The Challenges to Sustainability

Overcoming the Challenges to Sustainability

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Overcoming the Challenges to Sustainability

Sustainability is a top priority for most business leaders, leading to a constant stream of announcements around specific commitments and targets. Yet, there is a clear gap between talk and action. Nearly three-quarters (71%) of companies that participated in a major Arthur D. Little (ADL) study admitted that they either had no sustainability strategy in place or that it was not fully understood by their employees. Only half have modified how they manage their business, and just 8% have changed their business models.
Sustainability commitments do not seem to have the
same urgency or rigor as other business objectives.
Among companies participating in the survey, 65%
do not link management incentives to sustainability
performance and just 24% have structured plans,
roadmaps, and milestones to achieve their goals.
These stark findings demonstrate that companies
are struggling to embed sustainability in their
operations, impacting their competitiveness and
even business survival. In part, this is because truly
becoming sustainable is a major transformation process
spanning culture, planning, metrics, governance,
reporting, and mindset. This Report analyzes the
current state of sustainability and shares insights
from Prof. Tima Bansal of Ivey Business School. It also
sets out key recommendations to unlock the benefits
of sustainability by adopting an ecosystem approach,
integrating sustainability reporting, redefining culture,
and focusing on innovation.

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1 . T H E S TAT E O F S U S TA I N A B I L I T Y
I N O R G A N I Z AT I O N S

Driven by public and stakeholder pressure,
sustainability has risen to the top of the
business agenda for CEOs in all sectors.
Demonstrating the focus from investors, nearly
a third of shareholders (32%) supported social
and environmental proposals at US company

A D L H A S B E E N AT
THE FOREFRONT OF
S U S TA I N A B I L I T Y F O R
MANY DECADES

shareholder meetings in 2021 — up from 21% in
2017, according to the Sustainable Investments
Institute.1 The Securities and Exchange
Commission (SEC) has proposed new rules that
mandate that all publicly traded companies
disclose climate change risks in their regular
filings. 2 Similar regulatory and reporting
initiatives are in place in the EU and Asian
countries.
This has led to a wealth of commitments
covering reporting against sustainability
metrics and setting targets for improvement.
For example, 45 of the 50 largest companies
in the S&P 500 Index now report their carbon
disclosures to the CDP (formerly the Carbon
Disclosure Project) and 31 have committed
to achieving net-zero carbon emissions. 3
While acting on sustainability initially was
perceived as part of being a “good corporate
citizen,” it is now evident that properly adopting
sustainability within an organization can deliver
both top-line and bottom-line benefits, leading
to higher shareholder returns. Among benefits
leaders in sustainability have experienced
recently are faster growth, reduced cost of
debt financing, lower employee turnover, and
increased resilience in the face of business risks
and market challenges, as well as improved

However, the road to introduce and implement
sustainability within an organization is certainly
not without challenges. Many companies have
made commitments — but are they able to
deliver on them successfully?
ADL has been at the forefront of sustainability
for many decades, helping clients and
organizations to understand and meet
sustainability imperatives. As well as continuous
client experience across the globe, ADL has a
long history of influential research, including
key international surveys on the integration
of sustainability and innovation management
carried out in partnership with leading global
organizations such as the World Business
Council for Sustainable Development and
the World Materials Forum.4
Building on this tradition, ADL recently ran a
global study exploring organizations’ current
maturity in integrating sustainability into their
business models (see Appendix for full details
of methodology and sample). The study went
beyond the buzz to see what is actually being
put in place — and what is not. The headline
findings are of a business world in transition.

corporate reputation and branding.

1
2
3
4

4

Kerber, Ross, and Simon Jessop. “Analysis: How 2021 Became the Year of ESG Investing.” Reuters, 23 December 2021.
“SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors.” Press release, US Securities and Exchange
Commission (SEC), 21 March 2022.
Bansal, Tima. “Big Business Should Be at the COP26 Table.” Forbes, 30 October 2021.
Keeble, Justin, et al. “Arthur D. Little Innovation High Ground Report — How Leading Companies Are Using Sustainability-Driven Innovation to
Win Tomorrow’s Customers.” Arthur D. Little, 2005; and Brown, David, et al. “Building a Better Future: Innovation, Technology, and Sustainable
Development.” World Business Council for Sustainable Development, 2000.

ARTHUR D. LITTLE

On the positive side, companies see the

Despite understanding the benefits, a

benefits of sustainability across multiple

fifth of companies (20%) still do not have a

dimensions and how it increases their

sustainability strategy in place — and less

attractiveness to customers, employees,

than 30% believe the impact of that strategy

and investors (see Figure 1). However, the

is clear to all employees (see Figure 2). The

majority have yet to see a direct impact

majority are struggling to embed sustainability

on financial results. This is due to a

within the organization, and it is thus currently

disconnect between business operations

disconnected from staff, strategy, and

and sustainability, with many companies

operations.

unable to link sustainability performance to
financial or innovation metrics and reporting
systems. Only 40% of respondents apply any

This failure to take meaningful action and
embed sustainability at the center of the
organization does not only cause potential

externalities/social return on investment

environmental and social harm; it also holds

or creating shared value evaluation models
when making business and strategic decisions.

back business performance.

