Seizing “a watershed moment” for enterprise sustainability efforts
Commitments toward sustainability have become a greater priority in recent years as enterprises look to comply with environmental, social, and governance standards. However, many enterprises are finding that meeting sustainability goals not only aligns with compliance but also offers opportunities to drive new value, growth, and revenue streams. Just as the digital revolution transformed how we live and work, so now will sustainability. It will drive new value, new growth, and eventually, and I hope very soon, it's going to permeate everything that we do in business and in government," says Stephanie Jamison, global resources industry practices chair at Accenture.
This episode is part of our Building the future" podcast series. It's a multi-episode series focusing on how organizations, researchers, and innovators are meeting our evolving global challenges. We understand the importance of inclusive conversations and have chosen to highlight the work of women on the cutting edge of technological innovation, and business excellence.
Challenges remain for enterprises in targeting, measuring, and reporting sustainability performance, Jamison says, and those that lag behind can miss out on new sources of value and growth driven by sustainability. This is where technology can come in. Emerging solutions like cloud and platform providers offer tracking and insights throughout entire supply chains to help enterprises make better decisions.
Trying to build a purposeful, sustainable business is actually innovative, and it will grow your business in the long term," says Gita Rao, senior lecturer at MIT Sloan Management School. You are taking into account how you interact with your suppliers, customers and employees, as well how you handle the environmental impact of your operations."
Although many enterprises are making efforts toward sustainability, the role of governments in private-public partnerships remains an ongoing issue, says Rao. The absence of clear regulations makes transparency and accountability critical to distinguish between enterprises with genuine intentions to meet sustainability goals and those that want to appear committed to being sustainable.
However, says Jamison, This is a watershed moment in history." She continues, The focus on sustainable development will be the key to competitiveness and sustained success for businesses moving forward. By putting sustainability at the center of everything a business does and how they do it, is going to create new value in the future."
This episode of Business Lab is produced in association with Accenture.
Related resources
Full Transcript
Laurel Ruma: From MIT Technology Review, I'm Laurel Ruma, and this is Business Lab. The show that helps business leaders make sense of new technologies coming out of the lab and into the marketplace.
This episode is part of our Building the Future series. We're focusing on how organizations, researchers, and innovators are meeting our evolving global challenges. We understand the importance of inclusive conversations, and have chosen to highlight the work of women on the cutting edge of technological innovation, and business excellence.
Our topic today is sustainability. Creating sustainable enterprise requires not just support from leadership, but a commitment to setting and meeting outcomes in a transparent way across the entire enterprise. Building a purpose-driven model with a commitment to environmental, social, and governance goals can also lead to new products, new ways of working, and even new revenue streams. Two words for you: go green.
My guests are Stephanie Jamison, global resources industry practices chair at Accenture, and Gita Rao, senior lecturer at MIT Sloan Management School.
This episode of Business Lab is produced in association with Accenture.
Welcome, Stephanie and Gita.
Stephanie Jamison: Hi, Laurel. Thank you so much.
Gita Rao: Hi, Laurel. It's a pleasure to be with you all.
Laurel: Well, thank you both for being here. To start off, Gita, sustainability isn't new, but you managed the first global environmental, social, and governance, or ESG, portfolio in the United States. How has the focus on ESG improved since then, and how do you think about the current urgency for enterprises and governments?
Gita: Yeah, Laurel, I managed the first global ESG portfolio in this country way back. This was for a client in the UK. The impetus was that the client was, even back then, two decades ago, very concerned about fossil fuels. They were also concerned about human rights issues, the treatment of the workforce, and in addition, how companies were governed. It was a very proactive process where we would vote our proxies, and we would select companies based on a thoughtful consideration of ESG criteria in addition to their attractiveness as investments. We Engaged with managements and worked with them towards these goals, and then we would report back to the client. It was a virtuous circle, which is what is required in order to invest in businesses that are trying to achieve sustainability goals.
Laurel: Stephanie, how are you seeing this type of urgency play out with clients across industries now?
Stephanie: Laurel, at Accenture, we see sustainability as the new digital. Just as the digital revolution transformed how we live and work, so now will sustainability. It will drive new value, new growth, and eventually, and I hope very soon, it's going to permeate everything that we do in business and in government. Leaders have long understood that what we measure shapes what we do. Today we know ESG performance has become an imperative, but it's not just for compliance reasons, also for business performance too. Mapping a clear route, measuring the business potential, and impact of sustainability is key. Frankly, there is a lot of work to do in that regard for us to scale the progress.
Laurel: Stephanie, what are some of the more formidable challenges that organizations are facing as they move towards sustainable practices? There must be, obviously, opportunities as well.
