Davos Agenda

Here’s how sustainability can make you stand out from the crowd

A green plant is seen in the home village of Jakelin Caal, a 7-year-old girl who handed herself in to U.S. border agents earlier this month and died after developing a high fever while in the custody of U.S. Customs and Border Protection, in San Antonio Secortez, in Guatemala December 21, 2018. Picture taken December 21, 2018. REUTERS/Carlos Barria - RC1DD6BE18F0

Companies can use environmental commitments as a competitive advantage. Image: REUTERS/Carlos Barria

Shalini Unnikrishnan
Global Lead, Societal Impact Practice; Managing Director and Partner, Boston Consulting Group (BCG)
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Davos Agenda

This article is part of: Sustainable Development Impact Summit
  • The COVID-19 crisis has heightened awareness of the importance of addressing environmental challenges.
  • Companies are seeking to increase the environmental and social resilience of supply chains.
  • To make the case for investment, they need to understand how to use sustainability as a competitive advantage.

Whether making collective commitments on biodiversity or developing alternatives to the plastic bag, it’s encouraging to see that leading consumer goods companies are not holding back on their sustainability activities. However, an important question dominates the consumer goods and retail agenda – one that is critical to scaling up these activities: how can companies use sustainability as a source of competitive advantage?

Have you read?

Doing so is not easy. First, the complexity of the science, the environmental trade-offs, and the many sustainability standards out there mean that consumers are understandably confused.

Take a single-use plastic bottle. One company might claim to have made its bottles easier to recycle. Another might say it’s making its bottle from paper, while another might say it has moved from plastic to glass bottles. How can a consumer – with little time or appetite for scrutinizing detailed labeling – know which of these solutions is more sustainable?

It’s equally difficult for corporate leaders to know where to focus. In our analyses of which issues are material for consumer-facing companies – especially those in the food and beverage sectors but also those in home and personal care – we often find up to 25 topics of importance.

But how does an organization pursue 25 sustainability initiatives that meet its environmental, social, and governance (ESG) goals while also presenting a coherent narrative and a sense of distinctiveness?

Adding to the challenge is the fact that discussions of COVID-19 and the human and economic devastation it has created are dominating the public debate. Yet the pandemic is closely tied to environmental and social challenges, such as access to health, which calls for an integrated approach.

The good news is that the case for pursuing a sustainability agenda is clear. In an article earlier this year, we argued that abandoning their efforts today could leave companies facing grave risks down the line and make restarting sustainability efforts impractical or unaffordable.

Since then, we’ve been encouraged to see that leading consumer companies have not abandoned or watered down their sustainability ambitions. These companies understand that the COVID-19 crisis has actually heightened awareness of the importance of addressing environmental challenges.

In fact, in a recent BCG survey of more than 3,000 people in eight countries, 70% of respondents said they were more aware than before the crisis that human activity threatens the environment, which in turn poses a threat to life on earth. More than two-thirds of respondents said they thought economic recovery plans should make environmental issues a priority.

Public awareness of linkages between humans and the environment has risen.
Image: Boston Consulting Group

Companies are responding. BCG research has found that, as a result of the pandemic, many are focusing on supply chains, not only making efforts to enhance agility and efficiency but also seeking to increase the environmental and social resilience of supply chains, often through unprecedented types of collaborations with suppliers, customers, and even competitors.

Meanwhile, some companies are starting to develop their first sustainability strategies. These organizations understand that if they don’t act now, a huge gap will open up between them and the leading players.

We hope that more will join them. But to enable companies to make the case for the investments, they need to understand how to use sustainability to stand out from the crowd. We believe a number of critical steps can make this possible:

1. Set authentic ambitions: Avoid simply making more pledges and rushing to announce new goals. Create a cohesive and bold north star, and a few big societal impact goals that are aligned to your business strategy, and that you can work towards for several years.

2. Innovate for scale: Resist the temptation to keep launching new pilot ideas. Execution at scale is the only real means of creating differentiation. Innovation should focus on enabling a few promising efforts become large and distinctive.

3. Be transparent in your execution: Invest in digital and operations transformation efforts to integrate sustainability throughout the enterprise so that the starting point, cost, progress, and impact of your actions are transparent, both internally and externally.

4. Engage your consumers: Break out of traditional siloed sustainability communications channels (such as reports, speeches, and news releases) and focus on integrating sustainability into brands and consumer engagement (for example, by reimagining the pack).

5. Re-examine your coalitions: Collective action will be necessary to advance sustainability, but joining coalitions does not translate into impact. Look closely at the coalitions you are in, or are considering joining, and assess whether they are set up to translate ambition to operational outcomes.

Discover

What is the World Economic Forum doing to manage emerging risks from COVID-19?

COVID-19 has dramatically altered the landscape for consumer products and retail companies – including the expectations of consumers. As companies “build back” they have the opportunity to “build back better” by putting sustainability at the centre of everything they do.

Of course, developing systems and technologies that enable transparency, traceability, and impact measurement, and taking steps to shore up supply chain resilience demand new resources and investments.

However, those investments will deliver attractive returns in the form of social and environmental benefits, operational efficiencies, improved business resilience, and – importantly – the opportunity to create a powerful differentiator that, at a time of extreme economic uncertainty, will underpin the organization’s success.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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Davos AgendaCorporate GovernanceSustainable Development
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