A new study by IBM has found that while embedding sustainability into business operations results in higher revenue growth, more profitability and greater talent attraction, many are failing to do so.
The survey, which gathered responses from 5,000 C-suite executives from across 22 industries and 22 countries, found that while businesses are increasingly “doing sustainability,” it’s treated as more of an “add-on” and noted that this does not equate to being more sustainable.
The report runs through the common pitfalls in sustainability strategies, the benefits of embedded sustainability, and how businesses can more easily adopt the latter.
“Sustainability requires intentionality and a shared corporate vision”
The report, released this week, noted that there are three approaches to incorporating sustainability into business operations.
The first, it says, is through the lens of compliance, a defensive and reactive approach. The second is treating sustainability as a project which sees partial integration into the company. The third and final approach is embedding sustainability, where companies anchor sustainability in their overall strategy, permanently integrating it into their existing corporate governance frameworks.
The latter results in companies being 52 per cent more likely to outperform peers on profitability and talent attraction (56 per cent), with a 16% higher rate of revenue growth.
But, while IBM notes that the third approach is the only one that works for real business value, it found that the majority of organisations still approach sustainability as a compliance requirement or a way to appease consumers and shareholders.
In fact, just 17 per cent of those surveyed said meeting sustainability objectives is in itself sufficient to justify sustainability investments.
Likewise, the report showed a disconnect between executives understanding the value of sustainability and turning this understanding into action.
For example, while 76 per cent said sustainability is central to their business strategy, 75 per cent said it drives better business results, and 72 per cent said it can be a revenue enabler, just 31 per cent incorporate sustainability data and insights into operational improvements to a “great extent.”
Further, just 14 per cent do so with innovation initiatives.
Speaking about this, Oday Abbosh, Global Managing Partner, Sustainability Services, IBM Consulting, said: “An organization’s approach to sustainability may be holding it back. There is no quick fix. Sustainability requires intentionality and a shared corporate vision.”
Indeed, while there’s been an increase in the number of executives highlighting “significant progress” – 30 per cent, up from 10 per cent a year ago – this figure remains low.
So, what’s holding companies back?
Barriers to adoption
According to IBM, when it comes to embedding sustainability, the main issues that companies are encountering span data usability, business integration and people, skills and decision-making.
With data, despite the large majority (82%) recognising that high-quality data and transparency are necessary to achieve sustainability outcomes, only four in 10 can automatically source sustainability data from core systems such as ERP, enterprise asset management, CRM, energy management, and facilities management.
Meanwhile, on the skills front, C-suite executives cited a lack of sustainability skills as the top barrier to sustainability progress.
Indeed, as global demand for green skills skyrockets, the skills gap is widening, meaning it’s imperative that companies are proactive in closing the gap, facilitating knowledge-sharing and developing talent.
Enabling progress on embedding sustainability
In fact, the report found that this is exactly what so-called “embedded organisations” are doing.
These companies, it found, are 58 per cent more likely to develop talent and skills within the enterprise and operate as a “learning organisation.”
For navigating the challenge of sustainability skills, the report recommended integrating skills and talent development as a central part of a company’s sustainability journey rather than an afterthought. Meanwhile, to fill those sustainability skills gaps it recommended deploying internal efforts or seeking help from an ecosystem of partners.
With regards to getting better at data, the IBM report highlights that companies should utilise the sustainability data they already have, align sustainability and enterprise data strategies and establish data governance principles with ecosystem partners.
Underlining how embedders are operating here, the report notes that they’re 191 per cent more likely to have “greatly aligned” their data and sustainability strategies and 63 per cent more likely to have established consistent definitions of sustainability metrics.
Here, the report also highlighted the use of generative AI, which it said can be a “game changer” for data-driven sustainability.
In fact, 64 per cent of executives agreed that generative AI will be important for their sustainability efforts, and 73 per cent plan to increase investment in generative AI for sustainability.
Interestingly, embedders are already making the most of this technology, with 80 per cent more likely to be using AI to convert data into actionable insights.
Democratising access to sustainability insights was also highlighted as key to driving forward action, alongside ensuring decision-making isn’t centralised at the top.
The report also makes a point of debunking a few myths about embedding sustainability into business operations.
For example, it notes that sustainability embedders don’t actually spend more on sustainability. In fact, they typically spend slightly less.
What they’re doing differently, it said, is incorporating sustainability considerations, data, and insights into their operational decisions.
Likewise, instead of having larger sustainability programs, they incorporate sustainability more into their core operations.
Commenting on how and why companies need to course correct, Abbosh said: “Sustainability needs to be part of the day-to-day operations, not viewed only as a compliance task or reporting exercise. By embedding sustainability across their business, organizations are more likely to drive internal innovation, attract and retain skilled talent, and be better positioned to deliver both positive environmental impact and financial outcomes.”