Stephanie: There's so much opportunity. I would say, while most companies now recognize that ESG metrics are linked to performance and not just compliance, many business leaders are finding challenges with targeting, managing, measuring, and reporting sustainability performance. While others are actually getting ahead. What I see is that if the laggards let the leaders get too far ahead, those that eventually act could become locked out of securing some new sources of growth and value related to sustainability, and driven by sustainability.
I think the renewable energy space is potentially an example of that, not yet, but potentially could become an example there. This is an area where a small number of companies built their renewables businesses more than 10 years ago, and in some cases 20 years ago. Now they have large, profitable global businesses that new entrants will find it hard to compete with. Goldman Sachs refers to these leaders that are based in Europe as the green energy majors. Financial analysts love them. They have a lot of confidence in their future growth potential.
But, we still have a long way to travel on the sustainability journey, and it's not too late to act and enter new markets. By reshaping and retooling their organizations, leaders can overcome challenges, and create value and lasting impact while also improving ESG performance and metrics. I think to achieve this, organizations need to do three things. They've got to set a clear destination, they've got to set their route that gets them to that destination with milestones along the way, and measuring and reporting.
What we see today is that many report what they're doing, but in most cases it's not actually against a plan. When it comes to measuring and reporting, access to the right data to make better decisions at every level is critical. That's where technology comes in. There are some great solutions in the market emerging and starting to scale. Cloud and platform providers play a pivotal role here in tracking and providing insights throughout the entire supply chain.
I'll just give you one example of that. It's linked to a partnership that Accenture and Microsoft launched in June, earlier this year [2022]. The partnership will deliver solutions that enable organizations, our clients, to address their key sustainability challenges, and to capture new business opportunities. The initial focus of the partnership is to help organization transform their operations, their product services, and their entire supply chain to reduce the company's emissions. We will eventually expand focus in the future to tackle other ESG issues beyond emissions, but that is a critical focus for many businesses today.
We're investing in the co-development of solutions designed from the start to emit less carbon over their lifecycle. We've even joined forces with Microsoft to offer advisory services to help businesses reduce emissions, transition to the new energy sources, and reduce or eliminate waste. It's an opportunity that I'm really excited about, because it does take technology and human ingenuity to tackle this opportunity and to capture the opportunities here.
Laurel: Gita, there's something about this virtuous circle as Stephanie described coming about here as well. You're actually seeing it at every stage from the enterprise, reporting out, back to the clients, et cetera. What do you think about these challenges and opportunities here that are possible, the sustainability practices?
Gita: Well, if we take a step back, Stephanie mentioned renewables. I think it's really important to think about the role of government in all of this sector, and the role of regulation. The renewables industry in the U.S., as well as in other countries like India and others would not have gotten off the ground without a public-private partnership. Similarly, for ESG, there's a few things we really need. One is transparency, which is, How much are companies emitting? What are their goals?" The second is accountability, and that is, If they do not meet those goals, what is the consequence of that?"
In terms of regulation, Europe is pretty far ahead of the U.S. in that regard. But until we have a clearly defined set of regulations around this, it's kind of like the Wwild Wwest, honestly. It does open up a very the serious issue of potential greenwashing, which we should mention. That is, we have the companies with genuine intentions, and then there are others that are also going along. It's very hard for the investing public or for others to be able to distinguish between these. I would like to mention the role of government in all of this, and the importance of transparency.
Just to give you an example, the SEC [United States Security and Exchange Commission] recently [proposed] some disclosure rules about scope 1, scope 2, and scope 3 emissions. Now, we know from a lot of climate studies that scope 2 and scope 3 account for about somewhere between 70% and 80% of emissions. So scope 1 is a tiny part of total emissions. But getting visibility into scope 2 and scope 3 is incredibly tough. Companies have very long and complicated supply chains. We know this in part because of through the pandemic. How do we figure out where the supply chain has these nodal points? That's where I think the creative use of alternative data, the use of technology, is really going to be a game changer.
Laurel: To go on about that a little bit more, the transparency there, Gita, how does the transparency help internal decisions being made in an enterprise? Whether it is pursuing, like you said, compliance with those government regulations. Or even making changes to products or decisions. Because you have this overarching idea-harkening back to what Stephanie said-if sustainability is the new digital, that means every company...I'm following through on a very common tech phrase, which is, Every company is a digital company," or every company' is a technology company," therefore every company is going to have to be a sustainability company. How does that actually play out?
