Companies that integrate sustainability at their core today will shape the future

As businesses integrate sustainability in their core activities, the importance of sustainability becomes more apparent. In this article, we explore that rising importance, the strategic approaches companies can adopt, and the critical role of innovation, business model transformation, resilience, and long-term planning.

The forces driving sustainability

Several interconnected factors are accelerating the focus on sustainability as a strategic business topic:

1. Legislation and transparency: Governments are implementing stricter rules to ensure companies are transparent about their environmental and social impact. Regulations like the Ecodesign for Sustainable Products Regulation (ESPR) address how products are designed and produced to be more sustainable. Just recently the European Commission adopted the ESG Reporting Omnibus Package, a series of proposals aimed at simplifying the EU’s ESG reporting and compliance requirements. These proposals will result in changes to both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), which require businesses to report on their supply chain impacts and take accountability for them. However, at this point in time it’s too early to say how this will play out exactly.

2. Building resilience: Building up resilience is of growing strategic importance. This is partly because of today’s geopolitical uncertainties: being less dependent on the whims of foreign actors, or the scarcity of natural resources in the context of geopolitics, increases organisations’ chances to survive in the long run. But it’s equally important for organisations to have an adequate and flexible response to the (potential) physical consequences of climate change. Assessing climate risk exposure, based on plausible climate scenarios, can help organisations to prepare for whatever the future may bring.

3. Investors: Sustainability is increasingly a priority for investors, and is becoming integrated in their valuation of companies. While the specifics of their requirements vary, many investors assess how companies address challenges such as climate change, supply chain risks, and long-term value creation. What started as a moral imperative is now becoming a business necessity.

4. Competition: Sustainability can not only deliver a competitive advantage, but it’s also an essential pillar for the resilience of both companies and the EU as a whole. By prioritising sustainability, companies can better manage risks such as resource scarcity and energy costs, making them more flexible and less vulnerable to disruptions. This resilience can translate into a stronger market position and a future-proof strategy in a world where sustainability is becoming the norm.
For the EU, sustainability strengthens competitiveness by reducing dependencies—for instance, in energy, resources, or technology—and increasing autonomy. This strategic commitment makes Europe not only more environmentally conscious but also more robust and independent, ready to thrive in an uncertain global context.
In line with this strategic direction, some companies are already leveraging sustainability as a competitive edge. By offering greener products and more effectively mitigating risks like resource scarcity, they stand out in the market. This not only allows for premium pricing but also enhances their resilience and positions them better for a future where sustainability is a baseline expectation. The EU’s prioritisation of sustainability, placing it on the same level as issues like security, underscores that sustainability is more than ever a serious business topic.

5. Consumers and society: Research shows that sustainability is becoming increasingly important to citizens, which may further influence their behaviour and preferences as consumers. Public awareness has intensified due to climate-related events, such as recent wildfires in California, and activism from organizations like Extinction Rebellion. This attention has led companies to closely examine their role in sustainability: what they’re already doing, whether they should be doing more, and how effectively they’re communicating these efforts.

Yet, there’s a notable backlash against what is seen as overly moralistic or activist-driven approaches to sustainability. In light of this backlash, it makes sense to focus on the business perspective first. By anchoring sustainability initiatives in core business logic – through efficiency gains, innovation, or market opportunities – companies not only strengthen their business but also fulfil their broader responsibilities toward consumers and society.

Sustainability as core activity also builds resilience

Despite all of the above, sustainability remains an add-on for many – tweaking existing products to make them slightly greener. However, if businesses want to protect their future they have to prepare themselves, not just for a future that’s sustainable, but also for one that’s not. Are companies prepared to build resilience to the physical consequences of climate change, and make use of opportunities? It’s not just about marginal improvements. It’s about redefining everything a company does in light of the sustainability challenges our society faces and the role the company can or should play, building on its capabilities.

