Companies that want to be truly sustainable need to do more than just lessen their impact. They need to prepare to operate in a successful, sustainable economy. Just as the digital revolution upended analogue business models, so the sustainability transformation will disrupt dirty businesses.
The critical question for businesses is how should they navigate this disruption? How do they maintain profitability, continue to serve existing markets, and motivate employees, while metaphorically changing from being a race car into an electric train. It is one of the great business challenges. How business respond will define the legacies of an entire generation of leadership.
At FOUR32, we have thought about this for some of the biggest and most complicated brands. In that time, we have learned that the companies which succeed are those that successfully navigate what we call the “sustainability trilemma.”
The trilemma is made up of three competing aspects: customer needs, capital demands and regulatory pressure. Understanding these three aspects, and designing innovative solutions that meet all three lenses, is key to finding successful, long-term sustainable growth.
Ultimately, a business that is delivering sustainable growth will be one that can fund its activites, create products or services that the market wants, and which meets the expectations of regulators and stakeholders.
Firstly, it is vital to understand customer need. This will vary from sector-to-sector. For example, we’ve worked with one B2B component manufacturer whose customers are now asking for year-on-year reductions in the carbon footprint of each product. Other consumer brands will understand that the customer’s propensity to buy can be increasingly influenced by a product’s sustainability credentials. You must give the customer what they want.
These new products and services will require investment, investment which needs to be baked into your business plan. It is no good seeing sustainability as a nice-to-have, or a compliance cost. Finding sustainable growth is a core responsibility of the C-Suite and the Board.
Finally, you need to ensure your solution is sustainable – that it is in tune with the regulatory landscape and the goals of your existing sustainability plan. Your sustainable growth strategy must authentically contribute to averting the climate crisis while also protecting and enhancing biodiversity loss.
A bit of greenwash, or warm words will not cut it.
Sustainable growth is different from reducing your residual footprint. It is about finding new opportunities to surprise and delight customers. It is an opportunity to enter new markets and generate lasting profits.
Too many businesses are trapped in a paradigm that is all about “doing less harm.” Eliminating negative impacts is important, but it is no substitute for finding solutions that allow a business to thrive in a sustainable world.
Over the coming weeks, we are going to examine each aspect of the sustainability trilemma in more detail. But, in the meantime, if you want to discuss this, then do reach out and connect.
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