Historically, many companies entering the sustainability realm were characterized by high ambitions and low system readiness for reliable progress reporting. Appropriate tools and technologies were missing, and overly optimistic sustainability claims led to a perception of greenwashing among important stakeholders.

The step change in technology development in recent years has created a new kind of players that have strong organizational enablers through clearly defined roles, robust processes, and the use of next level analytical tools, but with no strong commitment to sustainability. Often, they perceive that their specific operations do not have a strong sustainability impact, for example, service companies with a technology focus (for example, e-tailers, internet-only brands, pure technology companies). However, their growing maturity in recent years is starting to fuel a substantial shift in attitude toward sustainability. These organizations are increasingly striving to connect reliable datasets to harvest selected sustainability opportunities.

Firms that follow this strategy often explore

• How to leverage existing processes, data and tools to gain a competitive advantage through sustainability
• How to manage sustainability risk
• How to incorporate datasets based on analytical findings to the overall strategic objectives

Corporations operating in this quadrant often focus on selected priorities close to the core of their operations. They are digging deep into certain aspects of their data and leverage their strong systems and processes, but have difficulty in moving horizontally into a leadership position as they lack overall direction or are not convinced about the return of the investment. We have also seen them implementing sustainability if they feel there is an immediate competitive advantage or benefit, but organizations of this type lack the understanding of the long-term benefits of a sustainability culture. They operate with a strong internal focus, rather than considering the benefits of the (often digital) ecosystem along the value chain that could contribute substantially to a stronger position.

We believe these companies have the prime ingredients to become future sustainability leaders as they have expert knowledge of a specific sustainability aspect (for example, transport emissions along the value chain for a retailer) that over time can be transformed into a leadership position on a broader scale. They will also be able to meet growing requests from stakeholders (from investors to end consumers) on transparency and integrity. To be able to advance, the sustainability transformation needs a further push of sustainability champions or stronger leadership commitment to move into the pioneering quadrant.

The quadrant in the upper-right-hand corner covers companies that are true leaders in sustainability – the pioneers. These companies often have a long history with detailed and successful sustainability strategies. They have made stepwise improvements to their sustainability performance and show a sound balance between sustainability ambitions and system readiness to deliver.

This quadrant is the clear boundary of sustainability, and much in it is still terra incognita, as selected pioneers try to figure it out as they push their sustainability impact to the next level. In the current sustainability landscape, we see no single firm that has mastered this quadrant and incorporated all levers that we have identified – and maybe this is currently not even feasible or required. Corporations that strive to master in this category are equipped with the proper systems to evaluate, implement, track, and report sustainability initiatives across multiple geographies, departments, and business units – and they exhibit the culture and leadership vision to make change happen and leave their mark.

Their trailblazing sustainability efforts are not confined to their own organization. Sustainability leaders understand the holistic nature of sustainability efforts and will undertake a conscious effort to bring change to their business partners, market peers, and customer base, further driving sustainability efforts and innovation. Some pioneers will also take action to steer political regulation in their industry toward a more sustainable future. Their ambition is not only to change their own ways, but their industry and – further down the line – society too. Leading sustainability innovation generates salient gains for companies, both on the top and the bottom line:

• Improved process awareness and innovations reduce waste.
• Reduced costs affect operational efficiency positively.
• Sustainable product portfolios and sustainable design provide access to new customer segments.
• New, often circular, business models create new revenue streams.
• Premium brand perceptions offer customer loyalty as well as options for premium pricing and margins.

Additionally, a superior brand perception supports talent attractiveness (“the war for talent”), boosts employee morale, and provides goodwill in the public domain.

We have seen that firms striving to be sustainability leaders are often occupied with:

1. Building a sustainability ecosystem
2. Generating cross-functional sustainability ownership
3. Offering sustainability as a service
4. Contemplating new circular business models
5. Becoming a sustainability innovation driver to promote sustainability innovation through their value chain innovating and reimagining what sustainability means

Companies that focus on regulatory compliance view sustainability merely as a formal matter, but not as a source of value creation. These companies ensure that the minimum legal requirements are met as “hygiene factors” and they are limited in their data gathering and analytical capabilities. The view on sustainability in these organizations is often based on five factors:

• The return on investment is uncertain.
• Sustainability is seen as a specialist subject and an extra on top of “real” business.
• The risk exposure is deemed as limited.
• There is limited consumer pressure (as it happens in B2B business environments).
• There is limited competitive advantage to be derived from sustainability investment.

Consequently, the focus lies on compliance with existing regulations as companies do not recognize how competitive positions and profitability can be improved. Organizations within this quadrant focus on:

• How to define the legal requirements
• How to track the fulfillment of legal requirements (audits)
• How to assess which data is needed and how it can be obtained (KPIs)
• How to deliver data and analytics in accordance with the requirements (goal definition)
• How to allocate selective responsibilities (transparency)

Organizations in this quadrant will miss brand-building opportunities, which might lead to a lack of goodwill with internal talent and public opinion. Furthermore, they are unaware of sustainability risks that are not directly visible in their business environment, for example, those created by the activities of upstream suppliers. They also miss the opportunity to attract investors that base their decisions on ESG principles. Regulators, as well as financial institutions, might ask for a stronger sustainability commitment before they grant permissions and/or financing, respectively.

Companies in this quadrant are working more reactively than proactively. Somewhat ironically, those companies that focus solely on being compliant are very often also the ones who engage the least to actually be part of shaping the regulations. They seldomly engage in active advocacy in order to influence legislation, so there is a missed opportunity to leverage their competence to find the best solutions.

But if the compliance quadrant is the starting point for the organization to embark on a journey of improvement, we suggest moving first upward (toward organizational enablement) before expanding ambitions along the horizontal axis to achieve the greatest impact. By following this path, you ensure that you have the right systems in place before starting the climb toward a more ambitious leadership position.

Organizations in this quadrant show high ambition and integrated leadership, but are lacking in terms of organizational enablement – this is preventing them from moving upward into a true leadership position. These kinds of corporations have long been perceived as sustainability leaders in the public eye, but often with a poor understanding of sustainability impacts: this carries the risk of being perceived as “greenwashers”. There is a clear opportunity for these companies to gather more reliable and improved data to better understand initiatives and track sustainability impacts. 

This position allows organizations to create value through sustainability, by being aware of sustainability challenges and identifying the potential opportunity. This high commitment leads to – and is well supported by – internal drive and direction. These corporations frequently employ business evangelists (in some cases, the CEO or founder role is used for that purpose) to reinforce their overall mission, vision, and management commitment to achieve traction for sustainability leadership. Additionally, the high public profile of these companies leads to partnerships with public institutions (PPP) and (cross-)industry peers, enabling a collaborative approach and a more holistic perspective on sustainability. Companies in this quadrant are convinced that sustainability leads to business advantages.

By exchanging ideas and sharing resources for common projects, these firms lead the development of certain topics (for example, involvement in industry associations to reduce waste). They are perceived as leaders, which attracts talent and provides substantial goodwill – both in the eyes of financial institutions and authorities.

Our view is that the underdeveloped part in this quadrant is a sustainability-targeted enablement, incorporating better systems support and more relevant and consistent data. These organizations could consider:

• How to better define roles, processes, and ownership to ensure better enablement of sustainability initiatives
• How to align overall purpose to analytics and measurable progress including balancing investment need with planned impact
• How to better balance environment, social, and ethics needs with governance (as we define it) needs
• How to make sure that pledges made are not perceived as “greenwashing” as they are not supported by consistent datasets.