How team structure and governance can unleash sustainability success

To unlock sustainability’s full impact, leaders must redesign their organizational structure, processes, and governance.

?Aaron De Smet

Delivers growth, innovation, and organizational agility and is an expert on culture change, leadership development, team effectiveness, capability building, and transformation

Wenting Gao

Advises organizations and investors on sustainability strategy, energy transition, green growth, and circular economy

Kimberly Henderson

Supports companies, investors, and public and social sector entities to address climate change

Thomas Hundertmark

Advises leading energy and industrial companies on creating value from strategic transformations, step-change programs, and sustainability

January 27, 2022Sustainability profoundly affects how all companies do business, and?stakeholders are not fooled?by mere lip service. To compete in a world that demands?serious sustainability commitment, companies must completely revisit their organizational approach to power the evolution of sustainability from the corporate social responsibility effort of yesterday to the central business imperative it is today.

Leaders should consider these?four principles?to create sustainability teams that can have a powerful impact on the organization:

Having previously explored?the first two?of these principles, let’s examine the second two.

Find the structure that best fits your sustainability agenda—and your organization as a whole

There is no “one-size-fits-all” approach to the design of a sustainability team. However, as a rule of thumb, the organizational structure should be well integrated into—and compatible with—the rest of the company. We’ve seen three models work well:

• Large central team with few business-unit resources.?In this model, a large central team incubates and plans most sustainability initiatives and coordinates with individual business units. A leading gold-mining company followed this approach to design and implement global environmental standards across its operational sites. This model helped the organization focus on priority topics, ensure sufficient budgets and staff, and maintain a broad view of trends and stakeholder demands.
• Lean central team with decision rights and many business-unit resources.?In this structure, a lean central team establishes a company-wide agenda and goals, but charges business units with developing initiatives. At a leading pulp-and-paper company, a lean central team sets the agenda, manages external relationships, and integrates internal efforts, while business-line leaders develop and deliver on initiatives, deploy their own resources, and embed sustainability into day-to-day operations.
• Central team that deploys agile or SWAT teams to business units.?This structure puts a central team in charge of?deploying task forces?to individual business units. The task force helps with the planning and initial execution of that unit’s priority sustainability initiatives and builds capabilities so that the business can eventually take over.

To dive deeper on organizational structures, read “Organizing for sustainability success: Where, and how, leaders can start.”

Prioritize the design of processes and governance—rather than reporting lines—that account for sustainability’s complexity and dynamic nature

Many companies default to focusing solely on reporting structure. But?our research on organizational redesigns?shows respondents were nearly three times more likely to report successful redesigns if they broadened their focus from reporting lines to improving multiple elements of the organization, such as performance management, business processes, and culture. Sustainability-focused reorganizations tend to be particularly multifaceted, and priorities can shift quickly. As a result, it’s critical to redesign processes and governance early on.

Processes for making sustainability decisions should be robust, clearly defining when an issue should be escalated from the business unit to the central sustainability team to the executive team. Many companies fail to adapt their decision-making cadence for sustainability issues, which often require faster movement than other business matters. For sectors such as cement or steel with longer decision-making cycles, this may require a significant mindset shift.

Capital allocation is another key principle of effective processes and governance. Sustainability investments often have different risk profiles and greater uncertainty than traditional investments. As a result, leaders should consider setting aside a separate pool of funds, defining different hurdle rates, and introducing an internal carbon price.

Companies should apply the universal principles of performance management to sustainability work, including setting measurable targets, establishing incentives, and conducting regular reviews.

Sustainability is no longer just an issue of compliance or reputation, but rather a?strategic and operational necessity. A dedicated, well-designed team can transform the enterprise by effectively capturing the value and managing the risks of sustainability.

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