Sustainable value - the next transformation wave

Playing time is over. Sustainability is the new name of the game. And it is here to stay, it is the next transformational wave, comparable to digitization. Window-dressing and feel-good strategies will no longer do the trick. To be part of the winners in the new era, companies and business leaders must be prepared to completely re-think their value chain and make sustainability part of the core of their business model.

The next transformation wave

Climate change has become undisputable. The growing concern of the wider public combined with expanding regulations and alarming academic studies, forces companies to consider a wider group of stakeholders and eventually their environmental impact. Employees increasingly refrain from working for companies whose sole purpose is ruthless profit maximization, often to the detriment of environmental or business ethical considerations. Social media indiscriminately point out any kind of green washing. Creating sustainable value is the next transformational wave.

Digital Transformation

The best way to envision the impact of this new transformational wave is to compare it with the current one, the digital transformation. What started driven by technology forces became quickly widely adopted and forced whole industries to review their business system. Winners are the digital natives, all because they had little baggage and ‘digital’ is at the core of their business model. This allowed them to to create new markets and become the corporate giants of today.

As customer expectations pivoted towards a more digital experience, incumbent companies invested vast amounts of time and effort to keep the pace. For most organizations the digital transformation – which is often still ongoing – turned out to be very challenging by the rapid change in complex technologies, the struggle of legacy systems and the lack of readily available skills.

Once the game is played and the dust settles down, it becomes tremendously difficult to catch up with the digital leaders in your industry. Disadvantaged in the ‘war for talent’, the immense investments and sometimes damaged reputation means that laggards face a huge setback.

What is the key learning from digital transformation? Staying behind is not an option.

Sustainable Transformation

The similarities between digital and sustainable transformation are very apparent. Instead of technological forces you now have the rise of strong socio-cultural forces that urge companies to be more sustainable. Once again you see the rise of native companies, organizations that manage to capture the wave by creating a strong and genuine reputation and bringing sustainability to the core of their business model.

To further build on our analogy you notice similar struggles from incumbent companies trying to emulate sustainable value. Organizations often underestimate the efforts required to address the whole value chain and to truly transform the core business, starting from redefining what ‘type’ of value the company wants to create up to balancing economic, social and environmental values.

When asked which companies are leading the way, we often refer to “Het Poetsbureau” who aim to create a great place to work for their cleaning staff, by uplifting their status and work environment, providing electrical bikes and even psychological assistance. Another example is Colruyt, who have long term strategy to make its business model more sustainable, by reducing packaging usage and encouraging a participative model for alternative energy. You don’t achieve this if your mindset is “profits first”. Customers and employees know when you are genuine, in turn this allows the company to have sustainable growth.

Business leaders must be prepared to completely rethink what creating value means for their enterprise, or, in other words, what they will contribute to our society. But one thing is for sure, just like in the digital transformation wave: Staying behind is not an option. You need to be prepared for this challenging, albeit rewarding journey. Today refocusing on creating sustainable value will give you an extra edge, tomorrow it will put you in a leading position.

Playing time is over. Sustainability is the new name of the game. And it is here to stay, it is the next transformational wave, comparable to digitization. Window-dressing and feel-good strategies will no longer do the trick. To be part of the winners in the new era, companies and business leaders must be prepared to completely re-think their value chain and make sustainability part of the core of their business model.