Leading the Climate & Sustainability transformation

When it comes to mitigating climate change, the next decade is decisive. How the world responds during this time to the “ear-splitting wake-up call” to decrease carbon emissions will reverberate for many years to come.

Business leaders are under immense, growing pressure to step up to the challenge – making bold choices to reinvent their business models and rethink their value propositions to succeed in a future defined by Climate & Sustainability. There’s not an option to sit this transformation out. The decisions that CEOs make today will impact the course of the climate crisis and affect generations.

A number of shifts have elevated the pressure for CEOs to respond to Climate & Sustainability and lead responsible organisations. Changing purchasing patterns, for example, put greater emphasis on sustainable products and services. Deloitte Global’s Millennial Survey found that 42 per cent of millennials decided to purchase a company’s products or services because they believed it had a positive impact on society or the environment. The survey also found that millennials and Gen Zs show deeper loyalty to employers that boldly tackle environmental and societal issues that resonate with them.

In addition to consumers, the actions of other parties – including financial institutions, employees, regulators and business leaders– indicate that momentum toward Climate & Sustainability is accelerating, as shown below.

There’s a unique mix of Climate & Sustainability-related pressures for every country and industry, shaping business responses. Meanwhile, the pressure to transform continues to mount globally – with campaigns and calls for accountability from the Climate Action 100+, the Task Force on Climate-related Financial Disclosures (TCFD) and others.

Those CEOs on the leading edge of Climate & Sustainability often possess three key attributes:

• First, they look ahead to understand what threats and opportunities Climate & Sustainability presents for their future business.
• Second, they look inside to reconfigure business operations toward greater Climate & Sustainability.
• Finally, they look around to identify opportunities to leverage their business ecosystem to create competitive advantage in a Climate & Sustainability-focussed world.

Let’s explore these strategies in greater detail.

#1: Look ahead to the future business

Businesses that want to succeed in the future need to start looking ahead, now. CEOs should understand what threats and opportunities Climate & Sustainability presents for the business – and, in particular, how the momentum behind Climate & Sustainability may create new avenues to explore. 

An important shift motivating change in business behaviour has been the redirection of financial flows, as investors, lenders and insurers emphasise sustainable practices. CEO of BlackRock, Larry Fink, the world’s largest asset manager, has been a prominent advocate of this shift, stating in January that we are at the beginning of a “long but rapidly accelerating transition” to a more sustainable future.

As CEOs look ahead, they can consider the following questions:

• How will Climate & Sustainability shape our industry’s future?
• What will our business need to look like to thrive?
• Does our strategy set the company up for success?

#2: Look inside to identify opportunity spaces

Next, CEOs can look inside their company for ways to accelerate its Climate & Sustainability transformation, seeking out new innovations and opportunity spaces. Depending on the magnitude of the Climate & Sustainability risks and opportunities they face, some companies may find they need to go beyond integrative approaches – which seek to weave Climate & Sustainability into existing business models, strategies, products and services – to transformative approaches, in which Climate & Sustainability considerations drive the design of new business models, strategies, products and services.

Businesses that have the ambition to – or are under pressure to – transform at a more rapid pace will need to build a strong capacity to innovate. CEOs have an essential role in creating that culture and often need to rethink business models and practices, shifting away from the status quo.

Some shifts include:

By viewing Climate & Sustainability through a lens of growth and opportunity, CEOs have been able to accelerate toward their future enterprise. For example, Volkswagen has embraced opportunity in the electric vehicle (EV) market – announcing plans to produce 22 million EV units by 2030, with EVs then comprising 40 per cent of its fleet. The company’s CEO has emphasised that the speed of the transition to electric vehicles is essential to capture rapidly rising market demand. In another example of seizing opportunity, multinational consumer goods company Unilever reported that its Sustainable Living Brands are growing 69 per cent faster than the rest of the business and delivering 75 per cent of the company’s growth.

As CEOs look inside to identify new innovations and opportunity spaces in a Climate & Sustainability-driven world, they can reflect on the following questions:

• What new sustainable business models are emerging within our industry? 
• What new opportunity spaces are emerging for the organisation?
• What new skills or capabilities will we need to capture these opportunity spaces?

#3: Look around to harness the power of the business ecosystem

The collective realisation that conditions need to change – and fast – is creating a unique opportunity for CEOs to work together. Examining the broader business ecosystem can help CEOs learn from one another in their Climate & Sustainability transformation. By harnessing peer networks, working with like-minded leaders and organisations, and forging partnerships, CEOs can position their businesses for the future and drive competitive advantage.

Climate change is too big of a problem for a CEO to tackle alone. With an ecosystem approach, leaders can accelerate the transformation of not just one company, but an entire industry.

As CEOs look around to harness the power of their ecosystem, they may consider the following questions:

• Who within our industry shares a similar vision for the future?
• What key partners and capabilities are needed to transform?
• How can we connect with and engage these partners to accelerate our Climate & Sustainability transformation?

The bottom line: Lead from the front 

It’s time for CEOs to take greater ownership in reducing climate change. Looking ahead, inside and around allows for a truly transformative approach, rather than incrementally improving efficiency. In addition, asking, answering and acting on the right Climate & Sustainability questions can help CEOs transform their businesses to not only survive – but also thrive – in the future.