11 November 2022 - How do organisations keep the net zero transformation central to their strategies during times of extreme volatility and uncertainty? Marking the launch of CISL's framework to support businesses on their decarbonisation journeys, Dr James MacPherson, Programme Manager and Bianca Drotleff, Project Manager from CISL’s Centre for Business Transformation reflect on the actions businesses must take for an effective transition, and the opportunities that await early adopters.
Introduction
The supply chain disruptions generated by the COVID-19 pandemic, together with the rising costs and product shortages fuelled by the Russian invasion of Ukraine, are just a few examples of the systemic risks that organisations increasingly confront while delivering on the net zero ambition. In this context, business leaders must recognise that individual organisations alone are unable to deliver change at the scale and pace required. Rather, companies urgently need to adopt a new way of thinking in which they take a whole-system approach to transformation if they are to become agile in navigating these systemic shocks.
To support such businesses, the University of Cambridge Institute for Sustainability Leadership (CISL) launched Net Zero Business Transformation - A framework for accelerating change in an era of turbulence and complexity. Building on CISL’s Targeting Net Zero Framework – which provides a comprehensive overview of net zero actions for corporates that are just starting out - the report and the tools presented within are designed to help ambitious businesses that have already set net zero goals adapt their transformation programmes in the face of systemic turbulence. It guides firms to develop targeted portfolios of innovative interventions across four levels of their operating context – individuals, the company, its value chain and the wider systems that it operates within.
To mark the launch of the report, a roundtable discussion at Reuters IMPACT 2022 on 3rd October brought together senior stakeholders from leading companies, including Croda, EDF Energy and E3G, to discuss the key findings of the report, and explore the barriers to progress and priorities for action. Below we summarise the main themes that emerged from the event discussions.
Embedding a sustainable corporate purpose is an ongoing challenge
Although many companies have aligned their corporate purpose with sustainability, embedding these values across the organisation still presents a real challenge. In general, progress is inhibited by the persistence of shareholder primacy and short-term thinking, which represent the prevailing logic in most modern corporations – even those perceived as leaders in the corporate sustainability world and through the lens of ‘ESG’ ratings. This narrow perspective, which prioritises financial value, shows up across many aspects of an organisation including governance structures, commercial strategy, innovation, and both hard (e.g. systems and processes) and soft (e.g. values) cultural aspects. This often gives rise to serious unintended social and/ or environmental consequences associated with commercial activities, such as pollution or deforestation, which represent material threats to organisations and their social licence to operate.
Companies undergoing net zero transformation must properly embed purpose into their strategy, governance, culture and innovation. Companies at the roundtable emphasised that this will require translation of the purpose into specific and tangible actions for all employees – from the governing body and executive managers to shop floor workers. To deliver on this, companies must understand the deep interdependence between the fulfilment of their purpose and the systems within which they operate to avoid unintended consequences. This includes the need to satisfy the requirements of shareholders, alongside other key stakeholders, and will require changes in the financial system and policy to deliver transformation. Our Net Zero Transformation Framework helps companies explore in depth these interdependences using the four levels of an organisation.
Unlocking employees’ passion and capabilities to deliver net zero transformation is key
Senior stakeholders at the round table recognised that sustainability leaders are key in driving decarbonisation and sustainability in organisations. Their role is reinforced in the seven case studies of leading organisations taking action on transformation accompanying the report. However, with the end goal of transformation to embed sustainability across the organisation, businesses must unlock employees’ passion to champion sustainability at all levels. This represents a departure from ‘business-as-usual’, where sustainability is a siloed activity that largely operates separately from the mainstream business and its outputs. To unlock this passion, companies must clarify the role of employees in the transformation journey and effectively translate sustainability targets and language into everyday roles, responsibilities, and incentives. Open and honest stories about sustainability transformation will also engage employees.
Moreover, companies should encourage the widespread development of a new suite of individual leadership capabilities and subject matter knowledge suited to 21st Century sustainability challenges. This should include empathy and deep listening to engage with stakeholders and better understand the organisation’s wider operating and strategic context. Both of these issues are also explored in the Net Zero Business Transformation report.
Companies that succeed are best placed to not only meet their net zero ambitions, but also become resilient in the face of rapid change, attract and motivate employees and find new sources of value creation for stakeholders.