Figure 1. Corporate benefits of sustainability
Figure 1. Corporate benefits of sustainability
How much do you agree with the following statements?
My company believes in sustainability because it:
Improves customer relations

86%

Provides an additional competitive advantage

85%

Improves relationships with employees and other
stakeholders

79%

Increases attractiveness as a potential employer

78%

Increases our attractiveness to investors

75%

Allows us to expand into new markets

55%
45%

Improves financial results
Source: Arthur D. Little

Figure 2. Sustainability strategy maturity
Figure
2. Sustainability strategy maturity
Source: Arthur D. Little
How mature is your company’s sustainability strategy?

We do not have a sustainability strategy yet

We do not have a sustainability strategy,
but we have launched an initiative to define it

8%

12%

We have a sustainability strategy,
but it is not fully understood by employees

We have a sustainability strategy,
and its impact is clear to all employees

51%

29%

Source: Arthur D. Little

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Source: Arthur D. Little

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2 . U N D E R S TA N D I N G T H E
CHALLENGES TO EFFECTIVE
B U S I N E S S S U S TA I N A B I L I T Y
Achieving sustainability is not a straightforward

Three factors stand out as causes for this

task. In today’s complex value chains, being

gap: a lack of commonly understood internal

able to move beyond making commitments to

sustainability standards, poor communication,

successfully implement sustainability programs

and lack of incentives.

requires a transformative approach based on
overcoming six key challenges, as shown in
Figure 3.

decision making

S U STAI N AB I LI T Y ST RATEGY
N OT UN D ER STO O D
Most sustainability strategies are not yet
mature when it comes to being understood by
those that are on the front line of delivering
them: the employees. Strategies are either not
in place or are not understood by staff within
71% of companies. Even among those with a
strategy in place, nearly two-thirds admit its

Figure 3.

Unclear internal standards undermine

impact and direction are not clear to employees

(see previous
Figure 2).
The
challenges

Currently, many organizations suffer from a
lack of commonly understood internal standards
when it comes to measuring sustainability
performance. Companies need to clearly
articulate what they are going to measure,
what the KPIs are, and what “good enough”
performance looks like for the organization.
If this is unclear, employees, particularly those
who are not in central sustainability teams, will
not be able to make informed decisions in their
day-to-day activities and will not see how they
can contribute to overall sustainability targets.

to effective business sustainability

Figure 3. The challenges to effective business sustainability

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2

3

4

5

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Source: Arthur D. Little

Source: Arthur D. Little

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ARTHUR D. LITTLE

Poor communication holds back understanding

business units (BUs) responsible for their own
sustainability initiatives (see Figure 5). Over

As Figure 4 demonstrates, over three-quarters

three-quarters (77%) of this group said their

(77%) of organizations have not communicated

employees understood their sustainability

their strategy at all, have communicated

strategy. However, the way sustainability

irregularly, or have shared it only with specific

is organized needs to be well-defined and

organizational levels.

anchored into the wider organization. It needs

Becoming sustainable is a major cultural change
for many organizations, meaning that it requires

to fit with how the organization operates and
governs itself. Otherwise, activities will not be
aligned, particularly around standards on what

an ongoing dialogue with staff to ensure they

is “good” performance (i.e., which indicators

understand objectives, their role in achieving

to follow and what thresholds need to be met)

them, and can measure progress toward

and how management incentives reinforce the

success.

right behaviors. It is possible that business unit
activities could even counteract or undermine

Interestingly, alignment is much more prevalent

corporate sustainability initiatives.

when organizations have made individual

Figure 4. Communication frequency of sustainability
strategy
Figure
4. Communication frequency of sustainability strategy
How frequently is your company’s overall sustainability strategy
communicated throughout the organization?

