Defining an effective sustainability strategy is the new key to corporate success, but delivering on its promise presents clear challenges.
From aligning multiple stakeholders behind a single sustainability vision, to measuring and incentivising sustainable progress, ensuring leadership teams are fluent in sustainability, and striking a balance between the need for immediate returns and building a truly sustainable long-term future - discover how our latest survey informs our work as consultants.
Key issues and how consultants can help
Different priorities, different language, different levels of understanding — lack of alignment across stakeholder groups is the No. 1 barrier to delivering a long-term sustainability strategy. Agreeing on a common sustainability vision, setting shared goals and creating a collective understanding of the choices that need to be made are all vital.
A seat at the boardroom table
Educating board members and executive teams is the single most important governance issue for sustainability. The ability to look beyond internal structures to specialist external institutions and educational programmes is imperative. Consultants bring outside perspectives, knowledge and experience.
Balancing short and long-term priorities
Balancing short-term priorities with long-term sustainable growth is essential. Research points towards significant disagreement in more than half of all leadership teams on how to balance the need for short-term returns with a long-term sustainability strategy. Clear, unbiased financial and non-financial analysis of the benefits of ESG (environmental, social and governance) is essential.
Setting the right KPIs
With as few as a quarter of organisations having enterprise-level sustainability KPIs (key performance indicators) in place, defining what is required to deliver on the promise of sustainability is an urgent priority. Defining how to meet targets and goals, choosing the right metrics, and identifying, capturing, and interpreting the right data are all business-critical decisions.
Establishing greater accountability for delivering against ESG targets is a priority. Executive remuneration has a significant role to play, but aligning goals, targets, KPIs, and existing reward structures takes expertise and understanding.
About the L.E.K. Consulting Global Corporate Sustainability Survey 2022
Our Global Corporate Sustainability Survey engaged 400 C-suite and senior executives around the world. We polled them on their attitudes and ambitions around ESG — the single most important agenda topic for organisations looking to thrive and survive.
Our Global Corporate Sustainability Survey respondents came from six countries, with 100 based in the United States; 180 in France, Germany and the United Kingdom; and 120 based in the Asia‑Pacific region.
We covered five sectors in total, with 150 participants from the industrial sector (including 64 from energy-only businesses), 100 from healthcare businesses, 75 from retail, and 75 from the transport sector.
Of the businesses represented in our survey, 43% were publicly held or listed, 40% were privately held and 17% were backed by private equity investments. Moreover, 28% had revenue over $10 billion and 31% over $5 billion.
If you’d like to speak to our experts about the Global Corporate Sustainability Survey findings and how L.E.K. can help your business, get in touch here.
L.E.K. Corporate Sustainability Webinar
Our survey tells us that corporate executives see a lack of alignment across stakeholder groups as their most significant barrier to developing a successful sustainability strategy. Making ESG a priority and sharing this emphasis throughout an organisation is an effective way to build consensus and a mutual understanding of what sustainability is, why it is important to a business, and what sustainability strategy the organisation has in place.
As with many areas of business, language can be both a barrier and an enabler. Establishing a shared vocabulary is a crucial step towards strategic alignment, giving stakeholders a consistent way to discuss, understand and develop a sustainability strategy.
Setting and agreeing on a sustainability strategy is only part of the challenge. Creating a culture that enables and supports sustainability behaviours is vital — and 40% of the organisations we polled in our recent survey saw this as an issue.
Boards of directors and executive teams set the agenda for a sustainability strategy, and this is where strategic alignment needs to begin. With leadership teams united behind a shared vision for sustainability, effective ESG strategies can take hold across organisations consistently and successfully.
As with all aspects of business, there are clear choices to be made around ESG. As sustainability experts, we have identified four levels of engagement amongst the participants in our recent Global Corporate Sustainability Survey.
Minimalists - 4% of those surveyed - are driven by compliance. They understand that they are being assessed through a sustainability lens, but they are focused on what they need to do to meet basic requirements and have little or no grasp of the strategic value of ESG.
Pragmatists - 25% of those surveyed - have measured the operational and reputational risks associated with ESG and are working hard to mitigate these. They rarely understand the positive side of sustainability and are ignoring the huge untapped potential for ESG to fuel growth.
Leaders - 51% of those surveyed - are growth driven. They have recognised the potential for ESG to drive commercial growth and have embedded sustainability into their organisations. They have a vision that reflects how sustainability affects all their stakeholders, and they recognise the need to put KPIs in place to measure their sustainability strategy in action.
Innovators - 20% of those surveyed - are driven by values. They understand the true worth of sustainability and have placed it at the forefront of their strategic agenda. Sustainability is a driving force behind their corporate innovation, and in return it gives them a competitive advantage and delivers commercial success.
Our Global Corporate Sustainability Survey shows us that only 27% of those polled have any enterprise-level ESG KPIs in place. Measuring progress against a clearly defined sustainability strategy is a necessary step towards proving the commercial value of ESG — and establishing the correct metrics and putting structures in place to capture and interpret data are key.
Offering the right products and services is important too — half the people we talked to felt that their organisation’s products and services failed to meet the needs of a more sustainable future.
Almost 80% of those questioned in our recent survey believe that their organisation lacks the skills and capabilities needed to deliver on sustainability goals. Couple this with more than half of respondents stating that their organisation needs to better understand both the financial risks and the opportunities that sustainability presents, and much work needs to be done to establish the skills and metrics required to encourage effective ESG.
Remuneration is the final, vital step in the journey towards a successful sustainability strategy. In addition to a clear, shared vision around the value of ESG, products and services that capture commercial value from sustainability, and a measurable strategy that delivers on ESG promises, linking recognition and reward to sustainability is the fuel behind sustainability success.
Amongst those taking part in our survey, 43% felt there was much more to be done in this area, but remuneration has a powerful role to play in aligning individual employees and executives with a shared sustainability agenda.
We established our Sustainability Centre of Excellence because we understand how vital the sustainability agenda is for the future of our clients. Our latest survey sheds new light on this vital topic.
John Goddard, Vice Chair, Sustainability and Senior Partner in L.E.K. Consulting's London office
Connect with John.
The L.E.K. Global Corporate Sustainability Report 2022
With ESG now at the heart of any smart business strategy, sustainability is a key priority for every board of directors and executive team. But understanding how to lead your organisation’s sustainability journey takes expert thinking and a sharply focused ESG lens. L.E.K. Consulting’s Global Sustainability Centre of Excellence and our expert team of sustainability strategy consultants draw on L.E.K.’s deep case and sector experience, proprietary research and insights, and rigorous approach to analysis as we help clients build and activate their sustainability strategy.
From setting ambitions to creating, executing and monitoring strategies — we help corporate leaders understand how sustainability trends impact business, identify sustainability-related risks and opportunities unique to each sector, determine the right sustainability strategy and road map, and develop thoughtful M&A approaches focused on ESG.