Why Is Sustainability a Strategic Issue for Business?

Open almost any current writings on management and you can read that “sustainability has become a strategic issue for business”. But what does that really mean? An issue becomes strategic when two conditions are fulfilled: the issue is able to affect your (long-term) success, and it calls for a tailor-made response from your company.

Leena Lankoski, 04.06.2020

These days it is clear that sustainability can affect the success of a company. Sustainability considerations may make your product obsolete (think about single-use plastics), increase demand (think about plant-based proteins), or scare away investors (think about carbon divestment), among many others. The attractiveness of entire sectors of economic activity may go up or down, which is clearly relevant for corporate strategy.

Sustainability Affects Success on Many Fronts"

In terms of competitive strategy, sustainability considerations may affect the costs and revenues of individual companies in different ways. Sustainability can be a source of product differentiation, or a route to higher efficiency or better employee satisfaction, for example. Well-thought sustainability strategies not only reduce harm and mitigate risk; strategic sustainability can also open up new opportunities when business models are aligned with sustainability.

Pausing to consider what the purpose of your organization is, gives an additional twist to thinking about success. What are you aiming to achieve? More and more companies are defining their purpose – and thus their success – around multiple measures that in addition to profit or shareholder value include broader conceptions of the value created for society. It goes without saying that sustainability considerations are instrumental to success measured in these terms. Again, thinking strategically about sustainability helps to identify opportunities and innovative solutions.

Sustainability Calls for a Tailored Strategy

Strategy is about finding your unique way of creating and delivering value. If the recommendation is for all companies to do exactly the same, that is not a strategy. Sustainability requires the same tailor-made approach as other strategies. Each company faces its unique set of sustainability topics and stakeholders and has its specific products, technologies, resources, and markets. There are win-win situations where sustainability and profitability go hand in hand, but not all situations are automatically like this. What works for one company or one sustainability topic may not work for another. So even though all companies need to embrace sustainability, they need to do it in ways that suit the particular circumstances of that company.

All this calls for a deep understanding of sustainability as a strategic issue for business. Managers need to carry out a strategic analysis from a sustainability point-of-view, design a sustainability strategy that fits their company, and ensure the effective implementation of that strategy. Such a strategic and integrated approach will bring the best sustainability results and the best business results.

Aalto EE's program Strategic Sustainability for Business offers a comprehensive introduction to sustainability strategy development and implementation in business. The program is co-created with UC Berkeley Executive Education. Learn more about the program

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