14%

It has not been officially communicated yet

It has been communicated but passively and
irregularly (e.g., only published on the website)

29%

It is regularly communicated,
but only to certain organizational levels

34%

It is regularly communicated,
involving all employees in a structured way

23%

Figure 5. Employee understanding of sustainability based on
organizational structure
Figure 5. Employee understanding of sustainability based on organizational structure
Source: Arthur D. Little

Companies that answered:
“We have a sustainability strategy, and its impact is clear to all employees”

Source: Arthur D. Little

Companies where there is not a
dedicated sustainability team

Companies where there is a dedicated central
(corporate) team that is administering only
sustainability-related projects
Companies where there is a dedicated central team
actively enforcing sustainability compliance
across different business units (BUs)/functions

Companies where there is a small central (corporate)
team plus additional staff supporting the BUs

Companies where each BU is responsible
for its own sustainability-related initiatives

6%

21%

33%

29%

77%

Source: Arthur D. Little

Source: Arthur D. Little

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Two-thirds do not incentivize sustainability

will oblige larger companies operating in the
EU to link bonuses to environment, social,

Along with effective communication and

and governance (ESG) impacts.

strong governance structures that anchor
sustainability in the organization, linking

FAILURE TO CH ANGE
BUSINE SS MODELS

sustainability progress to incentives is proven
to change behavior and drive change. This
starts at the top and then cascades down into
the objectives of all staff. However, two-thirds
(65%) of companies do not currently link senior
management incentives to sustainability

Sustainability is an opportunity for
organizations, but to be successful it must
be central to both new and existing business

performance (see Figure 6).

models. Simply seeing it as another cost to be
borne or regulation to be met will not deliver

Fixing the issues of communication and

its real, transformative benefits.

incentives is at the heart of engaging
employees at all levels with sustainability,

However, just 8% of respondents say that they

ensuring they both understand the strategy

have changed their business model due to

and are enthusiastically involved in its

sustainability. Most organizations have simply

execution. Forthcoming legislation makes

tweaked existing ways of doing business, as

this a priority — the European Commission’s

shown in Figure 7.

corporate governance
initiative performance
Figure 6.sustainable
Incentivizing
sustainability
Figure 6. Incentivizing sustainability performance
Are senior management’s incentives linked to sustainability performance?

65%

No

13%

Limited incentives (≤ 5% of management bonus)

Incentives between 5% and 15%
of the management bonus

Incentives corresponding to more than 15%
of the managerial bonus

16%

6%

Source: Arthur D. Little

Figure 7. Impact of sustainability strategy on company

Figure 7. Impact of sustainability strategy on company
How much does the sustainability strategy affect your company?

Source: Arthur D. Little

27%

No impact

23%

KPIs have been modified to the lowest level)

The priorities regarding the way of managing the
business have been modified

The organization has changed its business model

Source: Arthur D. Little

8

42%

8%

ARTHUR D. LITTLE

While some businesses (such as in digital

the ground and saying you will achieve net-zero

industries) may not need to change their

by 2050 is not enough — you need a plan that

models, the majority (59%) of survey

maps the short-term steps that will get you

respondents are in sectors such as automotive,

there. It is critical to start now with a concrete

energy, chemicals, engineering, and transport

strategy and detailed plans and to involve your

that are heavily impacted by sustainability, and

wider value chain. For example, in areas such

are required to make significant changes. This

as carbon, emissions are cumulative, meaning

lack of a profound systemic change further

companies need to make a big effort now to

demonstrates the current lack of maturity

invert the trend and start to lower emissions if

around sustainability. To gain its advantages,

they are to hit science-based targets by 2050.

organizations must change models and ways
of operating, often dramatically, rather than

Insufficient detail & scope in planning

continuing business as usual with minor
modifications. Sustainability targets, such

A third of organizations have not yet put long-

as around carbon emissions, cannot be met

term plans and goals in place, with a further

without starting to take major action now.

third defining plans but not yet deploying them
(see Figure 8).

NO C LE A R BALAN CE
B E T W E E N S HO RT- &
LO N G -T E RM PLAN S

Despite the need to balance long and short
timeframes, less than half (48%) of organizations
have considered both when creating business
plans (see Figure 9). Even here there is a worrying
lack of detail — just half of these (24%) have

For sustainability strategies to deliver, it is vital

defined and implemented structured long-term

to set a mix of long-term (20, 30, or 40 years)

plans with clear objectives for every initiative.

and short-term goals. Simply putting a stake in

Figure 8. Deployment of long-term goals

Figure 8. Deployment of long-term goals
Has your company deployed long-term goals with plans, initiatives, roadmaps,
and/or intermediate milestones?

No

33%

Yes, we have defined structured plans,
but they are not implemented yet

33%

Yes, we have defined and implemented structured
plans with clear objectives for each initiative

34%

Figure 9. Quantifying future sustainability goals

Source: Arthur D. Little

Figure 9. Quantifying future sustainability goals
Has your company quantified sustainability goals for the future?

No

29%

Source: Arthur D. Little

Yes, in the business plan time frame (3-5 years)

23%

Yes, both in the time frame of business plan
(3-5 years) and in the long term (10-30 years)

Have defined and implemented structured plans and
roadmaps with clear objectives for key initiatives

48%

24%

Source: Arthur D. Little

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This echoes other research findings. For

For example, companies that adopt the Science-

example, the “Corporate Climate Responsibility

Based Target initiative (SBTi) Net-Zero Standard

Monitor 2022,” from the New Climate Institute

are required to specify both short/medium-

and Carbon Market Watch reports that

term and long-term science-based targets.7

headline pledges for emissions reductions are

This usually requires making quick emissions

often ambiguous or limited, with just 12% of

cuts as soon as possible, then halving emissions

companies surveyed clearly committing to deep

by 2030, and finally coming very close to zero

decarbonization of over 90% of their full value

emissions by 2050 with any residual emissions

chain emissions by their set target dates. 5

fully neutralized through offsetting.

