Sustainability is the New Digitisation

What was discovered then is that there was more to the trend than simply digitising existing processes. Successful digitisation involved rethinking processes on a holistic level and even developing new business models. The winners and losers of digitisation are well known - there are a wealth of stories about former leading organisations that missed the digital revolution and new organisations that rose because of it. The winners tended to be those that saw the future and invented or re-invented themselves to take advantage of the new digital paradigm. The losers were those that were slow to adopt digitisation or think outside of traditional “quarterly conference call” priorities. To them, short-term profits outweighed longer term considerations. Unfortunately, like the Titanic commander, this type of thinking prevents organisations from doing the things they need to do to reach a future port safely.

We see the same dynamic developing today. Only instead of digitisation, it’s around Sustainability. And with Sustainability we once again see how human flaws such as short-term thinking and greed are putting organisations in a precarious position. Like digitisation, Sustainability is not going to go away; instead, it’s going to change the way in which the world works. It’s to be ignored at one’s own peril.

More Than the Right Thing to Do

There are some early advocates who believe Sustainability is the “right thing to do.” But the reality is, most people live in a short-term consciousness and just want to get the kids off to school and pay the mortgage, so “doing the right thing” is not a powerful message if it doesn’t provide immediate benefits. This means it’s incumbent on Sustainability’s adopters to bring it down to an individual level - how do you tell people that they should be adopting more sustainable practices because it’s important to their job, their pay and their community? With digitisation, organisations faced similar challenges: many people pushed it off in favour of doing the same old thing. But soon the “same old thing” was inadequate, entire markets moved away from the laggards and digitisation changed the world. And for every job and organisation digitisation destroyed, it created many more of them and made most people’s lives better. It was an unqualified net win for the world.

For organisations, Sustainability opens a world of new opportunity to improve operations, withstand risk and to become more profitable. But doing something differently brings perceived risk with it. For example, changing partners in your supply chain may seem risky, but if the “reliable” one that has given you years of good service operates in a war zone and the new one does not, the risk calculation changes.

Sustainability is a Two Way Street

As the Deloitte 12th annual Gen Z and Millennial Survey showed, younger generations are already using Sustainability as a primary consideration on how to buy and where to work. Organisations that serve and employ these audiences need to understand this or they won’t be interacting with them much longer. But beyond market forces like customer and employee preferences, there are many regulations and laws that are taking a more “top down” approach to Sustainability.

For example, the European Union’s (EU’s) new Critical Entities Resilience (CER) Directive requires critical organisations to comply with new laws each country in the EU will develop to enforce CER requirements. The goal is to make each organisation in the value chain more resilient to adverse events - ranging from geopolitical to environmental to social - making the EU’s critical infrastructure more resilient. This is one example of how regulations and laws can enforce sustainable practices and how Sustainability extends beyond the planet’s wellbeing to include everything involved with how organisations fill their roles within the value chain.

As we see from the CER Directive and other regulations and laws, Sustainability has become the new “rules of the game.” Playing by those rules is required; playing them well will make the difference between tomorrow’s winners and losers. The rules will be dictated in both a top-down and bottom-up manner. (It’s one thing to comply with the law, but it’s quite another to have a customer say, “Act this way or I’m going elsewhere.”)

We saw the same dynamic play out with digitisation. It started as a “free for all” with no rules, but today we see many regulations and laws that are designed to put guardrails around how organisations and their constituencies use digital technology and many of them are intended to address bottom-up issues, like how people’s personal Data is used. We also saw customers demand digital capabilities for interacting with organisations - it became a requirement for organisations that wished to remain competitive. While the digital ecosystem is still in development, it has created a virtuous circle where organisations reap the financial and efficiency benefits of digital technology while their constituencies enjoy greater and faster access to goods and services through digital technology.

Sustainability will be the same. There will be top-down laws and regulations setting the guardrails and constituencies will interact with organisations that live within them and - as the Deloitte Millennial and Gen X Survey says - shun those who do not. To be successful, organisations will have to move on from thinking the “old way,” where short-term thinking are king, to a “new way” where Sustainability requirements demand collaboration with every entity across the value chain. For organisations seeking to succeed in the Sustainability age, it’s all about creating value and profit in the short term and building on that through the medium term.

How do organisations successfully move to a world where Sustainability is a requirement? I’ll address that in my next blog.