In recent years, business transformation has become more and more prevalent, with organisations keen to implement strategic changes in order to achieve their full potential. But with Environmental, Social and Governance (ESG) factors increasingly pushing their way to the forefront, and a business’s stance on suitability fast becoming a deciding factor for clients, it has become more important than ever for organisations to assess their need for business transformation.
According to World Economic Forum, 8000 countries and companies representing 90% of global GDP have committed to meeting net zero by 2050 – just 26 years away. This, along with pressures from clients and potential employees, is driving organisations to consider business transformation with a specific focus on sustainability.
This was one of the key topics discussed in the first of a series of thought leadership events hosted by GRG Executive Search. Senior Partner Dan Edwards, Head of Interim Practice Sarah Bradley, and Partner Craig Howells were joined by a group of C-Suite leaders to discuss the importance of transformation and sustainability, and the factors businesses should consider before embarking on a business transformation journey.
In relation to the topic of sustainability, it became clear that leaders believed that big picture goals are often engrained, but the complexity of these challenges may differ depending on the functional lens and direct expertise.
Catherine Myszka, Transformation Director, believes that a business’s biggest driver for sustainable transformation will depend on their start point, suggesting that each company’s current situation will impact how they embark on a transformation project.
“From a regulatory perspective, organisations will need to be able to comply or explain regulation aims to drive transparency and accountability. From a brand perspective, customers are increasingly demanding sustainability to be embedded in the products they buy and the services they use and will switch to a substitute product that meets these demands if necessary.
“From a cost perspective, finite or scarce resources will make old production methods too costly; investors and financiers are starting to demand sustainability, and so sustainable businesses may benefit from lower costs of capital. Employees are increasingly aware of wanting to work for businesses that meet their personal values, so organisations who are sustainable will be able to attract better talent in a more cost-effective way.”
As Catherine raises, there are many benefits to sustainable business transformation. Independent Transformation Director Christopher Syrda reiterated this, sharing that companies who invest in ESG programs are likely to generate more shareholder value:
“Paying attention to environmental, social, and governance (ESG) issues is becoming increasingly critical across all industries. According to a McKinsey Global Survey, 83% of C-suite executives and investment professionals believe that ESG programs will generate more shareholder value in five years than they do today. Accenture’s research on responsible leadership shows that companies with high ESG performance ratings enjoy average operating margins 3.7 times higher than those of lower ESG performers, with shareholders receiving higher annual total returns.
“Simply put, sustainability is a business approach to creating long-term value by considering how an organisation operates within ecological, social, and economic environments. Developing such strategies fosters company longevity.”
ESG-conscious businesses that implement sustainability into their strategies can certainly reap the benefits, but how will it impact organisations from a talent acquisition perspective?
Recent data from the Corporate Governance Institute shows that sustainability plays a crucial role in job seekers’ decision making. The report shows that 37% of people would avoid working for a company with a poor record on green initiatives, while 42% are more likely to work for a company that demonstrates a commitment to sustainable causes.
The same study found that 60% of UK workers are unhappy with their employers’ ESG efforts; this suggests that, should your company invest in improving factors such as sustainability, it is likely that it will become more appealing to potential candidates.
Embarking on a sustainability transformation journey could make talent acquisition significantly easier for businesses, but what other benefits can prioritising sustainability offer?
“Businesses that embrace sustainability and make it part of their purpose, their raison d’être, understand that it allows them to create value across the triple bottom line – profit, people and planet.” says Catherine.
“They can generate financial value, whilst also creating value for the communities in which they operate, and the environment that is essential for human life to thrive. Old business models based on exploitation of finite natural resources will not survive – neither will businesses based on those old models.”
Put simply, Catherine believes that businesses that make sustainability part of their DNA ensure their long-term survival. While revenue is one of the main priorities for many businesses, placing value on people and the plant can be a driver or enabler of revenue.
Christopher echoes the opinion that sustainability should absolutely be a business priority: “Those who do not embrace sustainability could lose clients and business, and this will be represented in their profitability, performance, and margins. Businesses that fail to incorporate sustainability transformation in their strategy, planning and execution will be challenged by their shareholders, staff, and customers alike.”
CFO of Anglian Water Richard Eadie also agrees that, while a challenging task, sustainability should play a key part of business strategies.
“Putting a business on a sustainable footing is hard and often not the road most easily travelled. But giving it prominence can often create a broader set of ideas, a greater self-awareness for the business, and improved employee and customer engagement. At a more macro-level it can also open wider sources of investment in both debt and equity.”
90% of employees in Britain say it is essential that their workplace donate to charity, while 62% would think better of their company if it invested more in environmental initiatives. The data shows that it is essential for organisations to consider both people and the planet, and that this behaviour can make a business more appealing to both employees and potential clients and customers, which could equate to an increase in business growth and profit.
Transformation is the process of fundamentally changing a business; as the speed of disruption continues to increase, transformation will become a continuous process for businesses to ensure they can evolve their strategy effectively and meet business demands. It is becoming increasingly evident that businesses are equally embedding sustainability through these processes to ensure that they appeal to clients and connections who value sustainability efforts and are conscious of the positive impact sustainability could have on our declining planet.
“We are approaching critical tipping points for our planet, making the demand to accelerate sustainability transformation greater than ever.” says Christopher.
“Technology, in large part, will empower this change. The pace of technological advancement, along with our customers and partners, is driving our efforts to scale up business sustainability impacts more rapidly across the backbone of our economies and companies.
“Defining clear goals and actions to meet our sustainability ambitions, supported by AI and digitalisation, could empower companies, staff, customers, and partners to accelerate combined sustainability goals.”
In some businesses, sustainability is advanced, compared to others in their infancy. It is evident that driving an effective transformation agenda requires a cultural adoption to change, and that each organisation’s transformation journey will be different, depending on their start point.
But professionals and consumers alike can often very easily tell which businesses are adopting a sustainable approach, and which businesses are not.
“Leaders in this field have moved on from merely educating themselves on issues, to transforming themselves,” shares Richard Eadie.
“They tend to focus on a fewer number of initiatives they can materially move the needle on that are authentic to their business. By this point, sustainability is also not a bolt on strategy but enshrined in the overall company strategy and purpose. And finally, it is led from and discussed at the top of the organisation which is increasingly being linked to executive reward.”
We would like to thank Richard Eadie, Catherine Myszka and Christopher Syrda for supporting and contributing to the discussion and providing some invaluable insights. We thoroughly enjoyed hosting the thought leadership discussion and look forward to continuing the conversation at the next event.