Regulations will again demand prompt action.

To meet their targets, organizations need to

For example, the EU’s Corporate Sustainability

start by estimating their current GHG emissions.

Reporting Directive (CSRD) requires all large

This is challenging for most industries as

companies (an estimated 50,000 entities) to

those emissions occur across their value

publish regular reports on their environmental

chain, upstream and downstream of company

and social impact activities, following a common

production facilities. Therefore, it is crucial to

reporting framework.6

involve the wider ecosystem (and its emissions)
in improving performance, as we will discuss
below.

Failure to set challenging goals for
GHG & carbon emissions reduction

Achieving net-zero for greenhouse gas (GHG)
emissions should be a clear first target for most
businesses. Yet 43% of companies have not yet
set a strategy (see Figure 10).
Targets vary, as Figure 10 illustrates. While many
are long-term, reaching up to 2050, the nature
of science-based targets means they need to be
backed up by short- and medium-term plans to
show how companies will achieve their overall

A C H I E V I N G N E T- Z E R O
FOR GREENHOUSE GAS
AND CARBON EMISSIONS
SHOULD BE A CLEAR
F I R S T TA R G E T F O R
MOST BUSINESSES

net-zero aims.

Figure 10. Progress on net-zero GHG/carbon emissions
strategy

Figure 10. Progress on net-zero GHG/carbon emissions strategy

Does your company have a net-zero GHG/carbon emission strategy?

No

21%

22%

No, but we are planning to do so

Yes, net-zero target by 2050

27%

Yes, net-zero target by 2030-2050

Yes, net-zero target before 2030

22%

8%

Source: Arthur D. Little

Source: Arthur D. Little
5
6
7

10

“Corporate Climate Responsibility Monitor 2022.” New Climate Institute, 7 February 2022.
“The Corporate Sustainability Reporting Directive (CSRD).” Plan A, 2 February 2022.
“The Net-Zero Standard.” Science Based Targets (accessed May 2022).

ARTHUR D. LITTLE

NOT SEEKING SUSTAINABILITY
PARTNERS ACROSS WIDER
ECOSYSTEMS

Slow progress on embracing the

Given its interconnected nature, sustainability

adopting circularity. For example, across the

circular economy

Research from Material Economics9 identifies
a strong potential for reducing emissions by

requires an ecosystem approach, as we

four heavy industry sectors of cement, steel,

described in a previous Prism article. 8 To unlock

aluminum, and plastics, circular practices could

the opportunities it brings, organizations must

reduce the total carbon footprint of these

move beyond traditional partners.

industries by close to 60% by 2050 in the EU.

The ADL survey reveals increasing collaboration

Currently, the vast majority of companies

between organizations and an expanding

are not yet embracing these opportunities,

range of stakeholders (see Figure 11). Most

instead taking a linear approach that does not

sustainability collaboration remains with

have concrete circularity initiatives or targets

existing partners (81%), although a growing

(see Figure 12).

number of organizations now collaborate with
universities/R&D groups and downstream supply
chain partners/end customers. Organizations
need to broaden their horizons, such as by
cooperating with technology companies and
data providers to bring in new thinking and ideas
to meet sustainability commitments.

Figure 11. Stakeholder collaboration to improve sustainability
performance
Figure 11. Stakeholder collaboration to improve sustainability performance
Which stakeholders does your company collaborate with
on improving sustainability performance?

90
80
70
60
50
40
30
20
10
0

81%
53%

Suppliers

Universities or
R&D groups

52%

45%

44%

40%

Downstream Nongovernmental
Peers or
supply chain
organizations
comparable
partners/end
(NGOs)
companies
customers

38%

Local public National public
administration administration

27%

25%

Employer
organizations

Startups

Source: Arthur D. Little

Figure 12. Progress toward circular ecosystems

Figure 12. Progress toward circular ecosystems
How would you define the role of your company within the circular ecosystem?

We have not yet launched concrete
initiatives to define it

Source: Arthur D. Little

61%

Has your company defined targets for circular business or launched
specific circularity initiatives?
No, we have not yet launched
concrete initiatives

75%

Source: Arthur D. Little

8
9

Milanese, Stefano, et al. “Corporate Sustainability — Using Your Ecosystem to Sustain the Ecosystem.” Prism, December 2021.
“The Circular Economy: A Powerful Force for Climate Mitigation.” Material Economics, 2018.

