The world is on a brink of a sustainability revolution. What can your company do to shape tomorrow's world?
The world is at a crossroads. Which path we decide to take with regards to sustainability will impact not only the present generation but the generations that follow us. Ordinary citizens, governments, and naturally also companies, have a vital role to play in shaping tomorrow's world, creating the basis for a sustainability revolution. The risks of inaction are clear. But where there is risk, there is opportunity. Fail to address sustainability in your corporate strategy and you put yourself at risk of reputational damage, problems in the supply chain and negative environmental impact. Choose to tackle the sustainability question head on and you may reap great rewards.
In recent decades, sustainability has gained a place high up on the corporate strategy agenda. Not least since the European Green Deal, companies have begun implementing ambitious compliance and ethical standards. But this is not only because they have suddenly developed a conscience. Rather, the general public has been leading the sustainability debate, and growing public concern has resulted in a tightening of regulations in areas such as CO2 emissions, closed-loop recycling and gender inequality. Generation Z is proving to be a generation of activists and, as these new employees enter the workforce, companies are having to strengthen their
commitments to sustainability. Today's workers increasingly expect their employers to have a social mission, a sense of purpose and to actively engage with the outside world. And companies that wish to attract the best talent must toe the line.
In tandem with pressure from concerned citizens and their own staff, businesses are also facing tighter regulation by government. Regulation plays a key part in creating the necessary conditions for the sustainability journey. Here, we see certain geographical differences: In Europe the focus is on product lifecycles, CO2 emissions, the circular economy and the share of women in leadership positions; in the United States and China the regulatory framework remains less stringent. Increasing concern about issues of sustainability is also impacting the financial markets, and investors are expecting more and more of companies with regard to their sustainability performance.
Businesses thus find themselves under pressure from multiple sides: society, regulators and investors. This has led to strong demand for a standardized framework for measuring corporate responsibility. One increasingly popular framework is ESG, the initials standing for the three core dimensions of sustainability: environmental, social, and corporate governance issues. The ESG framework has a number of advantages over other approaches: It is holistic, covering all aspects of corporate sustainability; it is measurable, so it can be used for internal target-setting and steering; and it is customizable, so it can be tailored to specific industries or companies. As a result, the ESG framework is already gaining critical mass in certain fields, such as the investment world.
Thinking in scenarios
The question on many experts' lips, however, is will the sustainability revolution come fast enough? Trying to predict the future with any degree of accuracy is foolhardy, but we do have a tool for reducing the complexity of endless future possibilities: scenarios. We have developed four scenarios, or pictures of what the world may look like in 2050. The thirty-year timeframe is long enough for the scenarios to differ substantially from each other, and also reflects the planning horizon of governments and regulatory bodies, and hence companies.
Together, our four scenarios form a panorama of the future with regard to sustainability – a "sustainarama", as we like to call it. We have made the scenarios intentionally provocative in order to stimulate reflection and debate. Thus, in our "Planned new world" scenario, in 2050 being sustainable is required by law, the climate catastrophe has been averted, global warming limited to just 1.5°C and global poverty reduced. We are living in what could almost be described as a sort of "state communism" with regards to sustainability, with laws covering every aspect of our lives.
In the "Everyone for themselves" scenario, by contrast, large parts of the world are no longer habitable due to desertification, more than a billion climate refugees are on the move, oceans are overfished and food is scarce. Companies still donate, but only to "bread and circuses".
For companies, however, the most desirable scenario is the "Race for sustainability". Driven by consumers, companies act as responsible players in society, competing for innovative solutions that drive a green transformation of the economy.
Our opportunity horizon for companies
What can companies do to shape a future that is livable, equitable and environmentally secure? A wide range of opportunities exist, from achieving CO2 neutrality, eliminating child and forced labor in their supply chains and ensuring gender diversity within their organizations, to linking CEO compensation and staff bonuses to sustainability performance. We advise firms to develop an effective radar for spotting these opportunities early on – such as the one shown below (mouse over the dots for more information):
Risks and rewards
Businesses need to embark on a journey of transformation. This will involve defining their "ambition level" for each of the action fields in their
sustainability strategy. Should they try to be a pioneer in a certain area, or do they first need to close the gap with their competitors? Ambition levels must be realistic, as public scrutiny is growing by the minute. There must by no hint of "greenwashing"; deeds must live up to words. We are convinced that companies that fail to address sustainability in their strategy are playing with fire. Passivity on sustainability issues poses substantial risks to businesses – supply chain risks, the risk of reputational damage, environmental risks and others. But sustainability also creates economic opportunities. For example, making sustainability your guiding principle can help you boost your energy efficiency, increase your level of recycling and rethink your business model, which may lead you to discover new market potential. Tackling the sustainability question head on may pay great rewards. Our advice to companies? Be bold. Take a strong stance on sustainability. The time to act is now – and the chance to shape a "better normal" has never been greater.
Sustainarama – How sustainability will change the world in 2050
Sustainability is changing the world as we know it. What will our lives look like in 2050 – and what can companies do to ensure a livable future?