Gita: Well, Stephanie's the expert on strategy. I will just tell you, I like to keep things very simple. Companies have to think long term, and investors have to think long term. When we say long term, I mean all of these decisions, these are micro decisions, but they translate at the enterprise level into macro decisions. These decisions involve upfront costs. Those upfront costs are borne by the company understanding that longer term, it helps them achieve this goal of building a sustainable business. Sustainability and a long-term perspective are inextricably linked with each other. It starts with framing a strategy for the long term, and everything else fits into that.
Laurel: Stephanie, how does this transparency translate, as Gita said, to the strategy of a company?
Stephanie: Laurel, Gita mentioned the role of regulation, and I completely agree with all of her comments. The importance of regulation, the role of regulation. Those regulations have to be put in place, else we're going to be in the wild, wild west for quite some time. In some countries there has been some regulation put in place, but not enough and not fast enough, but eventually we will get there.
The absence of super clear regulation at scale everywhere drives the need for businesses and governments to focus on transparency. At Accenture, we have made sustainability one of our greatest responsibilities, not just because it's the right thing to do, but also because we believe that it will create one of the most powerful forces for change in our generation. We believe that transparency builds trust and helps all of us make more progress.
Therefore, when it comes to transparency, we have expanded our ESG reporting with three additional frameworks. Those are the Sustainability Accounting Standards board, the Task Force on Climate-Related Financial Disclosure, and the World Economic Forum International Business Council metrics. We've done that while continuing to report against the Global Reporting Initiative standards, the United Nations Global Compacts 10 principles, and the Carbon Disclosure Project. All of this shows you how seriously we take transparency within Accenture.
Laurel: To continue there, Stephanie, what is purposeful sustainability? How can an organization, especially c-suite leaders, apply this kind of framework to yield the greatest results, as Gita said, from the micro to the macro?
Stephanie: Laurel, I will use a framework that we apply to our own business within Accenture and advise our clients on. Our goal is to create what we call 360 Value for all of our stakeholders. That includes our clients, our people, our shareholders, our partners, and the communities that we operate in. We define 360 Value as delivering the financial business case, and unique value that a client may be seeking. Along with striving to partner with our clients to achieve greater progress on inclusion and diversity, re-skilling and up-skilling their people, achieving their sustainability goals, and creating meaningful experiences for their customers and employees.
We've developed a 360 Value reporting experience. We use that to bring together all of our ESG and financial metrics. This allows us to detail our progress and performance on our 360 Value goals. We actually produce that, and report and share that publicly and quarterly to really lead in that regard. We believe that reporting through the lens of 360 Value allows us simply to see more, and to see more clearly. We also advise clients on how to report, and communicate in the same way.
Laurel: Gita, what challenges will enterprises face when they are focusing on purposeful sustainability? Clearly there are also opportunities here as well.
Gita: Let me think of challenges. Let's step back and think of how do we assess for purposeful sustainability. One way is evolutionary, and the other way is revolutionary. Both of those involve different trajectories in terms of how the business grows, and how decisions are made. What do I mean by that? You take a company like Unilever or you take a Chevron, or even an Equinor, these companies are large, they have established practices. These are supertankers. Trying to guide those companies through these sustainable purposeful waters means you are making evolutionary changes. You really are. You're really trying to shape the future direction in which the company's moving, the supertanker is moving.
Revolutionary is very different. We have a fintech company that's been started by one of our, actually, our master finance alums. When we think of how all our clothes, and our cars, and everything arrivesd to us on these giant cargo ships from China and elsewhere, those cargo ships have people on them, and they're almost always men. They have to be there. These ships are not manned by robots. Those people, there's a huge problem with payments for these people, because they are on the ships 45 weeks a year, and the money they're supposed to get paid [needs to be transferred to them]... But the money doesn't reach their families for weeks on end. These are very poor people.
The ships collectively carry billions of dollars to pay their workers [of goods]. Let's think about this. What are the incentives here? The shipowners would like to reduce the amount of money they have to carry, because it's a huge business risk. The workers should and need to get paid on time. This fintech app allows this to happen and in real time, and the EU is one of the entities that is funding it. Now, this is revolutionary. What is the challenge here? The challenge here is scaling up; scaling up and figuring out how to put this in other contexts. There are many, many contexts in which this [technology] can be applied. That's what I would say, is these are the challenges, but there are y're fantastic opportunities when we start the framing, when we start with a framing that we want to build a business for the long term where there's a stakeholder perspective.
Laurel: This is an interesting example, Gita, because basically you're saying one very focused application of technology, which is this payment app, that also will help not just the workers, but also the owners of the boats. Also, I'm assuming other places in the supply chain know where this delivery of goods oil is going to. It is this probably an unrecognized need within the company itself. It's helping the workers in other ways, not just sustainability. Perhaps, one way of looking at sustainability is how we can actually help across the entire organization with other problems. It's not something that it's off on an island to itself. It actually can be integrated with everyday enterprise and business needs.
