Forum Institutional

Companies must focus on resiliency, profitability and sustainability

Tech is helping sustainability infiltrate the entire value chain. Merely measuring carbon footprints is no longer valid. Image: Unsplash

Christian Klein
CEO and Member of the Executive Board, SAP SE
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This article is part of: The Davos Agenda
  • Resiliency is the foundation for all business models.
  • We need to see profitability in terms of social wellbeing, not only shareholder value.
  • Tech as applied to sustainability can help companies measure and steer their carbon footprint across the whole value chain.

Whilst it is currently difficult to imagine a world in which COVID-19 isn’t part of our daily conversations, we will get there eventually. It is critical for our future how we respond to and recover from this crisis.

With disruptions increasing in frequency and magnitude – climate change, social unrest and inequality and geopolitical tensions – our world is more volatile than ever. Last year showed us where we have become negligent and where we have turned a blind eye.

The crisis is a wakeup call for society, businesses and humankind. As businesspeople this offers us an opportunity: an opportunity to rethink our business models so that resiliency, profitability and sustainability are not mutually exclusive.

It is also a chance to foster growth and contribute to a stable, prosperous, inclusive economy for all. Look at companies that have mastered the challenges of the pandemic better than others. You will find that they have invested in their digital transformation with the implementation of new business models, using new technologies or making supply chains more robust.

In this unpredictable environment, companies need to achieve incredible business outcomes – across all dimensions:

  • They need to drive resiliency – allowing them to navigate challenging times and adapt quickly to change.
  • They need to drive profitability – both top and bottom line, enabling growth and increased productivity.
  • And they need to drive sustainability – by reducing carbon footprint, waste, improving working conditions and transitioning to the circular economy.

Resiliency is ingredient number one

When the world went virtual overnight, companies had to change their processes and strategies in no time. As countries shut down their borders, supply chains were disrupted in a completely unforeseen manner. The ability to face disruptions and recover quickly from those difficulties is what makes companies resilient.

That’s when technology had its big moment because it helped us stay connected and carry out our business seamlessly with our employees as it strengthened our engagement with customers.

Interconnected value chains, adaptive manufacturing processes, and flexible networks help companies to adjust quickly and responsibly to disruption and fast-changing market demands, and to manage dependencies in real-time. Those businesses that had embraced technology fared better. They built the foundation for their resiliency.

Profitable companies make innovative societies

Profitability is the primary goal for any company, but it also leads the way to prosperous and innovative societies.

Traditionally, businesses have focused on maximising value for their shareholders. And no doubt, short-term financial profitability is important for a quick recovery. But stakeholders today are closely looking at what a brand says, does, and where it stands on issues like sustainability, equality, transparency and fair employment practices. Eighty-four percent of consumers globally say they try to shop from companies that support causes they care about.

So, for the long term, we need to broaden our view to other, even more purposeful dimensions of profitability: social wellbeing, equality, our planet and its ecosystem. And that’s a win-win. Here's why:

Studies show that there is a direct correlation between sustainable practices, share prices, and business performance. Bank of America found that companies with a better Environment Social Governance record than their peers produced higher three-year returns, were more likely to become high-quality stocks, were less likely to have large price declines, and were less likely to go bankrupt.

Multiple advantages to tech-led sustainability in business

Stakeholders expect that companies anticipate and prepare for environmental and social change and follow best corporate governance practices to prepare for any shocks or disruptions. It’s about building competitive advantage, lowering risk, getting ahead of new regulations, gaining ground with investors, and adjusting to new consumer demands.

Sustainable growth means growth that is repeatable, ethical and responsible to, and for, current and future communities. As a result, we see sustainability becoming a dimension of corporate decision-making just like cost or growth.

But sustainability is about more than reporting your carbon footprint, implementing carbon taxes, or compensation on a voluntary basis. Technology can help companies measure their carbon footprint across the whole value chain, allowing them to make responsible business decisions while taking sustainability into account.

Have you read?

It allows companies full transparency about the social cost of each product. They can simulate options for sustainable investment, operational decisions, and managing natural and social resources, just like any other enterprise resource.

Thanks to technology, companies can pick suppliers that comply with their standards, for example in cases of workplace safety, child labour or human trafficking.

2020 has showcased how digitalisation and technology drive innovation. The pandemic forces us to be innovative and find new ways to master the crisis. It is imperative that we stop thinking in silos – be it when it comes to the business outcomes we need to achieve, or when we acknowledge that no company or country will be able to tackle today’s challenges alone.

It is not an either-or anymore – it is about having a holistic view, not only of our business, but of our society as a whole. We must keep in mind the lessons learned because new strategies, markets and business models are constantly being formed.

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