The next big shift

Think back to the proliferation of the internet, resulting digital transformation, and the age of information. Imagine if companies like Blockbuster, and Sears had prepared for this shift. What could they have done differently, and what would they look like today?

Today’s companies find themselves at a similar inflection point. A sustainability transition is already underway—one that has the potential to disrupt businesses and industries at a scale not seen since the early days of the internet.

Take energy, for example. Massive technological advancements and rapid scaling of associated supply chains over just the past few years have made it nearly three times cheaper in most parts of the world to build new solar generation capacity than to build a new coal power plant. Just 15 years ago, the opposite was true.¹ And while legacy coal, oil, and gas facilities still account for 82% of the world’s energy consumption,² more than 80% of new capacity now comes from renewable sources.³ Just as with the digital transformation, success today does not require predicting the future, but rather seizing the moment.

The cost of inaction

Headlines in recent years have been littered with companies that have not taken sustainability seriously. Regulatory noncompliance may result in lawsuits and potential fines. Even more importantly, these infractions have the potential to create a lasting negative impact on a company’s brand and reputation. Studies, reports, and targeted social media campaigns from nonprofits and nongovernmental organizations (NGOs), like Break Free From Plastic,⁴ threaten to affect stock prices, customer sentiment, and the ability to recruit top talent.

Increasing social and environmental regulations have a direct impact on companies’ profitability and business operations. The Uyghur Forced Labor Prevention Act implemented in 2022 requires companies importing goods produced in certain parts of Asia to prove that inputs were not created with forced labor. More than $3.6 billion of electronics, apparel, footwear, and agricultural products have been held up by US Customs—creating stranded inventory and disrupting supply chains for companies that are not able to reliably trace products back to their second- or third-tier suppliers.⁵

Ultimately, the greatest cost of inaction comes through loss of market share to competitors that are innovating and effectively incorporating sustainability into their business and product strategy.

Making the case for profitable growth

The sustainability transition creates an opportunity to identify new revenue streams and optimize costs, positioning organizations for long-term, profitable growth that secures future market relevancy. Reliable evidence across sectors and industries shows that companies can meet their environmental and social goals while outperforming their competitors and driving positive top- and bottom-line growth.

It helps to evaluate the potential benefits of a sustainability initiative through the Sustainability Value Framework. The framework starts with three categories most C-suite executives already focus on: revenue growth, cost reduction, and risk avoidance. The levers in each of these categories can then be used to construct a business case that demonstrates how sustainability can drive long-term growth and profitability for the business.