Sustainability and strategy: A pulse check in the US

What challenges do executives and managers face as they try to spark sustainable growth in their businesses? To get fresh perspectives on that question, Nicolai spent the second half of October in a series of meetings and conferences in the United States, including the Sustainable Brands Conference in San Diego, the annual fall conference of the Professional Pricing Society in Las Vegas, and the VERGE 24 Climate Tech Conference in San Jose.

Through a wide range of conversations with people from many different industries and functions, he noticed five pressing themes that also come up in The Demand Revolution and in our ongoing research:

• Value propositions
• Affordability
• Compliance
• Scope of the problem
• A lack of inspiring success stories

Nicolai offers five recommendations on these themes in this edition of the newsletter.

1.???? Find that elusive sustainable value proposition

Communicating with customers remains a difficult marketing challenge, because the word “sustainability” lacks sufficient power. Simply saying sustainable is not a value proposition, any more than quality or superior value are ways you can communicate a competitive advantage. In today’s world of interconnected immediacy, those terms are generic and undifferentiated. You need more.

Consumers undertake considerable research before they decide to buy a sustainable solution. They are looking for reliable information, not green packages with a pretty leaf on them. In the absence of reliable and robust information, consumers increasingly turn to social media or word-of-mouth. If they have a good experience with a solution, they will advocate for it in those same channels.

In many markets, no company has become synonymous with sustainability in the eyes of consumers. If a company fills that vacuum in a trustworthy way and serves the pent-up demand in the market, a sustainable value proposition will help it achieve more rapid scaling.

2.???? Make sustainability affordable. Now.

Affordability is a sticking point for sustainability for two reasons that go beyond the obvious assumption that consumers prefer lower prices. First, consumers increasingly fail to see a rationale for a higher price on a sustainable solution. Many of these solutions come with a quality penalty, which means they don’t perform as well as the products or services they replace. Consumers also wonder why they don’t benefit from cost savings when a company produces something more efficiently.

The second and more important reason comes down to simple arithmetic. Someone who wants to live more sustainably can’t afford it if the bulk of their day-to-day purchases come with a sustainability premium. Few consumers can have the financial resources to make that transition. That all but guarantees that sustainable solutions will collectively never achieve the scale necessary to make a difference.

Companies need to stop buying into the green mirage and focusing on short-term cost recovery. The supply side does matter, because sustainable solutions at scale will require technological innovation. But success will ultimately depend on commercial innovations , as companies focus on their customers and develop new business models for their sustainable solutions.

3.???? Stop choking on compliance

Increased compliance burdens mean that executives and managers are emphasizing carbon metrics at the expense of commercial metrics. No matter how ambitious a company’s emissions and net-zero targets are, its primary metrics need to include revenue, volume, customer satisfaction, and profit. That applies to sustainable solutions.

Instead, companies are bogging down as they strive to measure their carbon footprint, reduce their greenhouse gas emissions, and document their compliance. These efforts not only divert the company’s focus away from where it should be, which is on customers. They also divert the resources that companies need to develop profitable innovative sustainable solutions and scale them.

4.???? Realize the problems aren’t “too big to solve”

There is a growing sense that developing and scaling bolder sustainable solutions lies beyond the scope of any individual company. We agree that many sustainable solutions will require a “whole value chain” or “whole industry” approach. No matter where a company lies along a value chain, it can identify opportunities to eliminate waste, increase efficiency, serve more customers, or bring more customer insights to light. This not only brings up questions of commercial creativity, but also creative destruction, as some future value chains may have fewer steps in order to bring affordable, less wasteful products to consumers at scale faster.

5.???? Become the success story you’re seeking

One of the best parts of attending these conferences is the chance to hear success stories. The list of companies that have brought innovative sustainable solutions to market at scale is growing, but not fast enough. Logitech COO Prakash Arunkundrum shared impressive insights into how his company is driving disruptive innovation. They have embraced many of the cornerstones of the new innovation paradigm that we describe in The Demand Revolution: eliminating waste, achieving speed and scale, being open to diverse expertise and perspectives, and collaborating within and outside the company.

These success stories will have resolved all the challenges mentioned above: strong value propositions, affordable pricing, a relentless focus on consumers, and the full support of an interconnected ecosystem.?

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