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WIDE RANGE OF GOVERNANCE
HAMPERS CONTROL
Successful change requires sufficient resources,
accurate data, and strong governance to ensure
that the entire organization, at every level,
moves in the same direction, speaks the same
language, and shares a collective understanding
of goals. It is vital that organizations define

INABILITY TO TRACK
P ERFORMANCE WITH
TH E RIGH T TOOLS
Clearly, organizations need to be able to
effectively track and demonstrate progress
toward their commitments both internally
and with external stakeholders such as
investors, regulators, and customers. However,

and measure standards across the business,
with everyone clear on what “good” looks like,
if governance is to be effectively embedded

a company’s activities are complex and are
continually changing, due to a variety of
situations including:

within daily activities.
There is no single approach organizations take
to governance models, as shown in Figure 13.
What is vital, however, is that sustainability
governance is organically embedded in the
existing corporate organization and structure
with some level of corporate control or
oversight. Targets and objectives must be

cascaded down (and validated bottom-up)
to meet overall corporate objectives.

Products and divisions can be sold.
New products are bought or introduced.
Growth in particular markets or regions
impacts emissions.
Low-carbon products may be retired due
to market changes.
Value chain partners can implement changes
that affect a company’s emissions.

Figure 13. Organizational structure of sustainability
Figure 13. Organizational structure of sustainability
How is sustainability organized within your company?

There is no dedicated sustainability team

19%

There is a dedicated central (corporate) team that is
administering only sustainability-related projects

20%

There is a dedicated central (corporate) team that is
actively enforcing sustainability compliance across
different BUs/corporate functions

22%

There is a small central (corporate) team
plus additional staff supporting the BUs

Each BU is responsible for its own
sustainability-related initiatives
Source: Arthur D. Little

Source: Arthur D. Little

12

25%

14%

ARTHUR D. LITTLE

Consequently, without the ability to track

organizations apply carbon pricing to important

performance it is difficult to understand exactly

business decisions, with a further 3% extending

where you stand and to measure sustainability

this to other externalities.

performance and progress against targets.
This will become much more important in the
near term when regulators mandate greater

S U S TA I N A B I L I T Y
PERFORMANCE
REPORTING REMAINS
THE POOR COUSIN OF
FINANCIAL REPORTING

transparency around climate change–related
emissions and risks. Yet, in this area companies
are held back by a lack of flexible, usable
measurement tools.
In fact, among respondents, 43% are not
confident that they can track performance,
while a further 47% have tools but feel they
are too labor-intensive to deliver full value
(see Figure 14).

The business impact of poor

As an example, carbon pricing is becoming a
significant factor in business decision making. It

measurement & reporting

is used to drive decisions around investment and

There is a growing volume of investment

product development, extending down to the

capital looking for sustainable investment

level of planning and measuring the impact of

opportunities. Attracting this requires

company travel. However, 68% of organizations

organizations to be able to demonstrate their

have not yet developed an internal carbon-

sustainable credentials and progress toward

pricing system. This lack of relevant data holds

achieving commitments.

back sustainability; just 11% of responding

Figure 14. Ability to track sustainability progress

Figure 14. Ability to track sustainability progress
Are you confident that your company can effectively track progress
to meet its sustainability commitments?

No, it is difficult to monitor our progress

13%

No, but we are planning to implement
a good control system

30%

Yes, we have tools to track our performance,
but they are labor-intensive

Yes, we have sophisticated tools
to assess and monitor performance

47%

10%

Source: Arthur D. Little

Source: Arthur D. Little

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Yet sustainability performance reporting

allow the proper steering of sustainability

remains the poor cousin of financial reporting.

inside the organization. As a result, these

Just 17% of organizations surveyed believe

companies fail to articulate their strategies and

that the two areas share the same rigor, while

develop the necessary confidence around their

only 13% integrate sustainability and financial

sustainability initiatives, which are essential

reporting into the same document, as Figure 15

in discussions with investors. Of respondents,

highlights.

30% say they do not discuss sustainability with

Often this lack of rigor comes from companies
being reactive rather than proactive. They begin
with the goal of creating a sustainability report
rather than starting with the bigger objective

investors at all, and only 22% are using their
performance metrics to attract green investors.
Essentially, 78% of the organizations are not
fully exploiting the growing availability of green
investment and the better terms it offers.

of setting a strategy and governance that will

Figure 15. Sustainability vs. financial reporting rigor
Figure 15. Sustainability vs. financial reporting rigor
Is your company’s sustainability report subjected to the same rigor
as your financial reports?
We do not have a sustainability report

They don’t have the same rigor,
short sustainability reports are prepared

16%

11%

They don’t have the same rigor, but there is an
extended and separate sustainability report

They do not have the same rigor, but financial
and sustainability performance are integrated
in a single report

