Building sustainable companies tactically – Kiran Dhanapala

In a GlobeScan survey of over 700 sustainability experts from more than 70 countries on perceptions regarding sustainable development, most no longer feel COVID-19 will slow the progress of sustainability efforts.

The main factor of being a leader in implementing sustainability is developing strategy and embedding it in core business and related models. This will be the key to a company’s continued ability to function.

Leadership is the ability to integrate sustainability into organisational business strategy. Leaders are needed in government and the private sector.

This survey includes rankings of governments as leaders in advancing sustainability; and of the top 15 countries, only two are Asian – Bhutan (11th) and Singapore (13th).

The Singapore Green Plan 2030 has set ambitious targets over the next 10 years. It’s positioning the city state as a beacon for other Asian nations in many facets of sustainability including education and training. This shows that size is not a significant factor in these rankings.

Purpose-led organisations uniting with NGOs on common platforms to tackle challenges of mutual interest is an increasing trend.

Sri Lanka has the potential to be a sustainability hub, given its profile in natural resources and other relevant factors – including size and geopolitical positioning. A sustainability oriented national policy and skills training with the right incentives, as well as structured and coordinated implementation, could enable it to become the Costa Rica of Asia.

The UNDP sponsored Colombo Development Dialogues on Green Development can be a starting point.

In terms of corporate sustainability leaders, the survey shows Unilever leading globally over the last decade; but the gap is closing between it and other corporates, such as Patagonia and Natura.

And in Asia, there is no clear regional leader; but Singapore’s City Developments and India’s Tata are notable in the regional rankings (tying at 7%), followed by China Light and Power, and Swire (at 5%).

Leadership in the sustainable development of companies is closely tied to their strategies or core business models. This has ranked first place over the last three years, and increased from 15 to 21 percent over the period while overtaking target setting and articulating sustainability values or purpose.

The survey demonstrates that Asia has the most variance for identifying leaders in sustainability. This means there is room to do more, improve visibility of what’s being done and strengthen stakeholder contributions. Additionally, there’s the presence of numerous smaller companies with agility and flexibility to participate in sustainability initiatives.

Strategy is often defined as a differentiating feature or some form of uniqueness. It’s often distilled by companies in the same sector into a common set of practices such as the adoption of eco-efficiencies in garment factories. The market leader will score ‘first adoptee’ advantages and then be emulated by others in the sector with sustainability becoming equated with a set of common practices.

Another aspect is strategy: practices that are special and unique to an organisation, and generate a competitive advantage, lead to above average results. Strategic practices differentiate a company from the rest in the sector.

In a 2019 Harvard Business Review (HBR) article, Ioannis Ioannou and George Serafeim use sustainability data from over 3,000 companies to identify those that converge in their sustainability practices over time as a result of common practices.

This is particularly so if the market leader adopted them early and was more often imitated by the rest, and environmental and social issues dominated rather than governance.

Common practices were found to be only positively associated with increasing market valuations. However, companies with strategic practices were found to be significantly and positively linked to both return on capital and increases in market valuation.

Under Paul Polman’s leadership, Unilever used strategies
to become a market leader in sustainability while driving growth and profitability. The company’s total shareholder return was close to 300 percent.

Andrew Winston and Polman have published a book on their vision of a ‘net positive’ company. As defined by them, it “improves wellbeing for everyone it impacts and at all scales – every product, every operation, every region and country, and for every stakeholder, including employees, suppliers, communities, customers and even future generations, and the planet itself.”

They advocate four critical practices for businesses to thrive: these can operate first to service multiple stakeholders, which then benefits investors (compared to putting shareholders above all others); take full ownership of all company impacts; embrace deep partnerships; and tackle systemic challenges by rethinking advocacy and relationship with governments.