Charting a path to becoming a sustainability leader

The Kearney Sustainability Chessboard series / article 1

It’s time for sustainability to shift from being a box to check on the C-suite agenda to a core part of the corporate strategy and an ever-present consideration throughout day-to-day operations and decisions. The question is how. Kearney’s Sustainability Chessboard offers a framework to help the laggards get started and the leaders push their boundaries.

The world has fundamentally changed over the past few years: the pandemic, the crisis in Ukraine, supply shortages, the energy crisis, and inflation dominate the headlines. However, there’s one thing we’ve been talking about for years but have never fully addressed: the climate crisis. In the face of not only looming gas shortages and rising oil prices, but also heat waves, severe storms, and floods, European governments finally seem willing to treat the issue more seriously. For example, in June, Denmark passed the world’s highest CO2 tax for companies. Also, the EU recently set an end date for internal combustion engine sales. But it is not only global climate protection that’s coming into focus: new regulations such as the Supply Chain Act are holding more companies accountable for their human rights compliance across the entire value chain. And in early August, the US Senate passed its biggest bill to date. The US Inflation Reduction Act will allocate $369 billion to reducing greenhouse gas emissions and investing in renewable energy sources. Experts have estimated that the bill’s climate provisions will reduce the United States’ planet-heating emissions by about 40 percent by 2030 compared with 2005 levels.

At the same time, forward-thinking companies are eyeing the opportunities of proactive sustainability activities beyond compliance. Those with a strong commitment to sustainability are more attractive to both ESG investors and potential new employees and can appeal to new and old customer groups alike with sustainable products and services. The leaders also have more transparent processes and data with sustainability as an overarching concept that promotes cross-functional collaboration, both internally and with external partners.

Sustainability can’t be an afterthought—it needs to be a cornerstone in your leadership philosophy

In view of new regulations and customer requirements, it is not surprising that more and more companies are setting ambitious sustainability targets. But how do you translate these long-term goals and strategies into practical short- and mid-term moves? And how do you avoid claims of greenwashing when investing in ambitious lighthouse projects might spark questions about how the rest of the business is conducted? Doing the bare minimum and hoping that the sustainability discussion will pass will not work. Companies with low investments in sustainability will lose competitive advantage and in the long run either be overtaken by more sustainable, innovative competitors or be thrown off track by more stringent regulations. Either way, they will fail to realize the commercial opportunities connected to engaging in sustainability. ?

Kearney’s perspective is clear: to be prepared for future challenges and get the most out of your sustainability strategy, a new leadership culture and corporate philosophy with sustainability at its core is required. Sustainability is not an “extra” to add to ongoing business; it needs to be embedded on the same level as other considerations that we are perhaps more used to, such as profit, cost, and quality.

Enter the Sustainability Chessboard

To assist in this crucial transformation, Kearney has developed the Sustainability Chessboard ?. This innovative and practical framework helps companies—regardless of geography, size, or industry—understand where they are in their journey and what their next moves could and should be. A firm’s general sustainability performance is mapped on two axes: the x axis indicates a firm’s ambition from compliant to pioneering, and the y axis indicates the level of organizational enablement, denoting whether a company has the right structures, processes, systems, data transparency, and tools to comprehensively implement sustainability.

Four top-level strategies emerge from this classification:

·??????Ensure sustainability compliance: These companies are focused on a compliance view of sustainability as a formality but not as a source of creating value.

·??????Leverage sustainability data: These firms have all the tools, systems, and data in place but only use it when they see an immediate competitive advantage.

·??????Create value through sustainability: These firms have a strong sustainability culture and passion but lack the supporting data, tools, and metrics to get the full benefits.

·??????Lead sustainability innovation: These companies view sustainability as core strategy dimension, using it to drive innovation, create commercial value, and push industries in a more sustainable direction. This strategy still involves a lot of uncharted territory, and only a few pioneers can be found here, striving to take their sustainability clout to the next level.

These four strategies build the guiding principles of the Sustainability Chessboard. Under each strategy are four approaches, which in turn are divided into four levers each. This forms the basic structure of the Sustainability Chessboard: four groundbreaking strategies, 16 basic approaches, and 64 practical levers for creating more sustainability. The good news: there’s always something more you can do.

Outlook: how to interpret the results on where you stand

The most important question now is how CXOs can use this framework to begin their journey toward a more sustainable future. The starting point comes from the combination of the company’s own organizational enablement and the sustainability ambition. But we all know that the ambition and the practical actions and investments needed to realize that ambition do not always correspond. That’s why ?you can assess the overall maturity and the gaps in your sustainability roadmap using this framework and plan your next moves accordingly.

However, finding the right starting position can be difficult—so stay tuned for our next article, where we will give you an instruction manual on how to get your transformation started.

The Kearney Sustainability Chessboard? is now available at www.kearney.com/sustainability-at-kearney/the-sustainability-chessboard .

Thanks Angela Hultberg and Markus Vejvar for their valuable contributions to this article.