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About this book

Despite recent optimism and global initiatives, the implementation of corporate sustainability programs has been slow at best, with less than a third of global companies having developed a clear business case for their approach to sustainability. Presenting numerous award-winning cases and examples from companies such as Unilever, Patagonia, Tumi, DSM and Umicore alongside original ideas based upon 20 years of consulting experience, this book reveals how to design and implement a stronger sense of focus and move sustainability programs forward. This proven combination of purpose, direction and speed is dubbed “Vectoring”.

Based upon practitioner cases and data analysis from the Dow Jones Sustainability Index, Vectoring offers a plain-spoken framework to identify the relative position of companies compared to their peers. The framework and its 4 archetypes deliver insights for practitioners to locate inhibitors and overcome them by providing practical suggestions for process improvements. This includes designing and executing new sustainability programs, embedding the SDGs within company strategy and assessing the impact of sustainability programs on competitiveness and valuation. Offering directions for CFOs to shift companies from integrated reporting to integrated thinking in order to accelerate their sustainability programs, Winning Sustainability Strategies shows how to achieve purpose with profit and how to do well by doing good.

Table of Contents

Frontmatter

Vectoring: Of Direction and Speed

Frontmatter

1. Introduction

Abstract
Contrary to popular belief and the optimism generated by the ambitious global targets set by the Conference of the Parties 21 (COP 21) and the United Nations Sustainable Development Goals (SDGs), the implementation of corporate sustainability programs has been slow at best, sloppy and ineffective at worst. Less than a third of global companies have developed clear business cases or supported value propositions for their approaches to sustainability [1]. With many initiatives stuck in storytelling (i.e. good stories but little action) or cherry-picking (i.e. some actions but with limited objectives) mode, the need for the executive level to start thinking about transformation toward a more sustainable business model is rising as rapidly as the levels of carbon dioxide in our atmosphere. As reference, according to the UN weather agency, CO2 levels are at their highest in the last 650,000 years, and so are the average temperatures, with the world’s nine warmest years all having occurred since 2005, and the five warmest since 2010 [2]. Companies and executives need to develop a new sense of urgency when it comes to sustainability, moving it from the realm of compliance to that of a key driver of performance and innovation, which requires imbedding it deeply into their core strategies. And crossing the chasm [3] in this case, that is, getting wider acceptance and implementation of this new reality in the higher circles of management, requires education, new skills, competences and tools.
Benoit Leleux, Jan van der Kaaij

2. Patterns of Frontrunners

Abstract
Peter Bakker, President of the World Business Council for Sustainable Development (WBCSD), is an expert with one of the best seats in the house to witness the evolution of the corporate world. WBCSD is a global, CEO-led organization of over 200 leading companies representing combined revenues of more than €9 trillion with more than 19 million employees. From that prime position, Bakker used powerful words to stress the mounting inevitability of sustainability-based transformation. In Bakker’s view, companies simply need to start changing much faster.
Benoit Leleux, Jan van der Kaaij

Direction by Design

Frontmatter

3. The Quest for Purpose

Abstract
In this chapter, we introduce and discuss the first critical success factor for an effective sustainability effort—identifying the proper objectives for it. Through clinical observation, we discovered that many firms failed to successfully implement their sustainability strategies, not because they lacked the desire, the willingness or even the belief in the impact of sustainability on their businesses, but because they failed to identify proper objectives for their efforts. When firms become overly ambitious and select too many targets, their efforts tend to become dispersed and hence of limited impact. This creates demotivation and too often leads to the abandonment of meaningful and inherently valuable efforts. It definitely pays to focus but on the right targets. In the next sections, we review the importance of purpose for an organization, and how it helps to coalesce various efforts and goodwill and gives a shared sense of direction. We then illustrate how sustainability can be a strong contributor to that sense of purpose by providing superior motives for business activities. In later sections, we review how to identify and qualify the possible sustainability efforts and then to single out a small subset that would be most compatible with your business and hence best able to serve as guidance for your organizational efforts.
Benoit Leleux, Jan van der Kaaij

4. Focusing on Materialities That Matter

Abstract
After introducing the importance of adopting a clear statement of purpose, and the role sustainability can play in identifying the various facets of a firm’s contribution to society, we proceed in this chapter to develop a better understanding of the tools available to focus the sustainability efforts on elements that contribute the most, that is, impactful materialities. Once the statement of purpose has been established, companies and individuals frequently must cope with limited bandwidth in terms of attention and resources. Hence, the importance of selecting a limited number of high-impact efforts, instead of the all-too-common machine gun approach of spraying efforts large and thin. Effective implementation requires sniper precision in the definition of sustainability targets and dedicated efforts in execution. Therefore, in the first sections of this chapter, materiality is first precisely defined, then the importance of gaining alignment between enterprise risk, company strategy and materiality is highlighted. Finally, some practical do-it-yourself (DIY) tools for materiality analysis and the development of a company materiality matrix are introduced and explained in detail.
Benoit Leleux, Jan van der Kaaij

