly due to the high level of complexity. Companies that want to be sustainably successful therefore need a professional management system “NOW!” in order to systematically exploit sustainability opportunities and avoid the associated risks.

Understanding sustainability holistically - reducing complexity

Sustainability is highly complex in its entire thematic breadth. Firstly, it encompasses a wide range of environmental aspects - such as climate change, the circular economy, biodiversity, etc. Secondly, it includes social issues such as the company's own workforce or human rights in the business area and supply chain. Thirdly, managing the key environmental and social aspects of sustainability in the business model requires solid anchoring in corporate management - with a strategy, appropriate management culture and communication. All three areas, which the capital market describes as ESG (environment, social and governance), must be considered holistically due to their interdependencies (see Fig. 1).

Fig. 1: Understanding and managing sustainability holistically

There are various methodological as well as national and European regulatory requirements for operational implementation. Examples include the Greenhouse Gas Protocol for determining the CO₂ footprint, the Supply Chain Duty of Care Act and the European Corporate Sustainability Reporting Directive (CSRD) as a reporting requirement. Depending on the size of the company, compliance with these is mandatory.

However, instead of “driving the proverbial pig through the village (company)” in ever shorter cycles for new sustainability aspects, only a structured strategic approach creates real added value. An approach that ensures compliance... but above all understands the impact, exploits opportunities for the company and avoids risks.  

Compliance ist Pflicht – Mehrwert entsteht durch strategisch und konsistentes Management

Studies show that companies with a focused sustainability strategy based on their business model actually achieve a double dividend - one financial and one sustainable (cf. Positive impacts (2023)). Two conditions must be met for this: cf.

1. Companies have a clear definition of their sustainability ambition as part of their (operational) business strategy. This must fit in with the company's business model.
2. Und: Sie benötigen ein Managementsystem, welches konsistent und glaubwürdig auf die bewusst gewählte Nachhaltigkeitsambition ausgerichtet ist.

The aforementioned double dividend can only be achieved if the two work together. Otherwise, the company is making expensive, unused efforts that are not in line with its strategy. Money is wasted. Or even better: the self-declared high ambition is not underpinned by suitable initiatives - greenwashing is being practiced.

Start: Decision on the sustainability ambition that fits the business strategy.

After taking stock of the relevant requirements, it is therefore necessary to decide on the right sustainability ambition (see Fig. 2). Is it sufficient to “only” comply with the legal requirements and prohibitions? Or does the company only address sustainability if, for example, customers demand it (stakeholder-oriented ambition)? Is the company pragmatic in its ambition and realizes sustainability-related cost or profit advantages? Or are strategic decisions even value-creating - for example, an adjustment to the product portfolio? Or is sustainability even suitable as the guiding star of the business? Each of these successive and consciously chosen ambitions implies an individual sustainability strategy that integrates the topic into the company to a greater or lesser extent.

Fig. 2: Five levels of ambition for the strategic integration of sustainability (source: Positive Impact, 2024)

Steps towards sustainable corporate transformation

With a consciously chosen ambition, it is then possible to shape the sustainable transformation of the company step by step, in a way that is both compliant and value-creating - specifically aligned with the business model, ...

• ... with a “double materiality analysis” in accordance with CSRD to identify material sustainability aspects,
• with a possibly more sustainable product portfolio, which strengthens the company's competitive position,
• with sustainability as part of business-specific risk and data management,
• with the HR department as a change agent for sustainable leadership and HR management and the development of any necessary knowledge among employees,
• with reporting that addresses customer and stakeholder requirements instead of uselessly working through “click the box” standards.

Tackle the sustainable transformation now and create value with sustainability

In summary, what makes the transformation to a sustainably successful company successful is the combination of an information-based sustainability ambition and the implementation of an explicitly value-creating strategy geared towards this. Without all of this, sustainability remains pure marketing (greenwashing) or an annoying “compliance exercise”. In contrast, companies with a smart, ambition-focused strategy and initiatives based on this will also sustainably strengthen the economic performance of the company.

About the author

Dr. Wolfram Heger is a TCI partner and sustainability expert. Before becoming a consultant, he spent many years building up and being responsible for sustainability management at Mercedes-Benz Group AG - primarily in the areas of governance and society.

Source cover image: © Summit Art Creations | Adobe Stock