Sustainability in the three areas of ESG is recognized as an essential principle for long-term business success. The challenge is embedding it in business strategy and operational decision-making.

Sustainability principles are summarized in three areas known as ESG: environment, social, and governance. As the climate continues to warm and population numbers increase, governments, customers and investors are creating demands for sustainability on a global basis. For any business to remain competitive and thriving in the future, sustainability needs integration into business strategies and operational decisions - and to become a permanent element of the organizational culture. This is a challenge that business leaders struggle to meet, because it requires leaders and employees to embrace ESG in everything they do. Some companies only need to deepen sustainability in operations, because it is already part of the company culture, but other companies need to fully transform. Embedding sustainability in everything the business does requires a willingness to question everything – Board and C-suite commitment, procurement practices, leadership decision-making, talent gaps, operational opportunities to progress sustainability, and sustainability team authority to implement programs and initiatives in which leaders are held accountable for meeting goals.

Sustainability Driving Business Strategizing

While embedding ESG into operations is a good strategy for the sole reason that it is the right thing to do, there are numerous other solid reasons for including sustainability in business strategizing. One reason is that many investors consider where companies sit on the sustainability spectrum before investing. Their perspective is that ESG minimizes business risks and contributes to long-term success. Consumers (especially the younger generations) are making buying decisions based on the brand’s adoption of sustainability practices in product manufacturing, community commitments, sourcing practices, human rights, and DEI.

Decisions involving talent recruitment and retention, labor and resources sourcing, greenhouse gas emissions, product designs and materials, and incorporation of principles like “reuse and recycle” are just a few examples of how sustainability impacts business strategies and decisions for meeting goals. There are also increasing regulatory demands at the federal and state levels and globally.

Business strategies incorporating sustainability can fundamentally change the way an organization works. Once the strategies are aligned in support of ESG, how do leaders engage the people in the organization to ensure the day-to-day operations support strategic sustainability goals? This step is one of the most significant challenges to embedding sustainability because leaders must embrace the organization’s sustainability focus and consider sustainability in their decisions and operations for the organization to sustain ESG, all the way from the CEO to frontline supervisors, employees, partners and suppliers.

Methodical Approach to Embedding Sustainability

One of the first steps to making sustainability a way of doing business is identifying the scope of change needed. For example, if ESG is already part of the culture but needs translation through improved decision-making, then leadership training on making aligned decisions may achieve objectives. However, if starting from scratch, integrating sustainability requires a more thorough approach that includes building awareness and ownership of the principles throughout the organization’s operations. There is a continuum of actions an organization can take to embed sustainability, and this can start at the point that reflects the organization’s current status.

As mentioned previously, first is building awareness of the importance of ESG to the organization, human capital, environmental sustainability, and social support in communities of operation. People who develop a shared purpose are more likely to support the drive to embed sustainability. Leadership training is essential because executives, managers and supervisors must reframe their perspectives and connect their actions and decisions to transforming the organization into a sustainable operation. They need the knowledge and skills to manage teams in a way that promotes change to support ESG. Leadership development should recognize where the organization sits on the sustainability continuum and which functions must be brought on board. Some organizations may have functions such as procurement that have already embedded sustainability into their operations. However, other functions such as marketing, finance, and R&D, often need to be brought on board.

Once leaders are developed and a plan established for a holistic approach to sustainability implementation, the decision-support tools are selected and implemented. Then it is time to develop specific capabilities. There are many tools and methods to utilize, including workshops, eLearning programs made available 24-7, experiential learning, and meetings, to name a few. The tools and leadership actions aim to engage the workforce, build trust, communicate the importance and integration of sustainability, develop critical thinking, and promote innovation. At this point the focus is internal, but external stakeholders must also participate. The organization’s partners and suppliers should support the organization’s core principle of sustainability. Engaging customers is another step towards becoming holistically sustainable.

Organization-Wide Sustainability

McKinsey suggests three stages for embedding sustainability in the corporate strategy so that ESG is an organization-wide issue. The first step is to embed sustainability in the strategy-setting process, requiring senior leaders to make ESG priorities a core component. Second, senior leaders will make decisions based on sustainability priorities in areas such as capital allocation, R&D funding, and portfolios. The third step is to scale up sustainable business practices to achieve a complete transformation. At this point, sustainability is incorporated into business planning, and leaders and employees are empowered and motivated to take responsibility for achieving the organization’s sustainability goals.

To organize the sustainability effort, McKinsey recommends that executives take four steps. One is to design for sustainability topics of specific importance to the company, rather than generalizing sustainability. The next step is to give the sustainability team the right to execute change. The third step is to develop the sustainability agenda’s best-fit structure for the organization. Finally, executives will prioritize the design of processes and governance, rather than following reporting lines. The fourth step recognizes that sustainability is complex and dynamic and crosses functions and reporting lines.

Sustainability Drives Resilience

When sustainability is fully embedded, it becomes a source of DEI, diverse supply chains, innovation, new business opportunities, customer engagement, enhanced corporate social responsibility, and a brand differentiator. It also reduces compliance and operating risks and can make an organization an employer of choice in a tight labor market. All of this adds up to being a more competitive and resilient company. Embedding sustainability is a process and takes a genuine commitment from leadership and organizational stakeholders, but success will bring many rewards well into the future.