Sustainable Business Strategy for a Positive Social and Environmental Impact

Define your ambitions, set and meet clear goals, and unleash the power of technology.

A sustainable business seeks to create long-term stakeholder value by factoring social, economic and/or environmental impact into strategic and operational decisions.

Sixty-three per cent of executives at organisations with sustainability programmes say the customer is their most important catalyst for action, but customers are not the only stakeholders demanding real change.

Employees, too, are demanding their employers take a stand on issues they care about, including sustainability and other environmental, social and governance (ESG) issues. (Check out our FAQ on how ESG relates to sustainability.)

Investors are also demanding that enterprises adopt a more forward-looking and methodical view of sustainability initiatives through frameworks and standards such as the Task Force on Climate-Related Financial Disclosures (TCFD). Meanwhile, regulators do and will continue to require adherence to commitments such as carbon neutrality.

In the coming months, many CEOs will call together a team to develop or revise their long-term strategies for sustainable business. At organisations with sustainability programmes, 92% of executives report that sustainability investment is already increasing.

The path ahead is neither clear nor easy, but actionable, objective insights from Gartner enable faster, smarter decisions on this critical priority. Access these complimentary resources today to help build a winning sustainability strategy. 

Gartner clients: log in for additional insights and tools or to schedule time with an expert.

A sustainable business seeks to create long-term stakeholder value by factoring social, economic and/or environmental impact into strategic and operational decisions.

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Sustainability in the 2020s: more spend, more aggressive goals and more stakeholder pressure

Gartner insights show that executives involved with sustainability strategy and initiatives come from organisations at different stages in their sustainable business strategies. Still, most report that investment is increasing and will continue to do so in the next three years.

Other findings from the 2020 Gartner Sustainability Survey (see FAQ for survey demographics):
52% say sustainability transformation is their organisation’s strategic ambition.
92% say sustainability spend is increasing at their organisation.
36% say more aggressive goals are driving higher sustainability spend.
Sustainability spend has increased by an average of 5.8% since 2017.
Sustainability investment growth is expected to increase by an average of 5.7% over the next three years.
63% say customers are creating the most pressure for action on sustainability.
70% say COVID-19 increased their prioritisation of social issues.
36% are pursuing a carbon-neutral goal.
19% say digital and renewable energy are the most used sustainability technologies at their organisation.

At the core of sustainable business strategy lie decisions about growth opportunities, risks and costs, technology and leadership.

When it comes to their strategic ambitions and the level of engagement for their enterprises, executives have many viable sustainable business options. They range from doing the minimum through compliance to pursuing new growth opportunities and differentiating through sustainability. But this is a fast-moving area. Regardless of the approach you choose, it is imperative to sense and respond to stakeholders’ expectations, regulatory interventions and market shifts. Access to capital, talent, growth and the enterprise licence to operate are all at stake.
  • Growth opportunities
  • Risks and costs
  • Technology and innovation
  • Leadership

Growth opportunities

Detect sustainable business inflection points and disruptions, support new investment opportunities and develop new business and operating models.

Product innovations that deliver sustainable benefits to stakeholders present an opportunity to create long-term financial security while managing natural capital flows.

Digital can help drive significant improvements in enterprise sustainability performance and create new growth opportunities, but digital business can also hurt sustainability. A coherent strategic plan is vital to successfully tie together digital business and sustainability.

Key questions

  • How can we support new sustainable investment opportunities?
  • How do business and operating models need to change to drive sustainability outcomes?
  • What sustainability inflection points will drive opportunities for growth?

Risks and costs

Assess, monitor and manage the internal and external risks associated with sustainable business.

Sustainable business investment is driven by opportunity, but it is also part of managing risks and costs. Increasing regulations and activist investors create pressure to focus on the financial, legal and reputational risks associated with sustainable business strategies.

Key questions

  • How can we manage sustainability costs and risks?
  • How do we ensure access to capital?
  • Which sustainability-risk-based monitoring strategies and responses should we adopt?