They have the same rigor, financial performance and
sustainability are integrated in a single report

Source: Arthur D. Little

Source: Arthur D. Little

14

43%

13%

17%

ARTHUR D. LITTLE

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3 . O P E R AT I O N A L I Z I N G
S U S TA I N A B I L I T Y

M A N Y O R G A N I Z AT I O N S
A R E C U R R E N T LY
STRUGGLING TO EMBED
S U S TA I N A B I L I T Y W I T H I N
T H E I R O P E R AT I O N S A N D
GOVERNANCE

Many organizations are currently struggling
to embed sustainability within their
operations and governance. This holds back
their progress toward their stated goals and
prevents them from unlocking the benefits
that sustainability brings. At the same time,
there has been a growth in new, sustainabilitynative organizations. Akin to digital natives,
these organizations have been created with
sustainability at their core and are providing
potential competition (and ecosystem partners)
for more traditional businesses.
Overall, to deliver progress in operationalizing
sustainability, companies need to focus in four
key areas:
1. Adopt an ecosystem approach.
2. Integrate sustainability indicators, reporting,

Next, it is vital to listen to those entities’
concerns, incorporate these into strategy, adopt
common standards, and take action. Examples
of companies that have reached beyond their
traditional partners include the following:

4. Focus on innovation and technology.

chain, Umicore set up new relationships with
Toyota, Nokia, and Sony around the “closed

and tools.
3. Redefine culture and build new capabilities.

Umicore. Looking outside its traditional value

loop” recycling of materials.
Aena. One of the largest airport operators
in the world, Aena published an ambitious
Climate Action Plan. Recognizing the need to

A DO PT AN ECOSYST EM
A P P ROACH

plan also includes measures for airlines and
handling companies.

Currently, many organizations are turning to

Organizations must act now to position

their traditional, linear supply chain partners

themselves effectively within these ecosystems.

to increase sustainability. This does deliver

In many cases, first-mover advantage is vital to

some benefits but given the scale of the

maximizing their share of the opportunity ahead

challenge, they need to adopt more circular

of competitors and other ecosystem players

approaches and involve nontraditional partners.

(see Figure 16).

These partners could include nongovernmental
organizations, peers, local and national public
administrations, employer organizations, and
startups.

16

influence the broader aviation ecosystem, the

ARTHUR D. LITTLE

Figure 16. Players in sustainability ecosystems
Figure 16. Players in sustainability ecosystems

PARTNER

SUPPLY CHAIN

SUPPLIER

GREENTECH

COMPETITOR

EDUCATION

COMMUNITIES

GOVERNMENTS

COMPANY
EMPLOYEES

SOCIAL MEDIA

CUSTOMERS

Source: Arthur D. Little

I N T EG R AT E S USTAI N ABI LI T Y
IN
DI C ATO RS , R EPORT I N G &
Source: Arthur D. Little
TOOLS
Organizations should set the right sciencebased targets that are understandable and
clear — and measure them effectively, internally
and externally. Understanding progress
toward sustainability goals relies on accurate,
timely data that can be used to underpin
every business decision. This approach must
be embedded within the organization so that
managers have immediate access to tools such
as carbon-pricing calculators when planning
operations. With science-based targets there

Whether created in-house or sourced externally,
tools should follow industry-standard
frameworks and harness artificial intelligence
and machine learning to remove the need
for labor-intensive collection and analysis to
deliver faster, more automated monitoring
and reporting.
Given the complexity of many organizations,
the tools must be able to monitor sustainability
at both a product and portfolio level and cope
easily with major business changes such as
divestments and M&A. (The sidebar “Adopting
sustainability tools and frameworks” highlights
some examples.)

is a major risk of failing to meet long-term
objectives if companies fail to achieve interim
goals through poor planning.
The right tools
For many organizations, a lack of effective,
automated tools is holding back collecting
and sharing data and thus monitoring and
improving sustainability performance. Given
their importance, sustainability tools should

S U S TA I N A B I L I T Y T O O L S
SHOULD BE AS STRONG
A N D F E AT U R E – R I C H
AS THOSE USED IN
O P E R AT I O N A L A N D
FINANCIAL SYSTEMS

be as strong and feature-rich as those used in
operational and financial systems and should
integrate with these systems as well.

