Building a Sustainability Strategy - Your first steps.

The year 2020 witnessed the coronavirus pandemic severely impacting the global economy, leading to a remarkable 8% reduction in greenhouse gas (GHG) emissions when directly compared to the previous year. This reduction, however, must be achieved annually until 2030 to limit temperature increases below 1.5°C and prevent catastrophic consequences. Such a target raises important questions about global sustainability and moreover what actions must be taken to effect lasting positive improvements.

Table of contents:

1. Balancing Risks
2. Measure your footprint
3. Flexible working operations
4. Long Term Planning
5. Transparent Communication Channels
6. Support and Progression
7. What Does this all Mean? 
8. Next Steps

Balancing Risks

The similarities between the climate emergency and the coronavirus emergency are striking. The World Economic Forum's Global Risk Report for 2023 highlighted the top ten threats to global prosperity over a two year and ten year timescale. It is clear to see a large majority of these risks are large scale environmental in nature.

The awareness of these risks places increasing pressure on companies from governments, customers, investors, and employees. Despite concerns regarding competitiveness and profit margins, operating sustainably is increasingly recognised as sensible business practice.

Undoubtedly, achieving environmental sustainability encompasses a wide range of issues, from reducing carbon emissions to addressing biodiversity loss. Balancing sustainable development with continuous progress proves to be demanding. However, amidst the sacrifices lie opportunities waiting to be seized. The Science Based Targets initiative (SBTi), a collaboration between the UN, WWF, and other NGOs, offers guidance to companies seeking to reduce their emissions. It emphasises setting targets based on scientific evidence, thus aligning business strategies with crucial environmental objectives.

Measure your footprint

Companies must comprehend their environmental impact to determine necessary changes. Traditionally, the focus has been on a business's own operations, but that provides an incomplete picture. To effectively address the issue, emissions across the entire value chain must be examined to identify the areas responsible for the greatest emissions. With advancements in machine learning, the internet of things, and smart meters, measuring factors like energy demand, carbon emissions, and resource consumption is now easier than ever. Armed with this knowledge, companies can establish science-based targets for improvement in line with the goals of the 2018 Paris Agreement. Limiting global warming to 1.5°C will lead to more secure supply chains, healthier workforces, and more stable operations. Achieving this target requires a significant reduction in greenhouse gas emissions and striving for climate neutrality by the middle of this century.

However, environmental sustainability extends beyond climate change. There is also a need to address the damage to biodiversity, as highlighted by a recent WWF study showing a significant decline in global populations of various species. Science-based targets should address these issues as well. The commitment of companies like Amazon, Unilever, Microsoft, and Ikea to carbon neutrality and even carbon negativity sets a positive example. By considering both climate change and biodiversity, businesses can make meaningful contributions to a more sustainable future.

Flexible working...

Businesses and companies armed with knowledge and realistic targets can begin adapting their operations to improve sustainability. By using energy, water, and raw materials more efficiently, companies can quickly enhance their sustainability credentials. Simple steps such as switching to renewable energy sources, phasing out petrol-powered vehicle fleets for electric ones, and maximising recycling efforts can significantly contribute to sustainability goals. While cost may initially pose a significant challenge, it's important for companies to consider the full life cycle cost and the ongoing drop in renewable energy prices. As sustainability gains higher priority, equipment costs are expected to decrease, and stronger penalties on unsustainable performance may be imposed in the future.

However, changing infrastructure within their own shops, factories, and offices is just one part of the equation. Businesses must also evaluate the potential impact of environmental change on their supply chains. The COVID-19 pandemic has clearly highlighted the vulnerability of the interconnected global economy, underscoring the need for a thorough assessment of supply chains.

According to the Intergovernmental Panel on Climate Change, climate change will amplify the frequency and severity of extreme weather events, including storms, floods, heat waves, and droughts. Additionally, it will accelerate sea level rise, water scarcity, agricultural productivity loss, and land degradation. These impacts are not just distant threats; for instance, northern India can experience work shutdowns for days at a time due to scorching 50°C temperatures. The loss of fertile soil is also a considerable concern, currently occurring at a staggering rate of 24 billion tons per year.

Supply chain disruptions can have significant financial implications, the United Nations projects that climate change-related disruptions in the US workplace could cause productivity losses exceeding $2 trillion by 2030, with agriculture, construction, and mining being among the most impacted sectors. The consequences of climate change should not be underestimated.

