For the past 6 years, we have been working with many companies in the areas of environmental sustainability and circularity and I had the opportunity to discuss with even more on the topic in the context of my daily work. Over this period the discussion has changed significantly from it being a non-topic to it becoming a subject that C-levels recognise and consider as a strategic focus. Despite this shift and the fact that environmental sustainability and circularity have made it to the board agenda, concrete actions are still often de-prioritised for more immediate and urgent topics. Additionally, the focus is often on very specific sub-areas such as setting CO2 targets and launching small-scale cooperations rather than a holistic approach to doing business in a new way.
This did lead me to a very fundamental question. If environmental sustainability and circularity are strategic focus areas that are discussed in the board room, why are they not yet a priority when it comes to capability building, strategic transformation initiatives, and holistic business and operating model renewal? We do still hear that concrete actions cannot be started due to a lack of resources (monetary or human) or due to a lack of support in the decision-making process.
As a result, I started to outline some observations on why the topic should be a priority for different people in the organisation and how individuals and companies could address the ongoing paradigm shift to emerge stronger and better positioned for the future.
CIO / CDO
Digital capabilities and data will be key enablers for the shift towards sustainable business operations. Furthermore, upcoming legislation will require companies to provide ESG-related data and information in a format and breadth that today’s systems and capabilities do not support. Similar to the discussion around GDPR back in 2018, we see many CIOs and CDOs deprioritise sustainability and circularity-related questions to a later date, as the deadlines for compliance are still months or even years from now. While partially understandable, the newly emerging requirements provide the CIO and/or CDO with a set of tricky questions to solve while at the same time providing a great opportunity to position digital capabilities at the core of the emerging shift towards sustainable business operations.
Conclusion: Forward-thinking CIOs and CDOs should start to get familiar with the requirements and opportunities of the shift towards environmental sustainability and circularity. In addition to the traditional financial business case, they should start evaluating their digital development projects also from a sustainability point of view to see how IT and digital capabilities can help their company reduce their footprint and enhance their handprint.
Head of R&D and Product Development
The markets are shifting and product requirements by customers, investors, regulators, and employees are changing rapidly. CO2, sustainability, and circularity requirements are becoming commonplace, both in B2C, B2G, and B2B, as first companies and public organisations, are including corresponding requirements in their procurement processes. As a result, environmental sustainability and circularity criteria need to be embedded into the research and product development models, processes, and procedures, incl. e.g., material choices, design decisions for durability, re-usability, and recycling, etc. Research has shown that design decisions are the single biggest impact on the handprint of a product or service.
Conclusion: To position products and services for future success, Executives in R&D and Product Development need to understand what these newly emerging requirements mean for their organisation and how they can be incorporated into the methods, frameworks, and processes that are being used in the organisation. This understanding must go beyond product design principles and incorporate business and operating model innovation to enable revised and/or new offerings that meet emerging market demands.
Head of Supply Chain
In a circular world, the focus on the supply chain will broaden to include the end-to-end value chain to enable a circular business and operating model. For companies, specifically in the B2B space, this means extending their understanding beyond direct suppliers and customers to understand the end-to-end flow from raw materials to the end of product life. It does not mean that companies need to own, manage, or orchestrate the end-to-end value chain but they need to develop an understanding of the value chain and their role within. Additionally, new business models including repair, refurbishment, reuse, and recycling will require a much broader ecosystem of partners and involvement of the company along the value chain, resulting in the redefinition of the role of the Head of the Supply Chain.
Conclusion: Circular business and operating models will fundamentally change how we view the supply chain. As a result, the Head of the Supply Chain will need to broaden their perspective and likely responsibilities to include the broader value chain to enable the shift towards environmental sustainability and circularity. Understanding and mapping out the end-to-end value chain in order to understand a company’s role, opportunities and risks is a critical first step.
Head of Legal and Compliance
You might have heard about the EU Green Deal, the EU Taxonomy, and the new CSRD requirements. All of these are EU-level initiatives that are mirrored on the country level as well as in other regions around the world. New regulations are being developed and are taking shape as we speak, and companies need to understand early what these requirements mean to prepare themselves for upcoming deadlines. One concrete example is the CSRD reporting requirements, which require companies to include CSR reporting in their financial reporting. While some companies are starting to develop a basic understanding, many still do not have the required understanding or focus.
Conclusion: While deadlines might be far out, it is critical for Heads of Legal and Compliance to familiarise themselves with the ongoing discussions, understands potential legal and compliance requirements, and as required take an active role in shaping the regulatory landscape.
Head of HR and People Development
As mentioned before, the shift towards a sustainable business world is fueled by customers, investors, regulators, and employees. From an HR and people development perspective, it is therefore critical to enable employees to develop the needed capabilities while defining a compelling employee value proposition that reflects the changed employee expectations. At the end of the day, it is the employees that sell and deliver the products and services that a company offers and that make new and enhanced sustainable business and operating models a reality.
Conclusion: People are at the center of the paradigm shift towards a sustainable business world, therefore, Heads of HR and People Development need to develop the needed tools and approaches to enable employees on the company’s journey and to make the company a compelling place to work in the eyes of current and new employees, specifically as the war for talent is far from over.
Getting the company ready for the systemic paradigm shift
Adjusting a well-known proverb to this context, “It takes a village to prepare a company for the coming systemic paradigm shift.” In that sense, there is not one single person or department that can make the required changes happen, but it requires a coordinated/concerted effort by the Executive team, to consider various aspects of the organisation and the wider value chain to be prepared for what is coming.
In many companies, the realisation has set in, that a stronger focus is required to manage and successfully master the upcoming change, at the same time it is often not seen as a priority and is taking a backseat compared to other topics that are considered more urgent or immediate. While this is an understandable perspective, companies risk missing the train that is already leaving the station, resulting in severe implications on their ability to succeed and grow in a changing operating environment and market.
Over the past years, we at Taival had the opportunity to work with many companies and individuals in many of the above-mentioned roles, challenges, and opportunities. While our Circular Business Assessment (co-developed with WWF Germany) provides a good basis to understand a company’s maturity and path to action, our proven and tested tools, methodologies and approaches can provide a good frame and starting point for taking concrete action in addressing the risks and opportunities this major paradigm shift will bring.
We are happy to help in understanding the requirements and making the first focused steps towards transforming your company into a sustainable business and a true champion of the future.
