Legacy ways of working are killing your climate change ambitions.

Authored by Michael Murphy, Principal, Toronto, ADAPTOVATE

Here in the first half of 2023, it is table stakes that every organization has a robust climate strategy and commitments in place to achieve significant emissions reductions. What we hear most frequently from clients is that they are struggling with follow-through on delivering the initiatives and step-changes that would actually reduce emissions.

This trend is borne out by research from the NewClimate Institute in Germany and an HBR survey of over 400 C-suite executives, which found that only 3% of companies had enterprise performance measures in place to track and meet their climate commitments.?

Barriers to Delivering on Climate Change Ambitions?

Siloed working that prevents collaboration?

• Climate change has many characteristics of a “wicked problem” – being difficult to solve, ever evolving requirements, and lacking clear solutions. Any corporate initiatives meant to combat such a complex problem will almost always involve teams from across the organization partnering to deliver a collaborative solution. Yet in many organizations, collaboration is not designed to be intentional. Lopsided focus on delivering the goals of ‘my team’ or ‘my function’ are stuck in a fixed mindset preventing cross-functional collaboration from thriving.?

Misaligned organizational incentives?

• How people are incentivized to operate in an organization will almost always dictate their behaviours when faced with tough decisions to make. If individuals are incentivized to achieve their personal targets or their immediate functional team goals, people will put their energy there instead of towards the organization’s broader climate efforts. More broadly, when organizations are evaluating go/no go decisions on projects, they are incentivized to keep costs low but don’t bake in the fully loaded carbon impacts of the lower cost options. For instance, when building a retail store it may be more affordable to build it in a lower density region, but if the increased carbon emissions from people driving from much further away were calculated into the fully loaded carbon footprint of that store it might encourage a different decision.?

Organizational inertia?

• The incredible power of “that’s how we’ve always done it” cannot be underestimated within an organization. Whenever given the chance, leaders may tweak at the edges but will nearly always avoid making big bets that could disrupt their own core business. It took GM nearly 20 years from when it first killed the electric car that could have supplanted its gas-vehicle lineup before CEO Mary Barra announced in 2021 that GM would move its entire fleet to electric and phase out gas by 2035. Not all industries will face such need to self-disrupt but each sector has its own orthodoxies that will need to be upended in order to deliver on climate change ambitions.?

Ways to Organize for Delivering Climate Initiatives?

A. Green-BAU

The easiest place to start is to look at any parts of your organization that are delivering products or services core to your business model but who need a rethink on how to deliver that value more sustainably. This is what we would call “Green Business-as-Usual” or Green-BAU. In these areas, we recommend keeping the organization or teams largely intact and augmenting with embedded sustainability expertise. For instance, a retailer looking to expand into new store locations may want to engage specific expertise in site assessments, green construction methods, sustainable materials and urban planning to ensure accessibility for green modes of transportation. By keeping ownership of the initiatives closest to the people and teams that know that aspect of your business most intimately, organizations can ensure continuity augmented by expertise to help make better decisions as a unified team.?

B. Capacity or Capability Building Initiatives?

Often organizations also need to innovate outside of their core competencies to drive real step-change in how they operate. For these companies, we recommend centralizing efforts for any capacity-building or capability-building initiatives under one hub or cluster of cross-functional teams. These types of initiatives could include building out a climate data capability or reimagining a sustainable approach to your supply chain – anything that is a bold leap forward from where you are today and that requires significant investment of people or resources to make happen. Centralizing these efforts is important as they likely wouldn’t be prioritized if left up to the decentralized legacy organization to deliver this magnitude of change.?

How to Get Started?

1. Realign Organizational Incentives & Decision-Making?

What gets measured matters, so consider adding your climate initiatives to the entire organization’s scorecard or objectives and key results (OKRs) in order to make carbon emissions a visible priority both internally and externally. At minimum, cascade climate OKRs for those leaders, departments or teams who have any degree of influence over the results. By tying their fates together, you are incentivizing real collaboration between different parts of the company to achieve an important shared outcome. In addition, consider adjusting incentives around how decisions are made – value-based procurement that accounts for end-to-end carbon emissions is a good alternative to traditional frameworks focused on controlling costs.

2. Get Your Operating Model Launched Quickly?

Time is not on your side here and the pressure to demonstrate progress is real. To this end, think about what resources can be immediately deployed for a first iteration of your operating model and then evolve towards ideal state over time. It may be quickest to formalize your sustainability experts and embed them into decentralized Green-BAU teams, with a fast-follow on any capability-building initiatives launched in a centralized cluster.?

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