Global business organisations are operating in an uncertain world shaped by constant and, at times, cascading changes. Geo-politics, climate, the economy, policy and technology are unsettling the world we live in and bringing unprecedented disruption to the business landscape.
Despite constant uncertainties that increase the risk to the bottom line, business leaders need a strategy to maintain growth and build resilience throughout the value chain, while aligning with regulation and meeting expectations of investors, shareholders and consumers. Many large organisations are already working with a net-zero strategy. All are at different stages of maturity in the process of business transformation required to meet the challenges and opportunities of a low-carbon-future economy, and to lay foundations for sustainable growth.
What is sustainable growth and how does it work as part of a business model?
Sustainable growth is, for us and the organisations we work with, the long-term strategy that delivers profitability while aligning the social, environmental and governance impact of its operations. In short, this requires the de-coupling of emissions and other environmental impacts from financial growth. Our approach identifies four pillars of sustainable growth:
- Consumer centricity – understanding social and behavioural change
- Market intuitiveness – macro-economic changes that will be brought about by environmental changes
- Adapting to innovation – trajectories of technological advancement and projections of future economics of the environment
- Operational agility – performance indicators, tools and processes that align with business transformation needs.
To achieve sustainable growth, business leaders need: a deep understanding of their existing and future customer base; the ability to scale around emerging technology; insights into the changing market and emerging regulation; and the operational agility to manage the transition.
Sustainable growth gives companies a competitive edge
Sustainable growth is being driven by the current transition to a low-carbon economy which will bring opportunities to businesses ready for them. An effective net-zero transition strategy must understand the relationship between the quantification of risk, the potential financial loss that a company might suffer, and the amount spent on offsetting that loss and the associated mitigation. Informed and data-led decision-making that considers the long-term is more likely to create financial rewards from a sustainable business model.
Business as usual
While business transformation will potentially add financial pressure, not laying the foundations for sustainable growth will erode business value – Risilience research found this could be up to as much as 30 per cent over the next five years. Failing to act can lead to customer attrition, supply-chain breakdown, reputational damage, direct legal action and, ultimately, financial impact. Organisations opting for business-as-usual will not be fit to optimise the upsides emerging from the low-carbon economy and risk being outclassed by their competitors.
Routes to reducing emissions
If a company’s growth depends on increasing the volume of products sold, increasing production will likely, though not inevitably, drive a growth in emissions. Risilience’s digital-twin models, built with an organisation’s data to stress-test the business model under a range of scenarios, show that the correlation between growth and emissions is more complicated.
External factors can support or hinder a business in achieving emissions reductions. Critically, the global climate policy landscape will define which emission pathway the world is on, with stronger government ambitions providing greater incentives for the economy to decarbonise. For an individual company, this means that emissions outside their direct control, such as from the electricity purchased from the grid or in the upstream supply chain, may be reduced by the introduction of new technologies or practices without direct intervention. In other words, a company can benefit – in terms of Scope 3 emissions reduction and the costs of action – from decarbonisation of the wider economy to support its sustainable growth.
Overcoming business blind spots
Companies failing to engage meaningfully with their global operations – knowing and understanding how they run, including all aspects of the value chain – will not be able to identify where and when they could be exposed to risk from changing regulation, investor pressure and consumer expectations.
In our uncertain world such business blind spots will lead to an organisation being left behind. If we are going to meet the call by António Guterres to ‘speed the shift to sustainability’ it will be the business leaders that can adapt to social change and demonstrate market intuitiveness and operational agility to manage the transition that will flourish in the future and enjoy sustainable growth.
- Learn more about Risilience at: https://risilience.com/about/