It is imperative for businesses to embrace sustainable practices and fortify their supply chains to mitigate these risks. By doing so, companies can not only enhance their resilience but also contribute to a more sustainable future.

Long Term Planning

The journey towards sustainability can be both daunting and formidable for businesses. While reducing scope one and two emissions may be more manageable, significant scope three emissions indicate heavy reliance on suppliers or customers who emit significant amounts of greenhouse gasses (GHGs). This calls for a radical reevaluation especially as larger organisations especially often struggle to adapt quickly to new conditions and with sustainability, time is very much of the essence. Unprecedented challenges demand unparalleled planning, cooperation, and adaptation.

The next decade holds pivotal importance for the long-term survival of companies and entire industries. According to BP's annual report on the future of energy in September 2020, oil demand may have already reached its peak in 2019. Simultaneously, BP announced a $1.1 billion investment in offshore wind, signalling its commitment to transforming its business approach.

Technological advancements play a fundamental role in building a sustainable way of life. However, innovation alone cannot solve all problems. The extraction process for rare earth elements needed in wind turbines, solar cells, and batteries contaminates the surrounding soil and water, and demand is projected to outpace supplies. Data centres powering cloud computing currently consume around 2% of all electricity consumed in the US. Additionally, global electronic and electrical waste amounts to approximately 50 million tons annually, surpassing the total production of commercial airliners, with only 20% being formally recycled.

Addressing these challenges requires closer collaboration between businesses and governments.  While companies can step up, they cannot solve all problems and often need support to achieve their objectives. With time running out, the next two decades are poised to witness unprecedented and transformative shifts in our economic mechanisms. These include decarbonising energy systems, ensuring sustainable food production without harming nature, and transitioning to a more circular economy to minimise waste.

Transparent Communication Channels

The awareness of sustainability issues is on the rise among customers, employees, investors, and regulators. While greenwashing remains a problem, it is becoming easier to spot. In terms of environmental matters, businesses need to communicate honestly and transparently, and many are doing so. An analysis by The Economist of emissions disclosures from over 5,000 globally listed companies revealed that 67% of the S&P 500 now disclose their emissions, up from 53% in 2015. 

However, effective communication can sometimes be hindered by fear and uncertainty, therefore, it is crucial for all stakeholders, both internal and external, to be informed. Educating consumers should also be a priority, as too many businesses fail to engage them with meaningful sustainability messaging. Instead, the focus often remains on excessive consumption with little attention given to the true cost of products. Unilever, a consumer goods giant, has taken a commendable step in this regard. It plans to label all 70,000 of its different products with details of their greenhouse gas emissions from manufacturing and shipping.

Support and Progression

How a company communicates on sustainability is closely tied to its broader environmental governance strategy. It's not enough to simply talk about sustainability; action is required to build a good reputation in this field. Business leaders should involve their communications teams early on to ensure that their sustainability strategy meets the expectations of all stakeholders. The areas where the strategy exceeds expectations provide an opportunity to enhance reputation and should receive focused communication efforts. There are numerous benefits to be gained from this approach.

Sustainable businesses are increasingly appealing places to work, particularly for younger people. With increasing figures identifying that millennials chose a job based on the company's sustainability performance compared to alternative places of work. Additionally, investors are recognising the value of sustainable practices and are more likely to support companies with strong sustainability commitments.

What Does this all Mean? 

Simply, sustainability is no longer an option for businesses in Europe; it is a requirement, and for the minority of companies and individuals embracing the quick and easy principles of 'green washing', in an attempt to demonstrate their alleged green credentials, life will become increasingly more difficult.

Through the successful implementation of a sustainability strategy, modern companies can save costs, genuinely improve their reputation, future-proof their business, drive innovation and continuous improvement, and promote environmental and social responsibility.

Whilst this all sounds great, be in no doubt: successful strategies require planning and prioritising investments, as well as aligning them with overall business goals. Ultimately, modern business leaders need to recognise that they have the power to make a positive impact on the environment while simultaneously improving their company's bottom line through sustainability.

Next Steps...

Ok, you've made it this far (thank you!)

Now, it's time to roll your sleeves up and have a go at planning your own companies Sustainability Strategy, don't worry however Dreher Consulting has got you covered.

Check here for our next publication in our Sustainability Strategy series which identifies the 7 Core values every successful Sustainability Strategy must contain. 

Or find out more about our consulting services on our website: Sustainability