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Adopting sustainability tools and frameworks
Examples of some of the tools and frameworks

created to cut GHG emissions across the

organizations have employed to monitor

information and communications technology

sustainability include:

sector. Approved by the SBTi, it gives guidance

1. Portfolio sustainability assessments.
Aimed at the chemicals/materials industry,
this framework was developed by the World

on how to set, measure, and plan targets to
achieve net-zero emissions by 2050.
3. Amazon Web Services (AWS) customer

Business Council for Sustainable Development,

carbon footprint tool. This tool enables

with assistance from ADL. It aims to provide a

customers to calculate the environmental

common framework for organizations, enabling

impact of their use of the Amazon cloud, now

consistency and providing a shared language

and in the future. AWS has pledged to reach

around sustainability across the value chain.

net-zero by 2040 and to power its global

2. Mobile Climate Action Toolkit. Developed by
the GSM Association and partners, this toolkit

operations with 100% renewable energy
by 2025.

is part of the first science-based pathway

Incentivize based on a balanced
set of indicators

Simply creating a sustainability report because

Oftentimes, the linkage between management

it is considered mandatory due to the current

incentives and sustainability performance

business climate is counterproductive. Such

is lacking, due to the difficulty of selecting

a report will lack strategic direction and

meaningful and appropriate indicators.

objectives and will not contain robust data. This

Sustainability targets are long-term and require

means it can hinder the potential for unlocking

cooperation within and beyond the organization,

sustainable investor value.

making it hard to capture meaningfully in annual
renumeration packages.

Instead, companies should rethink their

Companies should therefore work toward

toward an ongoing, regular (e.g., quarterly)

developing and reporting on a balanced set of

commitment toward shareholders and investors,

indicators suitable for their particular business,

similar to their approach to financial reporting.

backed up by a strong governance system to

Such a strategy puts organizations in a

track progress. These should take into account

better position to leverage green/sustainable

key principles, such as:

financing, increase the accuracy of analysts’

Reflecting both short-term and long-term

earnings forecasts, and reduce negative ESG

Ensuring that these goals accurately reflect

goals in incentives.

reporting from a mere end-of-year assessment

incidents, such as accusations of greenwashing
(claiming better sustainability performance
than is happening in reality).

corporate strategy.
Taking a broader stakeholder view, measuring
beyond company activities to include the wider
supply chain.
Considering multiple sustainability
dimensions; for example, not just climate
change but also waste, energy, and diversity
and inclusion.
Balancing lagging impact measures (such as
emissions) with leading proactive measures
(such as controls implemented).

18

Develop investor-oriented reporting

RE DEFINE CULTURE &
BUILD NEW CAPABILITIE S
Integrating sustainability into existing
operations is a transformative exercise.
Organizations need to successfully undergo
cultural change to ensure all employees
understand its importance and what it means
to their roles. Implementing new systems and
processes will be successful only if the people
involved use them.

ARTHUR D. LITTLE

As with any culture change program, embedding

1. Leverage innovation to increase

sustainability requires:

sustainability

Use innovation to become more sustainable,

Regular, in-depth, clear communication.
Sustainability is a journey, so take everyone
with you by showing the benefits. Inspire your

decisions about which projects to pursue

Defining and adopting a common language

current requirements but also creates future

around sustainability. This language must

across the wider value chain and convey what
sustainability means to the business on a dayto-day basis.
Strong leadership and clear incentives. From
the top down, ensure behavior reflects the fact
that sustainability is an integral part of the
success of the business, not just a regulatory

improvements. Factoring sustainability into

people to want to become involved.

extend not just within the organization but

from product service ideation to organizational

necessity.
Increase “pull” from employees. The entire
organization should seek shared beliefs, values,
and aligned incentives, rather than just relying
on “push” techniques such as imposing new
rules and processes.

Ensure you have the right capabilities in place.
In addition to tools and technology, look to
develop the skills you need internally, whether
through retraining, recruitment, or ecosystem
partnerships. Provide adequate resources and
put in place strong governance and a detailed
roadmap against which to measure and monitor
your progress.

FOCU S O N IN N OVAT I O N
& T EC HN O LO GY
New and improved technology is central to
successful sustainability initiatives. On the
positive side, innovation is accelerating progress
in areas as diverse as solar, EV/batteries, waste
recycling, air/water treatment, and green
hydrogen. As such technologies mature, their
costs are decreasing, enabling large-scale
deployments and making sustainability more
accessible. For example, the cost of solar
photovoltaic energy dropped by 82% between
2010 and 2019, while efficiency saw a fivefold
increase.
Organizations should look to bring sustainability
and innovation together. Four ways to achieve
this are:

not only enables organizations to meet
opportunities. For example, Ericsson is now
taking development of its range of System on
a Chip products (integrated circuits that bring
together all or most components required to
operate in a single chip) in-house. Through close
codesign of hardware and software, it is now
able to create high-performing, energy-efficient
products for a wide range of deployment
options, as well as providing Ericsson greater
control over its 5G portfolio development.
2. Seek out the right technologies across
your ecosystem

Sustainability breaks down barriers between
traditional value chains, so do not limit your
technology choices. Explore wider ecosystems
and engage with diverse, new partners (such
as research institutions and universities)
to find the right innovations to improve
sustainability performance. Revisit your own
innovation pipeline — are there technologies
you can develop, acquire, or harness to deliver
sustainability?
3. Encourage adoption of sustainable
technologies

Adopting new sustainability technologies is
vital but needs to be managed carefully to
avoid impacting current performance when
deploying immature solutions. Create clear
mechanisms and processes that enable the
testing and adoption of sustainable innovations
and technologies within the core business, such
as through large-scale pilots.
4. Harness a portfolio sustainability
analysis approach

Portfolio sustainability analysis (PSA) helps
focus innovation pipelines on relevant
technologies. PSA acts as a radar to capture
weak sustainability signals and move them
to research and development, maximizing
resources and increasing the flow of sustainable
innovations.

