3 ways CEOs can take sustainability programmes to the next level

We are entering a post-greenwashing era with the necessary shift from talking and measuring to acting for serious impact. In response, many firms have established sustainability programmes and partnerships to address social and environmental issues. At the same time, digital technology has matured to the point where it can serve as a force multiplier for social impact. Yet the opportunity to make corporate sustainability initiatives even more effective through the use of technology is too often overlooked.

Many executives still view sustainability and technology as separate priorities and even opposing goals. The opposite is true, as the interplay between digitalization and sustainability opens up brilliant opportunities to create a greener economy and society.

In fact, sustainability transformation could even become the biggest use case for digitalization and at the same time, digital transformation will radically alter all dimensions of global societies and economies and will therefore change the interpretation of the sustainability paradigm itself.

Digitalization, used responsibly, can significantly accelerate the path to true sustainability. These three often overlooked levers can help make today's sustainability programmes even more effective.

There is no doubt that the CEO plays a central role in influencing and steering the integration of sustainability into the corporate strategy and the firm’s value creation system. With this in mind, it's surprising that only 33% of employees said that their company's top leadership leads by example. Employees want leaders who don't just take a stand. Driving sustainability from the boardroom requires moving from commitment to action. If leaders can't change, the organization cannot either.

The CEO's natural role is to rethink the company's business models and find new ways of creating, delivering, and capturing value. However, many incumbents are still relying on yesterday's business model logic. The first assumption to be challenged is that sustainability comes at a cost. Following the traditional logic “I do my business, I have revenue, I have costs, I make a profit, and then after I make my profit, I decide how much of my profit to give to good causes” is no longer good enough. It means I am charitable if I spend some of my profit on something good. And if I am under pressure with my profits, there is nothing to do good with.

We are now entering a phase where sustainability is a good way of doing business. Hence, it is not about how you spend your profit, but how you earn your money. Such sustainability-focused business models offer the opportunity to increase both business and sustainability impact: 61% of companies seeking an integrated digital sustainability transformation already generate more than 10% of their revenue from these new business models, and nearly 80% expect to do so in three years.

While we advocate treating sustainability and technological change as an integral approach, this is also beneficial from an investment perspective. Companies, that rather strategically integrate than prioritize two separate areas, can leverage significant synergies and achieve a higher return on their innovation investments – both monetary and non-monetary. Such integrated optimization instead of separate (sub)optimization could be achieved, for example, by earmarking a certain share of R&D investments for sustainability and technology together. Volkswagen, for example, earmarked €11 billion in 2020 for the development of hybrid vehicles.

With a digital twin of the firm’s end-to-end value network, you can even perform scenario analysis to answer important investment questions by taking a snapshot, applying financial metrics, and evaluating strategic options: what level of CAPEX investment is required over what timeframe given emerging technologies? How would my operating expense picture change given certain investments in clean transport or production process technology? How would the emergence of carbon markets impact this picture, and at what carbon price assumptions?

Such a digital operating model enables CEOs to anticipate the impact of their decisions on the organization, extend information and decision-making power to a larger part of the company, and thereby increase commitment to transformation.

Sustainability cannot be solved alone. CEOs need to bring together complementary partners to develop, test, and scale the social impact of business in a concerted effort. At the same time, digitization – as a horizontal phenomenon – is blurring traditional vertical industry boundaries.

The automotive, metals and mining industries are closely linked in the shift to a sustainable supply chain operating model, with the final link being large-scale electric vehicle production. Given the auto industry's ambitious net-zero targets by 2030-2035, this subsequently requires the sourcing of low-carbon components and materials.

Consequently, the metals industry is working hard to decarbonize steel and aluminum by retooling its production and transportation processes with low/zero carbon technologies. In turn, the mining industry, as supplier of iron ore and bauxite, must likewise decarbonize their operations to meet the overall market mandate.

Digital platforms are the central means to orchestrate ecosystems for collaborative climate action across companies and markets at scale, and in concert with digital process flows that enable cross-sector collaboration, technology is the critical enabler. Or to put it more bluntly, sustainable change across industries is not possible without digital technology.

While challenging, these initiatives will prove to be very rewarding as they open up greater opportunities for long-term value creation for all stakeholders. CEOs who understand that they are increasingly expected to contribute to solving the world's challenges are in a better position.

It's time to focus on the essence of leadership: inspiring others to dream more, learn more, do more, collaborate more, and develop more next-gen leaders. The resulting momentum will move us much faster toward a sustainable future.