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In 2017, for the first time, humanity consumed more than 100 billion tonnes of raw material in just one year. There’s no doubt left: this trend simply cannot continue unchecked. We’re experiencing a new age of scarcity that is far more serious than any of the other crises we’re currently living through – whether Covid, the conflict in Ukraine, or the gas shortage caused by Russia.
Three major trends are exerting a steadily growing influence on the environment in which businesses are operating around the world: climate change, demographic change, and globalisation. What was earlier our normality – an economy of overabundance – no longer offers a feasible way forward.
In view of this situation, the concept of sustainability – and with it, of sustainable business management – is becoming more important than ever. Over the next few years, businesses must overcome their dependence on resources and safeguard their futures by embracing sustainability. As environmental awareness grows at both political and social level, all companies must face a simple truth: no longer just a fashionable trend, this sustainability awareness is finding its way into legislation, in the form of mandatory requirements with which businesses must comply. In Germany, the 17 Sustainable Development Goals (SDGs) formulated by the United Nations (UN) are regarded as a roadmap for environmental policy.
Under the European Green Deal, two major laws or regulations have applied to companies since 1 January 2023. The first is the Supply Chain Due Diligence Act, which obliges companies to ensure that the various suppliers in their global supply chains are not involved in child labour or environmental depredations. The second is the EU’s new mandatory Corporate Sustainability Reporting Directive (CSRD), which obliges companies to clearly and transparently document their own sustainability-related behaviour.
In addition to this new legislation, not to mention the issue of scarce resources, other factors are also playing a key role in imposing the need for sustainability on businesses. One of them is stakeholder acceptance – end-customers and employees are no longer prepared to accept environmentally harmful behaviour by companies. Even major investors such as Blackrock are revising their investment guidelines to prioritise sustainability.
What’s more, the Supply Chain Due Diligence Act is causing many large companies to change their terms of purchase. Only suppliers rated as “sustainable” by their in-house procurement systems are included in their supplier rosters and authorised to respond to calls to tender. In this sense, sustainability is no longer just a business option – it has become a legally binding obligation that is supported by groups of stakeholders representing the whole of society.
While sustainability is a multidisciplinary, multisectoral concept that affects all business operations, it is still important to put clearly designated leaders in charge of the process of transforming a business into a sustainable company. According to a recent study (Tobias, Deeg 2023), 57% of the companies surveyed in the EU have assigned this responsibility to the CEO. In France, Italy and Spain, the CFO tends to be the one in charge. Only a very few companies have set up a separate sustainability department. Managers in charge of sustainability must ensure that individual sustainability initiatives within the company do not simply fizzle out and disappear into oblivion after the initial ramp-up. The key term here is Corporate Sustainability Controlling, which covers the measurement, management and reporting of an organisation’s sustainability performance. It helps organisations to track and evaluate their sustainability initiatives, as well as the progress made towards achieving their sustainability goals.
Sustainability controlling includes, among other things, the collection and analysis of data on various sustainability indicators such as energy consumption, carbon emissions, waste generation and social impacts. This data is used to identify areas in which the organisation can further improve its sustainability performance and take the necessary corrective measures.
The first step in sustainability controlling is to define the organisation’s sustainability goals. Once goals have been established, the organisation can develop a sustainability controlling system based on these goals and other prescribed benchmarks.
The next step is to collect data on sustainability indicators. This can be done using various methods, including automated systems, manual data input, and third-party audits. The data should be regularly monitored and updated to ensure that the organisation can immediately access accurate, up-to-date information on its sustainability performance.
As soon as the data has been collected, it should be analysed to identify areas where the organisation can enhance its sustainability performance. Based on this analysis, the organisation can steadily evolve and implement more advanced sustainability strategies with the aim of further improving performance. This may involve setting new sustainability goals, developing sustainability initiatives, or allocating appropriate resources for supporting sustainability efforts.
Because this transformation entails major changes in the company’s structure and corporate culture, it is likely that implementation will meet with a certain amount of resistance. This is why it is vital to make this process an integral part of a long-term organisational development strategy and ensure that it is given professional support. If systematically implemented, sustainability represents much more than just an obligation – it gives companies a major opportunity to act with ecological and social responsibility over the long term, while at the same time remaining commercially viable.
Source: Tobias, Stefan; Deeg, Matthias 2023: Status quo der Nachhaltigkeitstransformation [The state of the sustainability transformation]. Horváth.
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