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D E V ELOP & AD O PT N E W
B U SI N ESS M OD ELS

This also gives a greater incentive to create

Sustainability delivers new opportunities for

ensuring uptime. For example, automotive

growth, particularly within the circular economy.
For example, new revenue streams can be built
around waste processing, recycling end-of-life
products and reusing or selling their constituent
parts. Working with partners, sustainable
materials can be created (such as from biomass)
and used to underpin new business models, such
as bio-based clothing.

longer-lasting, more durable products as the
company is responsible for maintenance and
manufacturers are not only rapidly transitioning
to electric vehicles, reengineering their
traditional business models and supply chains
to support this change, but are also introducing
new mobility-as-a-service offerings. Servicebased models are typically winner-takes-all,
so companies should explore opportunities
early to identify the right targets. First-mover
advantage can be crucial to success.

Introducing “as a service” business models
provides additional revenue opportunities by
enabling companies to connect more closely
to customers to meet their ongoing needs.

The opportunity to operationalize sustainability:

Thoughts from Prof. Tima Bansal , Ivey Business School
Sustainability is no longer an option, it is a

1. Include sustainability in the company’s

corporate imperative. ADL’s survey found that

purpose, vision, or North Star. No matter

92% of companies have taken some steps toward

what you call the statement that guides

a sustainability strategy. These companies

your company, a nod to a higher purpose

see important benefits accruing through

than profits will send a strong signal to key

sustainability — some of the most significant

stakeholders and give executives permission

being stronger customer and employee

to widen the types of issues they consider in

relationships.

making decisions.

So why is sustainability so hard to implement?
It’s simple. What matters most to most decision
makers is meeting short-term financial targets.
It’s hard to focus on abstract, long-term
ambitions when the next quarterly earnings call
or performance evaluation is around the corner.
Sustainability initiatives that do not advance
the bottom line are often shut down early. Yet,
failing to act on sustainability will ultimately
come back to bite most companies. It is only a
matter of time before sales contracts are lost
and employees look for jobs elsewhere.
Successfully operationalizing sustainability
requires a concrete strategy, as described in this
Report. Alongside this, a few simple measures
can go a long way in advancing the company on
an ambition that sometimes seems elusive:

2. Measure a few key sustainability metrics.
Identify five key metrics on which you want
to focus — a few environmental metrics,
such as carbon emitted, recycled content
sourced, carbon and waste emitted, and a few
social metrics, such as employee wellness
and diversity. These metrics will signal all
the way from senior executives to shop floor
supervisors that they need to widen the focus
of their attention.
3. Create a sustainability innovation fund.
Many companies set aside money for local
philanthropy without a second thought. The
same logic should be applied to sustainability
initiatives that can be proposed by anyone
in the organization. This fund will uphold
the company’s purpose statement, advance
progress toward the wider set of metrics,
and best of all, inspire creativity.
Although sustainability is now a corporate
imperative, it is also an opportunity. It gets
companies off the earnings treadmill to
consider how they can create value in making
the world better for all.

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ARTHUR D. LITTLE

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CONCLUSION

T HE N EED & B EN EF I TS
O F ACT I N G N OW

Therefore, now is the time to act and

Despite the majority of organizations setting

and improving the world around us, but it

concrete targets for sustainability, ADL’s
research shows that progress on embedding
it has been slow. This is largely due to the
enormous, practical challenges of putting
sustainability at the heart of operations and
business models. Organizations are struggling
to measure sustainability performance,
communicate strategy internally, change

operationalize sustainability. Not only will this
deliver benefits in combating climate change
simply makes good business sense. Effective
sustainability strategies improve efficiency
and financial performance, lower the cost of
capital, better engage internal and external
stakeholders, and provide new opportunities
for growth. Overcoming the challenges to
embedding sustainability is therefore a business
imperative for all.

culture, and engage with their wider ecosystem,
all while dealing with the complexities of
running and growing their business.
The positive news is that the wider picture is
changing. Technology advances are enabling
sustainability, new tools and frameworks are
being proven in the field, consumer demand
is growing, and best practice is emerging and
being shared across ecosystems. At the same
time, institutional and government players are
offering greater volumes of green funding.