By embedding sustainability into their operations, organisations can address urgent global issues while building resilience and unlocking new avenues for growth. One inspirational example of a business that has embraced this shift includes Interface. This US-based flooring company committed to sustainability in the 1990s, developing circular carpet tiles. The transformation reshaped its product portfolio and bolstered its financial performance.

Strategic tools for understanding impact and value

Strategic Impact Assessment: a lens to enable better decision-making

Tools like the Strategic Impact Assessment (SIA) are essential for companies navigating this transformation. SIA evaluates the impact of business activities in terms of societal costs and benefits, offering insights across three dimensions:

1. Societal impact: How does the company contribute to broader goals, such as reducing carbon emissions or preserving biodiversity?
2. Stakeholder expectations: How well does the business meet the demands of regulators, consumers, and investors?
3. Strategic value: Which activities and products deliver positive societal impact while strengthening financial outcomes?

Unlike traditional sustainability reports, which often measure inputs and outputs (like energy use or emissions), SIA provides a strategic lens, enabling businesses to make decisions that are both sustainable and financially sound.

Double materiality: a holistic view

The concept of double materiality urges companies to evaluate both their impact on the world and the world’s impact on them:

• Inside-out: Assessing the company’s environmental and social footprint, such as emissions or product sustainability.
• Outside-in: Considering how external factors, like climate change or resource scarcity, affect the company’s operations.

By integrating these perspectives, businesses gain a fuller understanding of how sustainability presents both risks and opportunities. The next step is to evaluate the companies’ efforts in the context of planetary boundaries, as well as in the light of the expectations of all stakeholders.

Innovation: the engine of sustainability

Innovation is the cornerstone of sustainability. Businesses must redesign products and services to meet the standards of a circular, low-carbon economy while continuing to address societal needs, such as affordable energy, health, food security, and mobility.

The outside-in perspective (how do external factors influence company operations) belongs at the heart of corporate strategy and enterprise risk management. That requires a focus on long-term interests, and involves balancing short-term initiatives that deliver immediate results with long-term visions that prepare companies for transformative shifts.

The challenges of transformation

Transitioning to a sustainable future is complex. Businesses face several challenges:

• Uncertainty: Political and economic volatility can hinder long-term planning. Yet this planning is critical to prepare for a sustainability-driven future. Timing is everything.
• Freerider issues: When one company invests in sustainability but competitors do not, it can undermine competitiveness. Sector-wide collaboration is essential.
• Resource constraints: While many businesses want to invest in sustainability, financial limitations can delay large-scale transformation. On top of that, while sustainability efforts are often pursued by different divisions such as risk, strategy, and public affairs, those efforts aren’t fully integrated in many companies.

An additional challenge here is that in business environments, the focus often lies on sustainability initiatives that increase revenue – the business case for sustainability. However, this is not the same as the sustainability case for business, which comes with its own opportunities to increase revenue, but also has its own challenges (for instance building a portfolio that is sustainable by default).

Why immediate action is essential

The physical limits of our planet are becoming alarmingly clear, with water shortages, wildfires, and extreme weather events signalling the need for urgent change. Regulatory pressures, consumer expectations, and competitive advancements are intensifying, while the social and political divide on sustainability issues (both on national and international levels) continues to influence policies. Companies that invest in sustainable transformation today won’t just comply with these demands – they’ll future-proof themselves, build resilience, and lead the charge in creating a better tomorrow.

How Deloitte can help

Deloitte helps businesses navigate these complexities by combining in-depth sustainability expertise with strategic and operational insights. Our approach includes:

• Integration: Aligning sustainability with financial performance and strategic objectives.
• Perspective: Offering comprehensive analyses that combine inside-out and outside-in viewpoints.
• Trust-building: Guiding clients through pilot projects to build confidence in new methodologies that support transformation.

That full service package makes Deloitte your transformation partner along the way. With a proven track record in transformations such as digital innovation, our team enables businesses to meet today’s challenges while preparing for the future.