Gita: I think that's a very important observation, and Stephanie's been emphasizing this. It has to be done from the ground up. Her company and others in working with the c-suite, in working with leaders and organizations, they are bringing this notion that it's not just cost-cutting, it's innovation that drives profits. Trying to build a purposeful, sustainable business is actually innovative, and it will grow your business in the long term. At the same time, you are taking into account how you interact with treat your suppliers, how you treat your customers, how you treat your employees, and how you mitigate handle the environmental impact of your operations. All of these things are part of your decision-making. Absolutely.
Laurel: Stephanie, as we're talking about innovation, how do you see purposeful sustainability evolving in the next three to five years? And then how can a focus on multidimensional-value creation really benefit both greater society, and investors, and enterprises alike?
Stephanie: Laurel, business leaders are certainly alert to the challenge. In a recent study done by Accenture, we found that more than 70% of executives that we surveyed said that becoming a truly sustainable and responsible business was a top priority for their organization over the next three years. 70% of the executives said, This is important, and it's important for us in the short term, and we are going to take action." I believe that, because if you just look back on the past one year, two years ago, there has been significant progress from business leaders. This pace, I do expect to accelerate.
The success of such change rests upon a tangible commitment to stakeholder centricity. Crucially, our analysis shows organizations with stronger sustainability DNA do deliver higher financial value, and greater environmental and societal impact. I believe this is a watershed moment in history. This is a watershed moment in history. The focus on sustainable development will be the key to competitiveness and sustained success for businesses moving forward. By putting sustainability at the center of everything a business does and how they do it, is going to create new value in the future.
Laurel: Gita, Stephanie calls it a watershed moment. You also call it a need for revolutionary or evolutionary actions. How are you seeing purposeful sustainability evolving in the next three to five years?
Gita: We have a confluence of events and circumstances. , which it's a cliche to call it extraordinary, but the pandemic trulyreally exposed our vulnerabilities. On top of that, we have ongoing effects of climate change both in this country and worldwide. It's estimated that half a billion people will be forced into migration due to climate change. That disproportionately affects those who are poor and communities of color.
There's a greater emphasis than ever before on making sure that we tie in all of these goals in trying to think about how businesses can function within the society that we have, and really contribute positively. There's been a reframing, and I'll give one example. We talk about the labor puzzle, which, is in the United States, where are the workers? We have a continuing shortage of labor at all levels. Where are the workers, where have they gone? At first, it was the pandemic, and the stimulus, and so on, but it's not easing up. Companies are saying, Well, this is with us for maybe for the long term, and we have to make sure that we engage in skilling, in retention. Maybe even, what is it? On-ramping." Stephanie, you know this term better than I do.
For example, people who were ready to leave the workforce, but you keep them on in some capacity, because of this collective knowledge and experience base they bring. It is not just about responding to climate change, and environmental issues, but it's a network effectweb, it's all related. Responding to that in an effective manner, in a concerted manner.
I would like to use one analogy, which is that no one company can do it alone. When the airlines started flying, if you wanted to fly from Washington, DC to Dayton, Ohio on Delta, Delta didn't build its own airport. Delta flew into a common airport that was used by United and American, and everybody else. Similarly, to solve these societal issues that impact companies, we actually need to create coalitions. These coalitions have to be coalitions of companies, partnerships with forums like Stephanie's, with governmental organizations, with NGOs, advocacy groups. We all have to work together on this.
Laurel: What a fantastic place to end. Thank you very much, Stephanie and Gita for joining us today on the Business Lab.
Stephanie: Thank you, Laurel.
Gita: Thank you, Laurel.
Laurel: That was Stephanie Jamison, global resources industry practices chair at Accenture. And Gita Rao, senior lecturer at MIT Sloan Management School. Who I spoke with from Cambridge, Massachusetts, the home of MIT and MIT Technology review overlooking the Charles River.
That's it for this episode of Business Lab. I'm your host, Laurel Ruma. I'm the global Director of Insights, the custom publishing division of MIT Technology Review. We were founded in 1899 at the Massachusetts Institute of Technology. You can find us in print, on the web, and at events each year around the world. For more information about us and the show, please check out our website at technologyreview.com.
This show is available wherever you get your podcasts. If you like this episode, we hope you'll take a moment to rate and review us. Business Lab is a production of MIT Technology Review. This episode was produced by Giro Studios. Thanks for listening.
This content was produced by Insights, the custom content arm of MIT Technology Review. It was not written by MIT Technology Review's editorial staff.