By Ria Pinto, Country General Manager & Technology Leader, IBM South Africa

With calls for international businesses to mature more quickly into sustainable, future-proof enterprises that can significantly contribute to the pressing IPCC call to halve global emissions by 2030, sustainability is becoming an increasingly important priority for boards and executives.  According to IBM’s 2022 CEO Study report, four out of five CEOs expect sustainability and ESG (Environmental, Social, Governance) investments to improve business results in the next five years, yet only 23% of CEOs say they are fully implementing sustainability strategies across their organizations today.

South African companies are progressively maturing their sustainability approach and developing innovative initiatives that are integrated into their core business strategies and operations for net-positive financial, environmental, and societal outcomes.

To help them accelerate the pace of achieving these outcomes, they need to pursue the themes of leadership, innovation, and education.

Visionary leadership with a commitment to shared value

The world needs brave, visionary leaders. Business leaders must understand and empathize with sustainability and recognize the imperative for innovation across the business model.

Revisiting a business’s purpose and place in the broader business environment is a chance to position sustainability at the core of business operations and strategy. Overall, the leadership team must empower its employees to pursue shared value creation.

New metrics and KPIs must be created to help leaders understand how and when to reward new sustainability behaviors. Scenario planning as a regular leadership activity is critical. Having diverse stakeholder relations, including government, suppliers and community leaders, will bring insight into scenario planning. Leaders can leverage this insight to increase business agility and responsiveness to external shocks. AI-driven insights will encourage forward predictive planning rather than looking to the past.

Innovate: prioritize for impact, co-create, build new value pools and reinvent

First, businesses need to baseline their current operations and assess these against ESGs, GHGs, and SDGs. Doing this provides immediate priorities and identifies areas for innovation, like a rapid transition to renewables.

Then they need to work with the business leaders and key external stakeholders to co-create an innovation strategy grounded in sustainability and aligned to the overall business plan, outlining how the firm will create, capture, and share new value.

It is important to reconsider the whole business model and reinvent it. Transition business models need to allow the “new” company to flourish alongside the “old” business that is slowly “decommissioned.”

However, insulating the new business from old behaviors, metrics, processes, and reporting norms will be a challenge while allowing the new business full access to existing core competencies, expertise, and networks.

Education: citizens, employees, shareholders, stakeholders

State, national and international regulations are creating a broader market for sustainable products and services. This means businesses can help build customer-driven demand through education. When consumers become disconnected from the value chain of the products they buy, they are often unaware of the mix of raw materials, processing steps, or the global supply chain that brought it to them. Consumers need to understand the true value of products, the effects of their waste and the steps that sustainable businesses are taking to create broader societal value.

Investing in business change and education programs is a priority. To build sustainability knowledge throughout the workforce, businesses must create new “mental models” for how work will now get done. Businesses must also instill new business processes that reinforce a sense of community and identity around “shared value” business practices. Incentives and rewards are essential steps to support employee learning, consumer education and culture change.

Businesses must demonstrate commitment and transparency to shareholders in their sustainability and long-term initiatives. Companies must be able to articulate the total societal value their activities create to educate shareholders or else be judged by environment, social, and governance (ESG) metrics alone.

Sustainability is a mindset change and needs significant leadership, behavioral, metrics, partnership, and operating model change. Technology innovation is a key enabler to sustainable business models.

Conclusion

Putting sustainability at the heart of business models drives complicated strategic change, and business leaders must be willing to compromise. Businesses must peel their business model down to its core value set and challenge who they are, how they operate, who they partner with and how they create and share value with the community.

First movers are demonstrating progress in sustainable solutions almost daily. The challenge is how to scale fast enough. Unfortunately, many incumbents will falter and continue exploiting their existing capabilities and assets, ignoring future-proof opportunities.

South Africa needs the first movers to succeed. We must champion sustainable societal and governance standards to build businesses that thrive in new sustainability-based markets with new terms of engagement and reduced environmental effects.

Companies that change their business models to create shared value will be the beacons of international business and the guardians of nascent “pay it forward” momentum.