The future of corporate sustainability: the vital role of stakeholder engagement

Sustainability has become a cornerstone for businesses striving for long-term success and societal impact. As we look towards future milestones in the net zero path, how can companies recognize and address the critical elements influencing sustainability requirements?? In this article, we explore key considerations for businesses, providing insights into the tools, standards, and methodologies necessary to successfully navigate the sustainability landscape.

?Understanding sustainability challenges and the opportunities

?In recent history, businesses have faced an array of sustainability challenges ranging from climate change and resource depletion to social inequality and greenwashing. Identifying these challenges was the first step towards addressing the underlying issues to address the core issue and the problems associated when sustainability is not done right.

Companies can use a range of relevant tools and standards to uncover sustainability opportunities, measure impacts, and disclose dependencies effectively. Key frameworks include the Global Reporting Initiative (GRI) Standards, widely adopted for comprehensive sustainability reporting, the Sustainability Accounting Standards Board (SASB) Standards, which focus on industry-specific, financially material sustainability topics, and the Task Force on Climate-related Financial Disclosures (TCFD), which guides organizations in disclosing climate-related risks and opportunities.

?While the financial standards are being implemented, the real battle has erupted—market transformation.? Another beloved professor in my sustainability journey was Professor Dan Esty, Yale Law School professor and director for the Yale Center for Environmental Law and Policy, He co-authored the book, "Green to Gold," and it is an in-depth guide to innovate, create value, and build competitive advantage through sustainability efforts. You can find Dan traveling world to help inform political policy across the globe. His insights helped me realize the critical role that marketing and communications leaders with a deep understanding of sustainability management and strategy is to companies wanting to build marketplace partnerships, engage stakeholders in mutually beneficial outcomes, and realizing value from their investments. The marketing and communications team is the link between being on the outside clawing to overcome policies that impact your organization and influencing outcomes in collaborative partnerships.

One easy example to point to is the Inflation Reduction Act (IRA). Currently, it is delivering a range of consumer and ecosystem incentives that are revitalizing communities with new industry and jobs.? The White House reports that more than $360 billion in private sector opportunities have been created. The outcome is also projected to lower energy costs by 9% by 2030.(1) ?Slowly, the bill has won support across the aisle including the American Petroleum Institute and the U.S. Chamber of Commerce.? While many citizens have seen the opportunities such as lower emissions or the incentives business and consumers have participated in to consider clean energy, including the $7,500 credit to EV buyers, multiple enterprise functions, including marketing and communications, have been required to engage stakeholders, build understanding of value created, and translate those stories into messages that are understood and build trust.

In short, policy makers may have found the key to unlock synergies for the citizen and the business. Corporate leaders, who understand the opportunities to collaborate with their government can benefit while impacting the communities in which they operate. But the IRA didn't start with sweeping endorsement nor is the impact understood. We can point to the way that ESG and sustainability has been forced fed as political pawns in partisan politics as the reason why this investment became so polarizing. If a more collaborative communications effort has been designed with willing stakeholders from both sides, the American people may have heard a more objective, engaging story of its potential impact to engage its constituents on the value of taxpayer investment. Luckily, most industry groups are starting to realize it's good for business and society.

Evaluating corporate sustainability performance

To navigate the complex sustainability landscape, companies need robust evaluation techniques. This involves balancing competing priorities and making critical decisions based on sound reasoning. Essential techniques include materiality assessments, which identify and prioritize significant environmental, social, and governance (ESG) issues. Carbon accounting helps measure and quantify greenhouse gas emissions, targeting reduction efforts effectively. Additionally, benchmarking and industry analysis provide an understanding of best practices and alignment with global sustainability goals.

Professor Todd Cort , faculty director of the MBA sustainability program at Yale School of Management and faculty co-director of the Yale Center for Business and the Environment, is one of the leading researchers on metrics and indicators that create the greatest value for investors, businesses, and society. As his student, one of the more challenging assignments in my journey was building a model and sourcing testable data to demonstrate the effectiveness of proposed actions to direct capital for ESG investments into emerging markets.

We spent countless hours trying to find data that was both comparable and reliable. Our experience reveals the difficultly facing organizations with much larger challenges without adopted standardized industry benchmarks and navigating double materiality issues. This requires organizations to consider both the financial impact of sustainability issues on their business (financial materiality) and the impact of the company's activities on the environment and society (environmental and social materiality).

Integrating sustainability into business functions

Sustainability should not be seen as a standalone initiative but integrated into core business functions, which will heavily require marketing, human capital, risk, and legal teams in addition to financial functions. Engaging both internal and external stakeholders is crucial. Leadership and governance must ensure that sustainability targets are embedded in strategic goals and decision-making processes. Finance departments need to integrate sustainability metrics into financial planning and reporting. Human resources should promote a culture of sustainability through training and employee engagement programs. Supply chain management should collaborate with suppliers to implement sustainable practices throughout the value chain.

?Articulating the vision and implementing the plan

In addition to a clear vision and a comprehensive implementation plan, creating a sustainable business requires setting clear organizational objectives and defining measurable sustainability goals, which will also rely heavily on marketing and communication skill sets. Organizations should establish timelines for achieving these goals and regularly engage stakeholders—such as employees, clients, investors, and community members—to create accountability for the success of their sustainability initiatives.

?Leaders should also integrate their enterprise platforms to help monitor the progress through dashboards empowering the organization to track and broadly report on their sustainability performance. Leveraging a culture of innovative, tools and emerging technology to further facilitate sustainability practices and enable leaders to make informed decisions is simply good management. This cohesive approach ensures that sustainability is integrated into the core business strategy, driving long-term value and positive impact for all stakeholders.

Final word....

Sustainability will remain a critical driver of successful leadership teams. By understanding the challenges, leveraging relevant tools, evaluating performance, and integrating sustainability into all business functions, companies can create long-term value for their stakeholders and contribute to a more sustainable world. ?More importantly, leaders will require marketing and communication professionals that understand the impact of sustainability and the tools to execute.

The original version of this paper was developed while a Yale School of Management MBA sustainability student in Prof. Dr. Rodney Irwin 's course, Sustainability Systems.? His class invited debate, encouraged diversity of thought, and was an invaluable experience to build a better understanding of sustainable strategy.? The impact of his knowledge sharing, passion, and kindness is forever appreciated.?This paper has been adapted and is not reviewed or endorsed by any parties mentioned.?

Sources:

https://www.whitehouse.gov/briefing-room/statements-releases/2024/02/12/fact-sheet-lowering-home-energy-costs-through-president-bidens-inflation-reduction-act/