PART 1: VECTORING: OF DIRECTION AND SPEED
1. INTRODUCTION
2. PATTERNS OF FRONTRUNNERS
Sustainability has made a resounding entry into the boardrooms of companies worldwide.
Topics such as climate change and labor conditions are regularly part of board and shareholder
meeting agendas and are now regarded as unescapable corporate responsibilities.
Climate Strategy: An Example of Data Analytics
The generic approach adopted in this book can be illustrated using the environmental, social
and governance (ESG) benchmark scores of global companies on climate strategy. Climate
change is often portrayed as one of the most important and truly global material issues.
While most companies focus on the risks associated with a changing climate, some also seek to
identify and seize the business opportunities linked to this global challenge. To realistically
assess the performance of companies on climate change they have developed a climate
strategy criterion in collaboration with CDP, formerly known as the Carbon Disclosure Project
that enables companies, cities, states and regions to measure and manage their environmental
impact. As a result, CDP claims to have built the most comprehensive collection of self-
reported environmental data in the world.
Sustainability-Based Transformations (Some examples of frontrunners)
Umicore: From mining bad boy to tesla partner
Former mining company Umicore left its dark past behind to become a global leader in the
circular economy movement, touted around the globe for its battery recycling technology.
Umicore adopted a radically new business model. The old mining–refining approach to
developing material solutions was replaced by a leading-edge recycling-based model that
relied on chemistry and metallurgy. The team succeeded in turning Umicore into a frontrunner
in its industry in terms of innovation and sustainability, redefining the playing field for all
parties.
Raising the Bar in Chocolate
How is it possible then for a startup company, initially run by amateurs with hardly any
funding, to grow 50% year-on-year in a market dominated by global players such as Nestlé,
Mondelez, Lindt and Mars? Too good to be true? That is what Tony’s Chocolonely, a Dutch
chocolate brand whose only purpose is to eradicate slavery from the chocolate value chain,
has been up to over the past decade. With big brands struggling to effectively implement
sustainability in their cocoa business, Tony’s was created from scratch in 2005, and it
developed into a €45 million company by 2017.
Identifying key success drivers
is it possible to identify the key genetic sequences in the DNA of frontrunners, that is,
companies that shine in their sustainability approaches?
,To summarize some of the key findings, transformational companies have a much higher sense
of direction and accelerate execution by embedding sustainability into their core businesses,
not adding them as appendices. This combination of direction and speed (or momentum) is
what we refer to as vectoring.
Vectoring step 1: Getting the bearings rights:
Counterintuitively, less is more when it comes to selecting objectives. For companies
developing sustainability programs, it can be incredibly tempting to support a vast number of
sustainability causes. The evidence overwhelmingly supports the fact that frontrunners are
obsessively focused on a limited number of critical, relevant and material sustainability issues.
Focus is the key to proper implementation and ultimately capturing value from the efforts.
Exemple que ens donen son les Bodegues Torres
Vectoring Step 2: Accelerating Execution and Getting Momentum
Once the appropriate materialities have been selected, the concern turns to activities required
to develop and roll out strategies to capture the opportunities that arise from these
sustainability activities. Frontrunners rigorously implement sustainability programs that deliver
value through reputation, cost reduction and/or growth, usually all three simultaneously.
Laggards, on the other hand, often limit their efforts at reporting activities as part of their
customary non-financial information cycle.
The Business Case for Sustainability
An intriguing discovery from the research is the sheer number of companies that lack direction
and momentum in their sustainability efforts. In many instances, the business case for
sustainability is so understated that it is hardly possible to muster the energy and resources
necessary to engineer fast and decisive change. In plain language, of the 20 global companies,
18 believe that a sustainability strategy is a key competitive element, but only 12 have actually
developed one, and 7 of those 12 have not yet figured out how to convincingly connect that
strategy to profits in the future.
Nevertheless, the absence of a clear business case puts many sustainability programs at risk of
turning into pure communication exercises, handled by generalists and put on the low priority
list at the corporate level.
So how can such a business case be constructed? According to the Integrated Reporting (IR)
Framework, a business case for sustainability can be assembled from four distinct building
blocks:
Cost savings from eco-efficiencies, for instance, by reducing waste, water usage or energy
consumption
Revenue growth from sustainable innovations
Enhanced reputation with stakeholders, such as clients, employees and shareholders
Lowering risk, for instance, by reducing the cost of capital or the dependency on scarce
resources.
, The four archetypes of sustainability
In an effort to investigate the preferences of sustainability programs for risk or opportunity,
the criteria in the list above were attributed to one or the other through an expert-opinion-
based survey. From it, four archetypes of company sustainability programs were extracted,
each with its own characteristics: traditional, communicative, opportunistic and
transformational.
Traditional
This sector encompasses many companies with a relatively high-risk profile and limited
development of their business cases for sustainability. Sectors that feature on the negative
screening lists of institutional investors and private equity firms with an inherent risk, such as
tobacco and weapons, are likely candidates for the traditionalist quadrant. Traditional
companies tend to be compliance-driven, leveraging regulations to justify and extend their
licenses to operate. Most of them have sustainability departments reporting to regulatory
affairs or investor relations.
Communicative
This sector includes companies that recognized the opportunities offered by sustainability but
are still struggling with the relatively high-risk profile of their portfolios. Prevalent in this sector
are diversified conglomerates, with portfolio companies at various stages of sustainability
maturity. Opportunity seizing happens in part of the portfolio, but the risk profile overall
remains
high. These companies often suffer from a form of sustainability schizophrenia, where the
least-sustainable parts of the company often end up being spun off.