5. Sustainable Development Goals

Abstract
In earlier chapters, we introduced the contributions sustainability could make to the definition of effective statements of purpose, that is, the self-definition of the company’s impact on its environment and society. We then proceeded to develop the argument further and highlighted the fact that, while sustainability offers a broad palette of meaningful objectives to choose from, this very diversity can be its Achilles’ heel, that is, too many choices often leads to the wrong choices. We developed the concept of materiality, to distinguish those material sustainability issues that have meaningful business impact, from immaterial ones. Vectoring is thus gradually coming into perspective as a concerted corporate effort to properly set the moral compass through a pertinent sustainability-driven statement of purpose focusing on a limited number of material sustainability issues. In this chapter, we develop a better understanding of an outside source of drive and inspiration for many organizations and individuals, namely the United Nations Sustainable Development Goals, a unique initiative in voluntary global responsibility with clear targets and deadlines.
Benoit Leleux, Jan van der Kaaij

6. ESG Ratings and the Stock Markets

Abstract
After introducing the primary components of a proper vectoring approach, namely a sound company purpose, a focus on a small set of relevant materialities synchronized to the Sustainable Development Goals, we endeavor to explore the connection between sustainability and the environmental, social and governance (ESG) ratings and how the latter are evaluated by stock markets. With the help of several company examples, this chapter first examines the increasing awareness of ESG factors within the investment community, then moves on to suggest an approach for designing a company-specific ESG ratings game plan. An overview of the most influential ESG ratings is also provided, including a summary of their background, methodology and typical usage.
Benoit Leleux, Jan van der Kaaij

7. Investors’ Perspectives on Sustainability

Abstract
In the previous chapters, we noted how the financial industry in general, and institutional investors in particular, have started to imbed environmental, social and governance (ESG) factors and UN Sustainable Development Goals (SDGs) into their valuation and portfolio management methodologies. In effect, the industry is acknowledging the fact that companies actively managing relevant ESG parameters are not only controlling their risk exposure better but also constructing more sustainable futures, with both dimensions leveraging each other to increase valuations. In this chapter, we elaborate on this rationale by looking at how major financial investors have adopted sustainability, either by incorporating the principles in their practices or by developing investment schemes around it. For this, we have sequentially reviewed the worlds of venture capital, private equity, hedge fund and mutual fund managers, with examples in each. We successively document how the various investor classes incorporated ESG metrics into their value creation arsenals, dedicating investments and personnel to the pursuit of higher goals.
Benoit Leleux, Jan van der Kaaij

8. Encouraging a Culture of Sustainability

Abstract
In the previous chapters, we have illustrated the importance of companies developing a clear sense of direction through the formulation of a clear statement of purpose. Based upon case studies, industry data and best practices from top decile sustainability leaders, we have uncovered different ways in which purpose statements can become effective drivers of sustainability programs, building on examples from adidas and Interface. The relevance of establishing a sustainability strategy based on carefully selected material issues for ESG ratings was highlighted. More importantly, we have portrayed the tendency of organizations to address too many sustainability topics that bear little to no relevance to their core businesses, which results in reducing the impact of the programs. In the following sections, we underline the significance of the leadership’s effort to embed sustainability into the core business strategy, the importance of harnessing a culture of sustainability and the impact of corporate behavior on performance. In the later sections, we suggest a tool for measuring corporate culture and stress the benefits of the systematic measurement of sustainability performance on culture, talent attraction and retention.
Benoit Leleux, Jan van der Kaaij

Acceleration

Frontmatter

9. Partnering as Strategy

Abstract
Part II of the book addressed the directional elements of the vectoring model, starting with the statement of purpose then proceeding to discuss materialities, environmental, social and governance (ESG) ratings and professional investors’ attitudes toward sustainability efforts. Part III proceeds to uncover and harness the power of various accelerators of the sustainability efforts. In other words, once you have determined a potent direction for your sustainability program, how do you provide the maximum impetus for the program, particularly in a business environment that might not welcome it with open arms? What are the secret drivers for effective execution? In this part of the book, we investigate concepts such as partnering (often one of the most underrated drivers of impact), the concept of the circular economy, innovation and finally team-building. In Chap. 9, we illustrate the importance of human capital development for generating productive relationships with various stakeholders and discuss examples of creative sustainability partnerships. We present and discuss an original checklist to help you structure potential strategic partnerships, based on the concept of MASS development, where MASS stands for more alternative sustainable solutions. To illustrate the concepts in action, we conduct an in-depth analysis of the programs initiated by Novozymes, a Danish biotechnology company that turned partnering for sustainability into a core component of its corporate strategy.
Benoit Leleux, Jan van der Kaaij

