Crafting Corporate Sustainability Strategy

Companies are increasingly integrating sustainability into their strategies. The main drivers include changing societal expectations, regulatory policies, financial market pressures, and changing customer behavior. The generic business benefits of sustainability include securing the license to operate, managing risk, reducing costs, and increasing revenues through improved innovation and future market opportunities. How companies realize these generic benefits depends on their specific position and the maturity of their sustainability strategy. Strategies with high maturity do not treat sustainability as a separate add-on, but instead integrate it into how the company creates value. Moreover, sustainability strategies that aim at real life cycle improvements, such as in the case of climate-oriented strategies, need not only to integrate firm operations, but also to consider the entire value chain. This integrated approach to sustainability changes the entire strategy process. Its first step, environmental scanning, needs to consider a richer set of factors and stakeholders. Regarding strategy formulation, the strategy’s effectiveness and credibility depend on reliable target setting, such as in the case of Science-Based Targets for climate action. Strategy implementation requires an integrated approach to management that also engages relevant value chain partners. Finally, strategy evaluation and control must produce reliable data that can inform integrated reporting. Integrating sustainability throughout the full strategy process adds complexity while significantly increasing the potential for long-term sustainability and business benefits.