WHAT DOES "SUSTAINABILITY" MEAN IN BUSINESS?
Updated: Jan 6
A growing number of organizations are integrating sustainability into their business strategy—realizing they can do well by doing good. In a recent McKinsey survey, 70 percent of respondents said their companies have a formal governance of sustainability in place. But what exactly does it mean to be “sustainable” in business?
WHAT DOES “SUSTAINABILITY” MEAN IN BUSINESS?
Sustainability in business generally addresses two main categories:
The effect business has on the environment The effect business has on society
The goal of a sustainable business strategy is to make a positive impact on either one of those areas. When companies fail to assume responsibility, the opposite can happen, leading to issues like environmental degradation, inequality, and social injustice.
WHY IS SUSTAINABILITY IMPORTANT?
Beyond helping curb those global challenges, sustainability can drive business success. Several investors today use Environmental, Social, and Governance (ESG) metrics to analyze an organization’s ethical impact and sustainability practices. Investors look at factors such as a company’s carbon footprint, water usage, community development efforts, and board diversity.
Research shows that companies with high ESG ratings have a lower cost of debt and equity, and that sustainability initiatives can help improve financial performance while fostering public support. According to McKinsey, nearly 3,000 employees said the strongest motivating factors to adopting a sustainable mindset are to: align with a company’s goals, missions, or values; build, maintain, or improve reputation; meet customer’s expectations; and develop new growth opportunities.
Rather, “doing good” can have a direct impact on your company’s ability to do well. Here are four steps you can follow so that you, too, can align your business strategy with your mission and create shared value.
HOW TO CREATE A MORE SUSTAINABLE BUSINESS STRATEGY
There are several ways you can go about transforming your organization’s purpose into performance. Here are a few steps to follow to create a more sustainable business strategy:
1. Assess the Problem and Define Objectives
The first step to driving change is assessing what sustainability means to your team, company, industry, and client. Consider the big problems each of these groups thinks is a priority.
To guide this process, consider asking questions, such as:
How much waste is the organization creating? Is our company culture struggling? Are our hiring practices attracting diverse job candidates? Is our product targeted to help a certain audience? What impact does our company have on the local community?
Answering these types of questions will help you establish your company’s sustainability objectives.
Quick Tip: Need help defining your sustainability objectives? Take the SMART goals approach as you move through these steps. Making sure your goals are “SMART”—Specific, Measurable, Achievable, Relevant, and Time-bound—in this early stage can save you time in the future.
2. Establish Your Mission
Once you’ve agreed on concrete objectives, you’re ready to define your company’s mission. A distinct mission statement is an important part of becoming a more sustainable business.
An effective mission statement outlines your company’s focus on “doing.” It should effectively capture your organization’s values and purpose, and serve as a guiding light of why you do what you do. In other words, your mission statement should define your company’s five Ws: who, what, when, where, and why.
Here are two examples of companies with effective mission statements:
Alignable: “We believe that local businesses are stronger together. Our goal is to help small business owners make the connections that lead to long-term relationships, generate more word-of-mouth referrals, and unlock access to the collective wisdom of the local business community."Patagonia: “Build the best product, cause no unnecessary harm, use business to inspire, and implement solutions to the environmental crisis.”
In each, it’s clear what the company values and how they’re executing against those values.
Quick Tip: Consider how your mission statement will grow as your company scales. A mission statement should help a business evolve with the market, not hinder your internal capabilities to innovate and disrupt business. For this reason, make sure your objectives can somehow be extrapolated from your mission statement.📷
3. Craft Your Strategy
With a strong mission, you’re ready to re-align your organization with a sustainable business strategy.
In crafting a sustainable business strategy, it’s important to ensure your company remains profitable. This is your number one priority. You can’t help your cause if you can’t stay in business. And as proven, your sustainability efforts may help you become more profitable.
Consider this: Does your company typically leave the electricity and heat on overnight, even while there no employees are on site? Imagine how much savings could be realized, in both cost and energy resources, if the last person in the office simply shut them off?
Or what about the consumers willing to pay more for a sustainably produced product? A Unilever study found that 33 percent of consumers want to buy from brands “doing social or environmental good,” creating an untapped opportunity in the market for sustainable goods.
There are several strategies specific to your industry that can increase your operational efficiency while driving social and internal value. Putting in the work to build a robust sustainability strategy can help both your company and the environment in the long term.
Quick Tip: Need a starting point for crafting your strategy? Consider internal and external opportunities to create value around your mission. Ask your team questions like, “Will our customers pay more for our product if we produce it more sustainably?” Or, “Can an enhanced business process decrease our emissions?” If yes to either of those questions, you may have the beginnings of your strategy, while simultaneously increasing your productivity and profit.
It’s one thing to talk about a newfound motivation to do well and do good, but it’s another to take a public stance, pledge quantifiable results, and actually achieve them. With your mission and strategy solidified, you’re ready to make strides toward reaching your objectives.
As you’re implementing your strategy, remember to revisit your process periodically to assure your objectives, mission, and progress remain aligned.
Quick Tip: Unsure of where to start? Ask yourself if there are any areas where your mission can have a great impact, quickly. Consider a partnership with an organization that has a similar mission to yours. Aligning your missions can help drive progress, fast. And partnering with an established player can enhance your credibility.
TYING IT ALL TOGETHER
So there you have it: four simple steps—from purpose to performance—that can help you create a more sustainable business.
When objectives become a purpose, a powerful story is established. That story will drive your mission and allow you to create an actionable plan. This plan is then ready to drive results and make you a true doer. Don’t worry if results don’t come immediately; the road to 100 percent sustainability is long and may take testing a few different approaches for you to make your greatest impact.
Are you interested in learning more about how to turn purpose into profit and creating business models that drive change? Explore our online course Sustainable Business Strategy.
This post was updated on July 19, 2019. It was originally published on October 10, 2018.
About the Author
Alexandra is a former member of the Harvard Business School Online Course Delivery Team who worked on the Sustainable Business Strategy, Economics for Managers, Disruptive Strategy, and Negotiation Mastery courses.
reposted by editorial, School of Corporate Affairs (SOCA)