Sustainability challenges

This section focusses on the sustainability challenges organisations face that are threatening their long-term resilience. These are linked to the main sustainability drivers of the change outlined above.Organisational purpose: Looking beyond profit
‘When you can be ESG mission forward, I think people want to work where there’s a purpose, and they want to work where climate change is something that’s talked about and considered in the decisions’.
_{Director, Financial Services, South Africa}Sustainability drivers are forcing organisations to reassess their purpose. As models of capitalism and a new generations’ expectations of doing business change, organisations need increasingly to think about their wider societal impact and their ability to help build a more sustainable planet.There is a shared belief that measuring, monitoring, and reporting should not become the sole focus of organisations, but rather a first step to embracing a sustainable business model. Organisations that are still in a shareholder perspective or en route to a stakeholder perspective are more likely to fall into the trap of solely focussing on compliance and reporting.Circular design of products and services, among other sustainability initiatives, will enable businesses to create an enduring competitive advantage — developing new products and services and expanding into new markets. Organisations closer to a system value perspective are better positioned to identify and take advantage of these growth opportunities.The Global Head of Counterparty Exposure Management with a financial services company in the UK provided a good example of redefining organisational purpose. They claimed, ‘It is all about making society a healthy and happy one. Not working just to make money as a firm. The change of purpose and the way we operate means there’s much more thought now about making sure it is the right thing not just for the firm, but for everyone’.An organisation can redefine their purpose through a commitment towards understanding and embedding sustainability and ESG considerations into their strategy and operations.This is partially driven by organisational ethics, a tool that businesses have at their disposal encompassing the values, principles, and standards that guide individual and group behaviour within an organisation.The key ethical considerations our research participants shared with us included:

‘Our supplier base is ethical and diverse in nature’.
_{Senior Finance Business Partner, Retail, UK}

‘If only sustainable operations can be seen as ethical, meaning those that are unsustainable are unethical, then the ethics landscape has completely shifted. A lot of big organisations that we thought were great because they provided employment, made a profit and did other wonderful things – are they now only adding to the problem?’
_{Director, Government & Public Sector, UK}

‘I’m quite sceptical of offsetting, and there’s a reason for that. Organisations cannot buy their way out of trouble without taking all available steps to reduce their own impact’.
_{Heritage Business Manager, Travel, Leisure & Tourism, UK}

‘Ethics is about keeping the business impact on nature at the forefront of our minds, for example, asking frequent questions about our materials and whether they are ethically sourced’.
_{Senior Finance Director, Technology & IT Services, India}

At a basic level, organisations are expected to make their products and services less harmful to people and the planet. This directly affects their business models, strategies, and future profitability. A multinational food and drink processing corporation, for example, may attempt to address consumer demands to reduce the amounts of plastics in their products. The conundrum for this organisation, however, is the increasing costs of using recyclable plastics and the ceiling price consumers are willing to pay. The company must weigh the cost of doing sustainable business and future profitability. These kinds of considerations are being discussed across many other organisations.Building organisational trust and brand reputationBecause sustainability has fast become the lens through which an organisation is judged, an organisation’s sustainability actions, when done right, can build trust with all of its stakeholders.The Edelman Trust Barometer is an annual research and survey analysis, now in its twenty-third year, that highlights the forces shaping changes in world trust. The 2023 global report paints a picture of increasing distrust and polarisation but with one glimmer of light. A positive key finding for organisations is that ‘business is the only institution seen as competent and ethical’. In its findings, the report notes that being ‘a trustworthy information source’ insulates business action from politicisation’.⁷ This, in turn, makes it possible for organisations to address the societal issues facing the planet without adding to polarisation.Organisational trust and brand reputation is built on transparency. It is important to understand that an organisation’s sustainability transparency is not taken at face value in the wider ecosystem. Stakeholders now have access to other sources of data and information to compare against an organisation’s green claims. A multinational consumer goods company, for example, can build trust through the traceability of materials used and the reduction of plastics in their products. A CFO from a corporation in that industry in the UK warned, ‘Consumers will see very clearly who is really driving the change or not driving the change, so it will be a hard wake up call for some companies and some sectors who are not embracing the change’.The route for a design agency to build their sustainability trust came through the process of certification.⁸ A Business Services Director, working in retail and shared services in the UK, specified it allowed ‘the finance folk’ to start talking about and socialising the concept of the triple bottom line. They said, ‘There are obviously people, definitely planet, and there’s profit. It’s about getting the balance of those three things’. The interviewee continued, ‘I think the finance lens is the greatest way to be brave and try to get the balance of sustainability and the realities of running a business lined up’.The sustainability skills and talent gapA key, short- to medium-term challenge for organisations is finding and retaining talent with sustainability knowledge and know-how. Across our research, we found that the sustainability skills gap was mentioned by 48% of participants. A senior manager with a multinational oil and gas company in the UK told us, ‘We need to build the sustainability skills to fulfil our strategy’.As organisations transition from a shareholder to a system value perspective, they require finance professionals with the necessary skills to lead across the sustainability challenges, which include

foundational sustainability knowledge,

an ability to identify sustainability opportunities,

a thorough understanding of sustainability data,

effective communication of sustainability issues, and

a forward-thinking approach.

While most of these skills are not new, the cohesive set implies a change in mindset as well as a need to redefine organisational growth that comes with the sustainability challenges in building resilient organisations for the future.A CFO, from a Fortune 500 company in the UK, encapsulates the sustainability challenge for organisations as:‘You’ve got to win over the hearts and minds of your shareholders to show that you are doing right by them but also right by our customers and that the approach is sustainable’.
_{CFO, Banking, financial services and insurance, UK}