Speaking to leaders in corporate environmental and sustainability departments, I’ve found most organizations are focused on sustainability as an operational issue. They prioritize carbon disclosure and decarbonization of their operations, and are measuring and addressing the carbon footprints of their supply chains and products. Despite the social and environmental value of their sustainability efforts, these organizations’ focuses are exceedingly narrow.
Organizations need to elevate sustainability from operational tasks to an outwardly strategic focus in order to capture market opportunities and mitigate risks in a low-carbon future. Climate change and the human response over the next decade will not require the same products and services we use today. Rather, organizations need to rethink their branding, product portfolios, operating footprints and supply chains — not solely the amounts of carbon they produce.
Climate change is a business disruptor. Material risks to organizations’ operations and supply chains from extreme weather events are bringing “climate-proof operations” into business discussion. New green technologies are emerging, delivered by agile startups with promises to upend incumbent businesses. Consumer preferences are rapidly changing, driven by a millennial generation that has no doubts about the reality of climate change and will use their purchasing power to prioritize green companies. Regulations are shifting and likely leading to a price on carbon emissions within 10 years.
Innovators are successfully launching products whose profiles will only rise in the low-carbon future. Tesla made a bet on climate change and the related shifts in demand for clean tech, and may yet disrupt an entrenched automobile industry. Nebia, a showerhead promising 70 percent water savings, has raised 20x its Kickstarter goal nearly a month before its funding campaign closes. Jessica Alba’s Honest Company, which provides sustainable, eco-friendly baby and body care products, is now valued at $1.7 billion (and Honest only sold its first product in 2012). Read through McKenzie Funk’s book Windfall and you’ll see example after example of organizations taking strategic bets on climate change.
In order to capitalize on opportunities of a low-carbon future, companies must shift their sustainability conversations. Yes, less resource-intensive operations and decarbonization are essential to curb the already-evident impacts of climate change. Companies can easily eliminate their carbon footprints if they become one of the estimated 40 percent of Fortune 500s that won’t exist within 10 years. If your organization is not currently talking about how the low-carbon future could provide opportunities to (or disrupt) your business, it’s a conversation worth having and a strategy worth developing.
The needed conversation is, similar to climate change’s impacts, rather broad. Clearly, opportunities are one important part of the conversation: What markets are emerging at the intersection of changing consumer preferences, new manufacturing methods and green technologies? What is the value your company provides to your customer, and does providing that value require different product offerings in the low-carbon future? Is having a “sustainability” page on your website enough to address consumer needs?
But businesses must also cover inevitable risks, such as: Which of your facilities may not be climate-proof? Which of your suppliers’ facilities or operations may be at risk? What about your suppliers’ suppliers? And with regards to regulations — is your company prepared for step-changes in the urgency of emissions reductions?
It’s a challenging conversation to convene, and it’s not one sustainability leaders can have alone. Similar to most other sustainability initiatives, this strategic dialogue will require convening the company’s operational and strategic thought leaders — a coordinated effort across people over whom you have no direct control. With divergent and sometimes competing views, the process of engaging and developing strategy has make-or-break stakes. One solution I’ve found is the use of scenarios to collect divergent views and build agile strategic plans. Whatever method you choose, be assured that these are high-stakes conversations to have because there are almost certainly hungry entrepreneurs eyeing your industry who are having this conversation. And it’s a disrupt-or-be-disrupted kind of world.
Rob Snyder is head of strategy at Anthros Consulting, a firm that uses scenarios to help business, NGO and government leaders build agile strategy when facing disruption and uncertainty. Prior to Anthros Consulting, Rob worked as a strategy consultant for McKinsey & Company. His interests lie at the intersection of sustainability and business strategy. Rob can be reached at email@example.com.