Sustainability; The green line influencing the top and bottom-line
For many organizations, sustainability is now firmly on the corporate agenda. And whether driven by consumer pressure, business issues, moral standards, or by the demands of ever-increasing compliance requirements and statutory regulations, there’s a drive within business to build sustainable business practices.
But does building a sustainable business need to come at the price of sacrificing organizational performance, efficiency and profitability? On the face of it, sustainability and profitability don’t immediately appear to be good bedfellows. But can these co-exist, and even be supportive of each other, especially when sustainable companies might attract like-minded consumers or find easier access to finance compared with those reluctant to move? In fact, could sustainability itself could be viewed by many as building a distinct competitive advantage, especially for those willing innovate?
A recent paper from EY and SAP, referenced in a blog from Sveinung Larsen at EY, appears to hold the answer many such questions, taking a detailed perspective on how a sustainability performance management approach might be the key to unlocking the door to profitable sustainability, utilizing SAP Sustainability Control Tower, and accessing the capabilities of solutions in the SAP Business Technology Platform along with EY’s own expertise in crafting and delivering highly successful customer solutions.
There’s more to sustainability than just metrics!
During a recent Financial Excellence with GameChangers radio show, two of the paper’s authors, Michel Haesendonckx of SAP and Esteban Rastrollo Lerma of EY, debated this topic, taking a viewpoint that sustainability is much broader than just reporting, in Michel’s words “There’s more to this than just metrics. There’s also the action, to move from understanding where I am to taking it to where we want to be. Reporting and KPIs alone are not going to save the world”. Michel goes on to say that “Linking sustainability into business decisions… makes it more actionable and more relevant to the business and overall business performance” and follows by citing an example of an organization making a business decision to optimize a supply chain but taking viewpoints from group and tax perspectives, as well as from a sustainability perspective too.
Esteban, supporting this viewpoint continues by saying that sustainability is “…not just about creating transparency…but also (about) how to find the parameters to activate in order to improve KPIs”, indicating that it’s not only sufficient “…to understand what is happening but also go one step further to answer the question of how to define mid-and long-term objectives for achieving sustainability”.
Continuing their exchange, the pair start to unravel this the matter further, “You cannot improve what you can’t measure” offers Esteban. “This is what really makes the difference. Provision of statutory reporting may allow organizations to be compliant, but they have to ask the question, with these reports and with these KPIs am I creating the right kind of information that will help me to identify the root causes of my performance?”.
Make sure the company is sustainably profitable
If building a sustainability capability in an organization extends further than compliance reporting and meeting ESG goals, how can organizations start to build such capabilities and who is best placed to lead this?
“Sustainability is a topic that’s rapidly increasing on the CFO agenda” offered Michel, “not just by itself however, but rather as part of making sure that companies are run in the best possible way, from a compliance and financing perspective – making sure that the company gets the funds to invest, and also making sure that the company is not just profitable, but is sustainably profitable. This is where the green line is influencing top and bottom-line “. He continues, “To become a sustainably profitable company we need to add in new dimensions of the business to monitor, and from a performance management perspective it can be a relatively simple proposition”.
Perhaps then we already know the answer; by looking to learn about how organizations already manage performance, adding in a new dimension of sustainability and then seeking the right direction and tools to make things happen. And with direction offered by EY, combined with tools from SAP to deliver a sustainability performance management solution, we can look forward to meeting future organizational and environmental sustainability goals, profitably.