While Wave 1 served to benchmark companies on their sustainability journey, Wave 2 identified a maturing approach to embedding sustainability across business processes. Results from this latest study show truly sustainable businesses 鈥� those that have established sustainability as part of business strategy and operational decision-making 鈥� achieve a genuine competitive advantage. In addition, more respondents than ever see a stronger positive relationship between sustainability and competitiveness with 72% believing sustainability contributes towards their competitive differentiation.

“We see in the research how many companies are shifting to view sustainability no longer as a regulatory compliance tactic, but becoming more of a strategy to actually build business value,” Sarah Dziuk, 麻豆原创 Insights Head of Research, said.

The study includes results from 4,750 respondents across 21 nations and 29 industries. Eighty-five percent of responses came from midmarket businesses (under US$1 billion annual turnover) and 15% from large enterprises (over US$1 billion turnover per year).

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Making More Leaders Accountable

A key finding in Wave 3 was that businesses making the connection between sustainability and competitiveness make more leadership roles accountable for sustainability. This allows for a broader span of control and more accountability. The most competitive companies tend to have more than one top action taker such as a chief sustainability officer and an environment or sustainability manager.

鈥淥ur experience suggests that success is more likely when executives empower [their] organizations to engage proactively and strategically hold them responsible for creating measurable impact. Only then will companies be able to maximize the value at stake from their sustainability initiatives.鈥�

McKinsey

Improving Data Quality

Becoming an intelligent, sustainable enterprise requires regular, reliable, and accessible data. With the majority of emissions sitting within a company鈥檚 supply chain, shareability across business networks is also essential for meaningful decision-making. Unfortunately, many companies still rely on estimates and assumptions, many of which they gather manually.

Highly sustainable organizations have a solid focus on the quality of their sustainability data. Quality data comes from primary sources that track actual emissions, waste, and other elements. Unsurprisingly, this leads to more satisfaction with the data. The companies with the most substantial connection between sustainability and competitiveness report the highest level of satisfaction with overall data quality 鈥� 47% compared to just 10% of other organizations.

Reliable data is more useful in determining strategy. Forty-one percent of respondents indicate strong data usage to inform decision-making. They also integrate data into more business processes and operations such as procurement, product labeling, selecting M&A opportunities, and recruitment.

鈥淭he way we report on environmental data needs to quite quickly go through the same journey that accountancy went on many years ago.鈥�

S.Oleum, a Brazilian agroforestry business that generates a third of its revenue from carbon credits, has implemented several 麻豆原创 software solutions to help track and manage its environmental, social, and governance (ESG) data. Having a robust core system in place serves as a basis for all other processes and decision-making, as well as provides the accountability, transparency, and confidence it needs.

Quality data is the cornerstone of Catena-X, a program that allows the standardized exchange of carbon emissions data in the automotive industry using interoperability standards established by the WBSCD Partnership for Carbon Transparency (PACT). This lets businesses share product carbon information, promoting transparency throughout the supply chain, accelerating their journey to net zero, and making them more competitive in the process.

Sustainability as a Business Strategy

The top 25% of businesses reporting the strongest impact from sustainability reported that they treat sustainability as any other strategic pillar, on a par with IT for example. This has resulted in a much higher use of metrics for decision-making, increased investment, higher data satisfaction, and higher confidence of a return on investment in a one-to-three year period.

It has also led to positive business impacts including growth and improved profitability, increased efficiency, better quality products and services, and reduced costs, suggesting a truly sustainable business is more robust and resilient.

With clearer business imperatives, companies make investment decisions to drive business value. They invest in sustainability initiatives and can set realistic expectations of a positive financial return on investment in a shorter time frame, putting sustainability on a comparable timeline with other investments.

Linking Sustainability to Competitiveness

Companies are motivated to take action on sustainability when they see it as a genuine opportunity for differentiation and revenue growth. This leads them to make more people responsible for delivering on sustainability strategies and renders the barriers typically encountered earlier in a company鈥檚 sustainability journey, such as funding and concerns over ROI, less material.

It is interesting to note that in the UAE, where sustainability has been promoted at a country level as being as crucial for differentiation, a high proportion of companies (nearly 74%) are planning to increase their investment in environmental issues over the next three years.

