Six approaches to how sustainability accelerates lasting business success

Climate change, unequal working conditions, corruption: companies must realign their business models to meet global challenges. Nevertheless, executives are increasingly recognizing that competitiveness and sustainability are inextricably linked. The study "Transforming Business for a Sustainable Economy" by the international management consultancy Bain & Company reveals that for 81 percent of the companies surveyed, sustainability is more important today than it was five years ago. Eighty-five percent believe that the issue will become even more important in the next five years, and as many as 99 percent are aware that the necessary changes will have to be implemented quickly or faster than before. 297 globally active companies took part in the study.

Change process is a matter for the boss

"Many companies have already integrated certain sustainability goals into their business models as best practices," notes Bain partner and industry expert Michael Staebe. "But some pioneers have already taken the next step. They have developed new target strategies with the so-called Next Practices, which enable them to have a comprehensively sustainable business model." This new way of doing business may look different for each industry sector. For the automotive industry, for example, it means using autonomous vehicles powered by clean energy and shared mobility. In the financial sector, on the other hand, it's about dovetailing investment decisions with environmental and social goals, for example.

Six approaches for more sustainability

"A convincing business philosophy, bold goals and self-confidence accelerate the transformation," explains Bain partner and transformation expert Lars Dingemann. "It is also necessary to locate the change process at board level and involve influential opinion leaders to actively support the responsible innovation managers."

As part of the study, Bain identified six strategic approaches that help achieve both sustainability and business goals. It does not matter how experienced or inexperienced a company is when it comes to sustainability.

1. Implementing a bold vision in a controlled manner. Sustainability pioneers first design their business model of the future and then develop strategies to put it into practice ("Future Back Thinking"). Among the companies surveyed, the number of those aiming for a comprehensive sustainability transformation will almost triple in the next five years, from 9 percent today to 26 percent then.
2. Rethinking customer loyalty. In the future, long-term customer loyalty will become the most important driver for the success of sustainable companies - even ahead of reputation and cost savings. Pioneers convince their customers with a holistic approach: Sustainable products become part of the value proposition, the change process is accelerated by innovative product features and price advantages. For example, Procter & Gamble was one of the first to market cold laundry detergents that save up to 90 percent energy and are gentle on clothing.
3. Involve partners comprehensively. Many companies are using new forms of collaboration to fundamentally change their entrepreneurial ecosystem. 64 percent of the study participants consider this change to be very important. Respondents expect to increase collaboration with regulators, legislators and competitors, among others, over the next five years.
4. Using new technologies responsibly. The use of innovative technologies must be designed in such a way that sustainable successes are achieved quickly, and without undesirable side effects for health and the environment. Pioneers in this respect include Apple with its use of recycling robots and Google with its use of artificial intelligence, which saves up to 40 percent of the energy required in the cooling process in data centers.
5. Redefining the way value is created. Pioneers are going beyond purely financial indicators as part of their business strategy. The first major companies are incorporating environmental and social aspects into their investment decisions. "All these companies are convinced of their strategy," says Bain partner Staebe. "For them, it's more than just a trade-off between profitability and sustainability."
6. Customize core business as needed. 90 percent of the companies surveyed have recognized that they need to change their core business model to become more sustainable. 38 percent even consider a radical transformation to be essential. The strategic shift toward greater sustainability can encompass products, customer relationships, but also the core business.

Avoid mistakes, achieve long-term success

Companies that want to fundamentally restructure face the challenge of maintaining their current business model while simultaneously driving the transformation toward sustainability. The risk of failure is high. According to the Bain study, transformation has been fully successful for only 4 percent of study participants. 47 percent say they have failed so far.

"This failure rate shows how difficult it is to build a truly sustainable business model," Bain partner Dingemann points out. "But it is also evidence of how seriously companies are taking the transformation and how critically they are evaluating their work." He adds, "Those that start the strategy shift now can gain an enormous competitive advantage by leading the way."

Source: Bain & Company