Transformational
This last sector covers companies that have embraced sustainability in a holistic fashion, that
is, both to capture opportunities and to reduce risk exposure. By focusing strongly on
1. INTRODUCTION
2. PATTERNS OF FRONTRUNNERS
Sustainability has made a resounding entry into the boardrooms of companies worldwide.
Topics such as climate change and labor conditions are regularly part of board and shareholder
meeting agendas and are now regarded as unescapable corporate responsibilities.
Climate Strategy: An Example of Data Analytics
The generic approach adopted in this book can be illustrated using the environmental, social
and governance (ESG) benchmark scores of global companies on climate strategy. Climate
change is often portrayed as one of the most important and truly global material issues.
While most companies focus on the risks associated with a changing climate, some also seek to
identify and seize the business opportunities linked to this global challenge. To realistically
assess the performance of companies on climate change they have developed a climate
strategy criterion in collaboration with CDP, formerly known as the Carbon Disclosure Project
that enables companies, cities, states and regions to measure and manage their environmental
impact. As a result, CDP claims to have built the most comprehensive collection of self-
reported environmental data in the world.
Sustainability-Based Transformations (Some examples of frontrunners)
Umicore: From mining bad boy to tesla partner
Former mining company Umicore left its dark past behind to become a global leader in the
circular economy movement, touted around the globe for its battery recycling technology.
Umicore adopted a radically new business model. The old mining–refining approach to
developing material solutions was replaced by a leading-edge recycling-based model that
relied on chemistry and metallurgy. The team succeeded in turning Umicore into a frontrunner
in its industry in terms of innovation and sustainability, redefining the playing field for all
parties.
Raising the Bar in Chocolate
How is it possible then for a startup company, initially run by amateurs with hardly any
funding, to grow 50% year-on-year in a market dominated by global players such as Nestlé,
Mondelez, Lindt and Mars? Too good to be true? That is what Tony’s Chocolonely, a Dutch
chocolate brand whose only purpose is to eradicate slavery from the chocolate value chain,
has been up to over the past decade. With big brands struggling to effectively implement
sustainability in their cocoa business, Tony’s was created from scratch in 2005, and it
developed into a €45 million company by 2017.
Identifying key success drivers
is it possible to identify the key genetic sequences in the DNA of frontrunners, that is,
companies that shine in their sustainability approaches?
,To summarize some of the key findings, transformational companies have a much higher sense
of direction and accelerate execution by embedding sustainability into their core businesses,
not adding them as appendices. This combination of direction and speed (or momentum) is
what we refer to as vectoring.
Vectoring step 1: Getting the bearings rights:
Counterintuitively, less is more when it comes to selecting objectives. For companies
developing sustainability programs, it can be incredibly tempting to support a vast number of
sustainability causes. The evidence overwhelmingly supports the fact that frontrunners are
obsessively focused on a limited number of critical, relevant and material sustainability issues.
Focus is the key to proper implementation and ultimately capturing value from the efforts.
Exemple que ens donen son les Bodegues Torres
Vectoring Step 2: Accelerating Execution and Getting Momentum
Once the appropriate materialities have been selected, the concern turns to activities required
to develop and roll out strategies to capture the opportunities that arise from these
sustainability activities. Frontrunners rigorously implement sustainability programs that deliver
value through reputation, cost reduction and/or growth, usually all three simultaneously.
Laggards, on the other hand, often limit their efforts at reporting activities as part of their
customary non-financial information cycle.
The Business Case for Sustainability
An intriguing discovery from the research is the sheer number of companies that lack direction
and momentum in their sustainability efforts. In many instances, the business case for
sustainability is so understated that it is hardly possible to muster the energy and resources
necessary to engineer fast and decisive change. In plain language, of the 20 global companies,
18 believe that a sustainability strategy is a key competitive element, but only 12 have actually
developed one, and 7 of those 12 have not yet figured out how to convincingly connect that
strategy to profits in the future.
Nevertheless, the absence of a clear business case puts many sustainability programs at risk of
turning into pure communication exercises, handled by generalists and put on the low priority
list at the corporate level.
So how can such a business case be constructed? According to the Integrated Reporting (IR)
Framework, a business case for sustainability can be assembled from four distinct building
blocks:
Cost savings from eco-efficiencies, for instance, by reducing waste, water usage or energy
consumption
Revenue growth from sustainable innovations
Enhanced reputation with stakeholders, such as clients, employees and shareholders
Lowering risk, for instance, by reducing the cost of capital or the dependency on scarce
resources.
, The four archetypes of sustainability
In an effort to investigate the preferences of sustainability programs for risk or opportunity,
the criteria in the list above were attributed to one or the other through an expert-opinion-
based survey. From it, four archetypes of company sustainability programs were extracted,
each with its own characteristics: traditional, communicative, opportunistic and
transformational.
Traditional
This sector encompasses many companies with a relatively high-risk profile and limited
development of their business cases for sustainability. Sectors that feature on the negative
screening lists of institutional investors and private equity firms with an inherent risk, such as
tobacco and weapons, are likely candidates for the traditionalist quadrant. Traditional
companies tend to be compliance-driven, leveraging regulations to justify and extend their
licenses to operate. Most of them have sustainability departments reporting to regulatory
affairs or investor relations.
Communicative
This sector includes companies that recognized the opportunities offered by sustainability but
are still struggling with the relatively high-risk profile of their portfolios. Prevalent in this sector
are diversified conglomerates, with portfolio companies at various stages of sustainability
maturity. Opportunity seizing happens in part of the portfolio, but the risk profile overall
remains
high. These companies often suffer from a form of sustainability schizophrenia, where the
least-sustainable parts of the company often end up being spun off.
Transformational
This last sector covers companies that have embraced sustainability in a holistic fashion, that
is, both to capture opportunities and to reduce risk exposure. By focusing strongly on