The commitment to investment and lack of skepticism around sustainability in the UAE leads businesses there to report a significantly higher than average level of satisfaction with data 鈥� 36% are completely satisfied compared to 23% in the rest of the global results. More of these businesses, therefore, use reporting for decision-making, which is viewed more materially and results in decisions being taken more quickly. A positive relationship between sustainability and competitiveness is the culmination of these favorable indicators, allowing them to outshine their competitors in their sector.

Conclusion

The Wave 3 study results are clear: reacting to sustainability initiatives and demands isn鈥檛 adequate to gain a competitive advantage. Companies must invest in and treat sustainability as a key business strategy to unlock opportunities. In doing so, they will set a virtuous circle in motion where investment in accountability and better quality data drives more strategic decision-making and further investment. This benefits the company as a whole, making it more efficient, profitable, and robust in the face of the changing climate.

Heather Davies is a brand journalist.

The sought to discover, among other things, how the motivations and barriers of businesses adopting more sustainable actions are evolving. It comes ahead of the UN Climate Change Conference (), which will be held at Sharm El-Sheikh, Egypt, in November, and follows an 2021 sustainability study conducted by 麻豆原创 Insights. The research was based on a survey of over 6,000 businesspeople across 40 countries and 29 industries.

An Evolution in Motivation

While revenue and profit growth, together with company purpose and commitments, were still the top two motivators for companies operating sustainably, customer demand showed a seven-fold increase in importance between the earlier research and the latest. This was the largest change of any motivator and indicates an increase in the strength of customer influence on a business鈥檚 sustainability strategy.

Changing Barriers to Progress

Similarly, there has been an evolution in the barriers to progress. Aside from uncertainty generated by the COVID-19 pandemic, this year鈥檚 results showed that a lack of funding, incoherent strategies, and difficulty proving the return on investment of sustainable practices were the top barriers preventing businesses from acting on sustainability.

Measuring environmental impact, embedding sustainability into processes, and aligning actions with strategy are barriers that have dropped in importance. The reduced importance of these barriers鈥� points to a maturation of business processes and a better understanding of sustainability.

More Investment to Combat Climate Change

Financially, most companies are planning to increase their investment in addressing issues caused by climate change over the next three years. This year鈥檚 survey also showed that five times more companies are planning to start investing in sustainability compared to last year, whereas the number of businesses planning to decrease their investment fell by 55%.

Shareholders generally support businesses investing in sustainability. Most businesspeople surveyed believe their financial stakeholders are largely tolerant of their business鈥檚 sustainability goals, even at the cost of deferred or reduced profitability.

Strategically Speaking

Businesses are recognizing that operating more sustainably is not just a “nice to do” but a way of creating value (profitability) and differentiation (competitiveness) in the marketplace.

To this end, more businesses 鈥� 86.7% of those surveyed 鈥� say they are using data to inform strategic and operational decision-making.

This could be driven in part by the improvement in the quality of data available thanks to the fact that metrics are maturing, relying less on assumptions and estimates. Companies are also developing more in-house measurement systems. Nevertheless, business leaders said they need more frequent and reliable data with better transparency in terms of the calculations and assumptions used.

鈥淣ow that so many businesses are integrating sustainability into their most important decisions, they can and should demand that sustainability data be as comprehensive and accurate as any other type of data,鈥� says Vivek Bapat, senior vice president for Purpose and Sustainability Marketing and Solutions at 麻豆原创.

People and Accountability

Earlier 麻豆原创 Insights research showed that integrating sustainability into operations was being driven almost solely by the C-suite, but the latest research shows more diversification of responsibility. More sustainability and risk managers are now being held accountable in addition to CEOs and chief sustainability officers. In fact, sustainability managers top the list of employees accountable for embedding sustainability, which fits with the global trend toward companies making more 鈥済reen鈥� hires.

This shared ownership shows companies are integrating sustainability more broadly within their businesses.

鈥淪ustainability must become a talent that everyone within the business shares,鈥� says Bapat. 鈥淭hat will only happen if top management makes sustainability part of how the business defines success so that employees understand why they need to incorporate sustainability into how they think and what they do.鈥�

A Positive Outlook

While challenges around strategy, funding, and data transparency still exist, this research leads us to conclude that businesses are maturing when it comes to embedding sustainability. The survey results suggest that this is because they are sharing accountability, becoming more motivated by their commitments to their customers, and are supported by their investors. They also have access to improved data and are being incentivized by better business outcomes.