Article by Maximilian Jungmann
The world is changing and so is the private sector. In an era where climate change, biodiversity loss, inequality, and other social and environmental challenges continue to rise, businesses are required to move from degenerative to regenerative practices. To do so, they often need to transform both their core business models and the way they operate. Such a transformation needs to be well managed so that the new structures, processes, and organizational culture can be sustained over time and effectively contribute to progress towards the Sustainable Development Goals (SDGs) and the success of the respective business.
Sustainable transformation management involves integrating sustainability principles into all aspects of an organization's operations, strategies, and decision-making processes. It goes beyond short-term fixes and aims to create long-lasting, positive change by addressing economic, social, and environmental challenges. To achieve sustainable transformation, businesses require a holistic approach, authentic and sincere leadership commitment, effective and tailored stakeholder engagement, strategies and action plans, and proper metrics and reporting.
Holistic Approach: A major lesson from business efforts in the field of Corporate Social Responsibility (CSR) or environmental protection units was that CSR or environmental managers often act in isolation. They do important work to reduce the harm businesses cause the environment and society through their business practices, but they often are not empowered to unleash the full innovation potential of sustainability. Since the scope of their work is defined too narrowly, they lack time and financial capacity to deal with the complexity of the topic, and have to deal with conflicting overall business goals that undermine their sustainability work. Moreover, sustainability not only requires an all-encompassing approach within an organization, but also deep collaboration with business partners and various actors across the supply chain.
Leadership Commitment: While transformation processes in general require both bottom-up and top-down support, this is particularly true for sustainable development. Without sincere leadership commitment and a clear mandate and budget for those managing the transformation, the best ideas, individual actions, and sustainability strategies will not reap their full benefits since sustainability often requires strong and decisive action now to benefit in the future. It involves decision making under high levels of volatility, uncertainty, complexity, and ambiguity (VUCA) and thus requires a clear message and commitment from the top of the organization to inspire and motivate every team member to contribute to this joint mission.
Stakeholder Management: Engaging stakeholders is essential to bridge the ambition action gap between an organizations’ goals and implemented practices. It requires a thorough analysis of relevant internal and external stakeholders, their role within the transformation journey, effective engagement and communication strategies and instruments, and continuous learning and evaluation. While a multitude of stakeholder engagement concepts and methods exist, approaches that combine strategy development with capacity building and stakeholder engagement have proven to be particularly effective. This means that, in the spirit of design thinking, co-creation, and strategic foresight, diverse groups of stakeholders are involved in developing sustainability strategies and thereby build trust, gain a deeper understanding of the issue at hand, develop a joint identity for the same cause, and subsequently implement the proposed measures. Such approaches can involve workshops, surveys, interviews, and various other forms of innovation and engagement processes.
Metrics and Reporting: To ensure that an organizations’ vision, sustainability strategy, and specific measures are also effectively and efficiently implemented, it is essential to define specific, measurable, achievable, relevant, and time-bound (SMART) goals and key performance indicators (KPIs). Sustainability goals and KPIs need to be aligned with the overall corporate strategy. Specific methods, such as carbon accounting, materiality analyses, SWOT analyses, cost-benefit analyses, and impact measurement frameworks, can help to effectively track progress, enable strategic decisions, and visualize results. Measuring progress not only helps to motivate stakeholders to keep developing innovative ideas to boost the transformation and implement the strategy, but it also enables more effective decision making to understand where the business is heading, in which areas of sustainability the business has the strongest lever, and how to differentiate one’s own organization from competitors.
In times of increasing global risks and challenges, sustainable transformation management offers organizations an opportunity to do well for themselves, the environment, and society at the same time. It is an ongoing journey that involves continuous learning and improvement, and an organizational culture that is characterized by psychological safety, excitement for innovation, and strong teamwork towards a joint mission.
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