Technology and innovation

Monitor, prioritise, apply new technologies and improve on existing technologies to enable sustainable business in enterprise outcomes.

Meeting sustainable business goals and commitments requires innovation, information and digital technology, such as artificial intelligence (AI), blockchain and the Internet of Things (IoT), as well as sustainability technology itself. (See FAQ for more on sustainability technology.)

Key questions

  • What sustainability technology trends should be on our radar?
  • How can we make IT more sustainable?
  • How can we apply and prioritise technology to improve enterprise sustainability?

Leadership

Identify the role of executive leaders across the enterprise in strategic planning, culture, talent and business capabilities.

Business sustainability strategy cannot advance without purpose-driven, authentic leadership and governance. It relies on expertise from across the organisation, from the shop floor to an executive level, and that requires new leadership approaches, talent, skills and competencies.

Key questions

  • What is our role in sustainability?
  • How can we incorporate sustainability into strategic planning?
  • How can we build and support sustainability leadership, culture, capabilities and talent?
  • How do we engage with stakeholders on sustainability?

Answer key sustainable business questions with actionable insights from Gartner

A sustainable business seeks to create long-term stakeholder value by factoring social, economic and/or environmental impacts into strategic and operational decisions. 

 

The degree of strategic ambition for sustainable business ranges from doing the minimum through compliance all the way to pursuing new growth opportunities and differentiating through sustainability. 

 

Those sustainable businesses expecting to transform and differentiate will need to identify new market opportunities, inflection points and disruptions, and incorporate their plans and response into strategy.

ESG (environmental, social and governance) is often used interchangeably with sustainability. But ESG is a measure of performance, while sustainability is an outcome. 

 

ESG measures are used to assess the robustness of a company’s governance mechanisms, and its ability to effectively manage its environmental and social impacts. Incorporating systematic ESG performance data alongside financial analysis gives better insight into the overall and long-term performance of the organisation.

 

The objective of sustainability is to create long-term stakeholder value by factoring social, economic and/or environmental impacts into strategic and operational decisions. ESG provides metrics to gauge what is being done about sustainability.

CSR refers to corporate policies and programmes that an organisation implements to benefit its community, the objective being to improve the organisation’s reputation or positively impact the retention and loyalty of employees and consumers.

 

While organisations can use CSR initiatives to achieve ESG targets, CSR initiatives are typically driven by a team or function that operates independently or from within the HR or corporate affairs functions. Sustainable businesses take a more strategic and integrated approach to taking account of social, economic and/or environmental impacts into value creation strategies.

Sustainability technology includes:

  • Environmental technology, such as renewable energy and direct air capture

  • Social technology, such as human capital management (HCM) and vendor management for responsible sourcing

  • Reporting and process technologies, such as carbon accounting, that enable ESG reporting

Digital business can be used to go beyond sustainability compliance by helping enterprises reach targets and enabling new business models and revenue streams.

 

Digital business and sustainable business outcomes can feed each other. For example, IoT, and data and analytics can optimize wind turbines, reducing costs (a digital business outcome) and greenhouse gas (GHG) emissions (a sustainability outcome). A mobile app can help customers measure and reduce their GHGs. This improves customer engagement (a digital business outcome) and supports sustainability targets like achieving net-zero emissions. A circular economy platform creates new revenue, a business outcome for both digital business and sustainability.

 

This survey was conducted online during November and December 2020 among 183 respondents from organizations in North America, Europe and APAC with $250 million or more in annual revenue. It covered multiple industries, but we excluded responses from oil and gas, utilities and power generation, given the high intensity of impact on these sectors. 

 

Respondents were screened for director level or above, and were screened out if their organization did not engage in sustainability activities at all or were limited to achieving compliance.

 

The goal of the study was to understand pressure from stakeholders (customers, employees, investors, regulators and partners) for more aggressive economic, social and environmental sustainability action, and to identify best practices from early adopters.