A brief guide to Sustainable Business Strategy — Part 1: What is it?

Addressing strategic sustainability challenges: Despite progress, companies struggle to integrate sustainability fully into core business strategies, impacting decision-making and overall direction.

Many businesses make claims about their sustainability, ESG or CSR, but without a realistic and effective sustainable business strategy, they are unlikely to deliver the gains that more sustainable performance can bring.

But just what is sustainable business and sustainable strategy?

This two-part guide is designed to provide answers, the first part provides a clear idea of the meaning behind the words, part two highlights challenges that sustainability practitioners frequently find, together with guidance on how to overcome them.

So, what is a sustainable company?

A sustainable company determines its activities, behaviour, products, and services through a detailed understanding of the environmental and social context in which it operates. As a result, it works within understood environmental and social limitations and reflects the demands and requirements of society. It also ensures that its total impact upon environment and society is either neutral or positive.

What is a sustainable business strategy?

Sustainable business strategy is the vehicle which supports and drives a transformation from an unsustainable company to a sustainable one.

Such strategy should establish a pathway likely to support and drive the company as a going concern over the long term (at least 2 decades).

Delivering a strategy requires the following core elements:

  • Recognition of the full strategic context — understanding the global and local sustainability issues that could impact the organisation. Achieving focus on the priority (material) issues that require management.
  • A clear sustainability vision — painting a picture of the company’s long-term ambition in the context of relevant environmental, social and economic trends and pressures.
  • Plans for action — an implementation strategy containing actions and plans likely to achieve that ambition.
  • Timescales — a timescale relevant to the trends identified for material environmental and social issues.
  • Communication & disclosure — clear, meaningful, and consistent messages communicating transparency, materiality focus and performance to stakeholders (in the form of formal reporting and informal communication e.g., in investor day presentations).

Why focus on strategy?

Strategy represents a translation of company capacity and market positioning into a series of actions to be conducted over time to meet stated business objectives. As such, it is the vehicle by which an organisation establishes and describes its ambition for success over the medium to long term.

In addition, almost all companies need strategy to attract investment, whether they are publicly listed or seeking support and capital from private investors or banks. Essentially, investors and funders analyse a company’s strategy and assesses its capability to deliver that strategy. They then make a judgement about how well that company represents a good candidate for investment (e.g., that it will supply the required “return on investment”) over the time frame that the investor requires.

Company strategy is therefore an essential area of focus for anyone who wishes to effect change towards more sustainable corporate behaviour. Strategy is the distilled essence of a company, and if this strategy does not feature, or reflect, a company’s commitment to a delivery of more sustainable business practice then investment drivers will wholly focus upon narrow financial performance and will fail to either reflect and reward sustainability actions or respond to the needs and intentions of society.

The challenge of truly strategic sustainability

While most leading companies acknowledge the importance of sustainability, they still struggle to weigh environmental and social issues against economic ones.

At its heart this discussion is about the ability of sustainability practitioners within companies to make the case for sustainability as a driver of business practice and strategy. While many companies have established programmes of ESG and sustainability, these generally run in parallel to the development of mainstream business strategy and as a result, they do not truly influence company direction and decision making.

For more insight into the specific challenges that sustainability professionals face in building sustainable strategy, see Part 2 of this post.

About Terrafiniti

Terrafiniti is a sustainability consultancy helping companies transform purpose & performance. We provide support on strategy, training, reporting & innovation to ambitious companies and NGOs worldwide who want to make today better or remake the future.

Find out how we can help you achieve your net-zero goals while elevating productivity and reducing operational costs.

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