Aligning sustainability with corporate strategy – Kiran Dhanapala

Hard times necessitate hard discussions. The business case for sustainability has never been so strong – i.e. for the survival of businesses and lives. There is no other way and no other planet.

Sri Lanka must differentiate itself through sustainability initiatives for economic survival and to strengthen its resilience. All stakeholders – including corporates – will need to actively collaborate to help the country thrive rather than merely survive.

Corporate sustainability will play an important role in creating a resilient nation. Corporates must select both globally and locally relevant goals that are impactful. The mini-vehicles to do so are well designed and need based sustainability projects. Such projects must fulfil corporate purposes, capture new opportunities and mitigate new risks.

Sustainability is not charity; and it’s much more than philanthropic CSR projects.

Fulfilling a corporate purpose requires alignment with long-term strategies, and improving environmental, social and governance (ESG) impacts as organisations, while enhancing innovation and reputation as a result.

Meanwhile, new opportunities will aid revenue growth, reduce expenses, and increase asset and market values. Risk mitigation encompasses those related to revenue erosion, increasing expenses, as well as falling asset and market values.

Sustainability projects are akin to most change initiatives in organisations and form a specialised subset. Many change initiatives or projects face challenges. A 2016 survey of more than 300 large companies revealed that about 16 percent of sustainability initiatives failed to deliver, producing less than half of the expected results while this held true of 38 percent of all change efforts.

According to the survey, corporates generally dilute their efforts and settle for less – as seen in 81 percent of sustainability programmes and half of all change initiatives.

All projects must provide specific support to organisations in their sustainability journeys.

First, ESG goals must be supported, which implies that different projects will be sequenced to operationalise different goals over specified periods. Often, an initiative may not be able to cover all goals so a menu of projects over the years is necessary.

Second, projects must increase revenue or reduce costs; common cost savings include energy, transport, waste recycling and so on. Projects must also help reduce financing costs and increase access to capital.

Additionally, they must perform well in terms of financial criteria selected to identify suitable projects such as ROI, IRR or other means; and such projects must enhance the value of corporate assets.

And finally, the risks of not embarking on sustainability projects must be monetised. This may include the risk of new regulations that can lead to business disruptions, fines or similar repercussions, or losing orders as buyers seek more sustainable competitors.

In Sri Lanka, various aspects of sustainability projects need further strengthening. This includes stronger conceptualisation based on national needs including which Sustainable Development Goals (SDGs) are being addressed and why, and specific corporate ESG goals; greater use of SDGs’ specific indicators and targets to monitor project impacts; and clarity on how projects are aligned with and contribute to corporate sustainability visions and strategies.

Furthermore, a sound understanding of project monitoring is needed and their indicators should be tracked transparently. Evidence based impacts are necessary to ensure that projects have succeeded or for lessons to be learnt on what can be improved.

Local corporates must also define project beneficiaries and what they’re looking to achieve at the beginning, and track these indicators using disaggregated data.

Robust stakeholder analyses must be conducted, integrating diverse stakeholders and assessing the impact of projects on them. Collaborations with external and unusual partnerships also add value to these projects.

Businesses must innovate with new technologies, approaches, partnership combinations and so on through pilot initiatives before scaling up with lessons learnt or sharing with others as a result of the projects.

There must also be clarity on events following completion – i.e. the exit strategy, value sustained, and lessons learnt and how they will be shared.

In addition, independent and external project evaluations must be conducted from which corporates must learn lessons.

Good sustainability projects call for several key steps to be followed – including developing aspects such as a long-term vision of how sustainability looks to organisations; corporate sustainability strategies and policies; projects to realise these strategies and goals over a specific period; innovative partnerships; and transparent communication – internally and externally – regarding corporate ESG goals and achievements.