How to Integrate Sustainability into Corporate Strategy (CSO Podcast #4)

As companies grapple with environmental challenges, shifting consumer preferences, and regulatory pressures, sustainability has evolved from a peripheral concern to a core strategic imperative. As such, many companies are choosing to integrate sustainability into their corporate strategy functions.

On the Chief Strategy Officer Podcast, we met with three chief strategy officers who are also responsible for sustainability in their organizations: Alpa Sutaria of WestRock Company , Paula Kovarsky of Raízen , and Maisie Ganzler , formerly of Bon Appétit Management Company .

In the episode, we explored why companies might choose to make sustainability a core responsibility of chief strategy officers. We discussed the benefits of integrating sustainability into the strategic framework and examined the challenges that come with this responsibility. Our expert guests shared insights on overcoming these hurdles, offering practical advice and innovative solutions.

Listen to the episode here.

In the episode, we cover:

• When and why should sustainability be a strategic priority for companies?
• What are the main challenges faced by strategy officers when incorporating sustainability into their plans?
• How can companies effectively balance short-term financial goals with long-term sustainability objectives?
• Where should a Chief Strategy Officer start if their organization is considering making sustainability a part of their role??

Key questions explored:

• (5:27) Why and how did your company decide to integrate sustainability with strategy?
• (15:04) How do you integrate strategy and sustainability in the minds of people in the organization?
• (26:21) ?What pressures do you feel for companies who have made sustainability part of their strategy????
• (40:22) What advice would you recommend to a new chief strategy officer who has sustainability as part of their strategy role?

The Strategic Imperative of Sustainability

Sustainability is no longer just a compliance issue or a “nice-to-have” initiative. For many companies, it has become a fundamental driver of value creation and competitive advantage. Alpa Sutaria, SVP Strategy & Sustainability at WestRock, noted that over the past 10-15 years, consumer demand for sustainability has grown significantly on a global scale. This shift has compelled companies to rethink their operations and offerings.

Paula Kovarsky, Chief Strategy Officer and Vice President Strategy, M&A and Sustainability at Raízen, emphasized that sustainability can be at the core of a company’s value proposition. For Raízen, a joint venture between Shell and Cosan, the entire business model is built around the sustainable attributes of sugarcane in reshaping the future of energy.

“We really had to strengthen this sustainability team beyond the old concept of a sustainability team. They have to have the technical and the commercial background, because at the end of the day, we need our products to be economically sustainable.” – Kovarsky

Integrating Sustainability into Organizational Structure

One of the key decisions companies face is how to structure their sustainability efforts within the organization. Maisie Ganzler, former Chief Strategy & Brand Officer at Bon Appetit Management Company and author of You Can’t Market Manure at Lunchtime: And Other Lessons from the Food Industry for Creating a More Sustainable Company, cautioned against creating isolated sustainability departments:

"When you have a sustainability department that operates by itself, it can often become siloed and become one of two things. Either it's a purely compliance focused department that's simply doing reporting and doesn't have any ability to really affect change in operations. Or it becomes almost like philanthropy of it's a nice to do thing around sustainability." – Ganzler

Instead, Ganzler advocates for integrating sustainability into every aspect of the business. At Bon Appetit, sustainability was woven into everyone’s KPIs and discussed during the hiring and onboarding process for all employees.

Challenges in Implementing Sustainable Strategies

• Evolving Standards and Regulations: Sutaria pointed out the difficulty in staying ahead of rapidly changing expectations, especially those set by third parties and governments. The lack of well-defined or consistent standards makes it challenging to balance meeting these expectations with running day-to-day operations.
• Metrics and Measurement: Kovarsky highlighted the issue of metrics developed in the Global North being applied to businesses in tropical climates, potentially leading to unfair assessments of carbon footprint or land use.
• Financial Incentives: Despite banks’ rhetoric about supporting green investments, Kovarsky noted that their lending practices often fail to provide meaningful incentives for sustainable companies.
• Customer Willingness to Pay: While consumers express desire for sustainable products, their willingness to pay a premium remains a challenge.

"Everyone wants to buy something greener or something that is sustainably developed, but not necessarily everyone is willing to pay the price." – Kovarsky

Balancing Short-Term and Long-Term Objectives

Integrating sustainability into strategy requires a delicate balance between short-term financial goals and long-term sustainability objectives. Sutaria emphasized the importance of making sustainability a differentiator in positioning while also ensuring it drives revenue and delivers bottom-line value.

WestRock made a deliberate choice to invest heavily in R&D, design, and innovation in collaboration with customers and industry partners to break down barriers in how you can make packaging more sustainable.?

"We have to have our operations be as sustainable as we can make them. And that is always a journey because there's always something more you can do. That means that you have to make the investments where they're going to drive the maximum value to achieve that next level of sustainable benefits." – Sutaria

Where to Start: Advice for Chief Strategy Officers

For chief strategy officers tasked with incorporating sustainability into their role, our experts offer the following advice:

1. Stakeholder Engagement: Ganzler recommended starting with a comprehensive stakeholder interview process, including top-level executives, employees throughout the organization, and external experts.
2. Define and Focus: Sutaria advised understanding the role sustainability plays for the company and determining where to focus efforts. She states, “Start to articulate a way of inspiring action against that focus area. Think about alignment in the organization and the value chain.”
3. Embed Sustainability: Kovarsky emphasized the importance of making sustainability part of the core business.
4. Look to the Future: Ganzler suggested paying attention to fringe groups and extreme critics, as they often indicate future trends in sustainability expectations.

Final Thoughts

By following these guidelines and understanding the challenges and opportunities presented by sustainability, chief strategy officers can effectively integrate sustainability into their corporate strategies, driving long-term value and positioning their companies for success in an increasingly sustainability-focused business landscape.