10. Toward a Circular Economy

Abstract
So far, the book has introduced vectoring as an effective model for architecting corporate sustainability efforts. By focusing on a limited number of material sustainability issues and developing the appropriate leadership, culture, and environmental, social and governance (ESG) profile, vectoring provides sound foundations for purposeful contributions to society at large. With the moral compass heading in a few selected, impactful directions, the book then proceeded to elaborate on the most effective execution strategies—that is, sustainability acceleration. The previous chapter highlighted the contributions from broad-based value chain collaborations and partnership arrangements. A method for selecting suitable strategic partners for innovation was proposed and the concept of many alternative sustainable solutions (MASS) was introduced to support the acceleration of sustainability innovation. These topics are extended here by developing the concept of circular economy, a radical departure from the more traditional linear way of thinking, that is, take–make–dispose. After introducing the potential impact of the transition to circular economy thinking, the chapter provides several examples of different forms of circular economy improvement strategies.
Benoit Leleux, Jan van der Kaaij

11. Capturing the Sustainability Premium

Abstract
In this chapter, we deepen the discussion on how to capture the sustainability premium, looking at potential innovation channels and how to change consumer behaviors. First, several innovative practices based on collaboration are discussed, starting with the example of the BMW Startup Garage . This example of how BMW became a venture client for startups, as opposed to an investor, can be seen as an extension of the BMW i3 team exercise presented earlier in the circular economy discussion, in Chap. 10. Next, different approaches to changing consumer perceptions and attitudes are explored, supported by examples from the food industry, such as the sustainability-driven turnaround of Coronilla , a Bolivia-based gluten-free pasta business. Finally, a few additional tools are added to the toolbox, mostly techniques to uncover customer requirements.
Benoit Leleux, Jan van der Kaaij

12. Stellar Performance from Sustainability Teams

Abstract
After exploring the critical importance of partnering to achieve impact in sustainability as well as opportunities presented by the circular economy concept, we reviewed how to find and capture the sustainability premium. What remains to be examined is how to obtain superior engagement from teams focused on accelerating sustainability programs. By studying patterns observed in different industries, such as food, drinks, ingredients as well as haute cuisine, a four-pillar structure is presented to energize the teams in charge of sustainable innovation. First, pillars #1 and #2 are investigated, namely Direction and Diversity, by taking a peek inside the kitchen of Atera, the reputed Manhattan-based restaurant that underwent a complete cultural re-engineering while maintaining its two Michelin-star status. Then we examine pillars #3 and #4, Experimentation and Collaboration Culture, through examples from companies such as Tony’s Chocolonely, Torres wines and Novozymes. The chapter concludes with an approach to help key account teams develop collaboration and engagement with their clients on sustainability.
Benoit Leleux, Jan van der Kaaij

13. Embedding Sustainability into the Business Core

Abstract
So far, the journey has taken us from a clear statement of purpose to a concise set of relevant materialities, with further elaborations on the role of partnerships and circular economy models in accelerating innovation. In the previous chapter, we proposed four pillars (direction, diversity, experimentation and a collaboration culture) to increase the effectiveness of sustainability teams. The journey into effective sustainability implementation is now approaching its final destination, namely ensuring that the great strides made improving a firm’s positive impact on society and the environment become sustainable. Discussing the sustainability of sustainability programs is the ultimate crowning moment of the journey, as it ensures sustainability’s legacy for future generations of managers and stakeholders to enjoy. Conceptually, it is time to embed sustainability deeply into the business, so it can get safely and effectively transmitted and robust to outside forces. In this chapter, we discuss how to make sustainability an integral part of the business and ensure its perennity. The vectoring approach promoted throughout the book to develop and execute sustainability strategies not only improves communication with stakeholders but also facilitates the effective and efficient reporting of sustainability performance. A limited set of relevant key performance indicators (KPIs) tightly connected to the company’s core business helps focus sustainability activities and makes for more consistent communication.
Benoit Leleux, Jan van der Kaaij

14. Epilogue

Abstract
In one of the first case studies of this book, we introduced the purpose-driven business of Tony’s Chocolonely, an original, small-scale Dutch effort to combat the forced labor, deforestation and poverty often clouding the cocoa supply chain. In subsequent chapters, we developed the argument that a clear sense of direction, a narrow list of relevant materialities and a strong focus on execution (an approach referred to in this book as vectoring) were key success factors in developing an effective, impactful sustainability strategy. We conclude the journey of Winning Sustainability Strategies: Finding Purpose, Driving Innovation and Executing Change with another powerful example from the cocoa industry, one that provides a perfect ending to the virtuous circle started in the first chapter. Barry Callebaut and its “Forever Chocolate” program provides an inspirational narrative of a multinational company pursuing a vectoring approach to its sustainability efforts and qualifying as a game changer for the complete sector (refer to Fig. 14.1).
Benoit Leleux, Jan van der Kaaij

Backmatter

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