Turning a brand’s sustainability ambitions into action
While a majority of Australia's C-suite recognise the importance of sustainability, a much lower proportion of businesses have committed to concrete action in the next three years, writes Dan Pankraz, strategy partner at The Works, part of Capgemini.
Australian organisations recognise the importance of becoming truly sustainable now more than ever before. This, and an increased focus on ambitious net-zero targets and eco-initiatives set by a growing number of companies are indisputably positive trends. However, if you dig a bit deeper it’s clear there’s a gap between long-term ambitions and short-term actions. We call it the ‘Ambition vs Action Gap’. While organisations in Australia across a range of industries have acknowledged the urgency of climate change, limited action is visible on the ground as businesses have been reluctant to fundamentally reconfigure the way they work.
A recent Capgemini Research Institute global study ‘A world in balance’ found that while well over 50% of Australian executives say sustainability is on the agenda, there’s a much lower proportion of companies that have committed to concrete action in the next three years. The study surveyed 2,000 respondents in 12 countries from 668 organisations – including more than 200 Australian business executives across C-suite and director level positions.
A range of industries, including consumer products manufacturing, retail, government, utilities, telco, auto, energy, fin services and healthcare, were included.
First for the good news: 76% (vs 64% global average) of Australian business executives say sustainability is part of their C-suite’s agenda – the highest among the 12 countries surveyed.
But the bad news is that only 49% have a defined list of priority sustainability initiatives that are set to be implemented over the next three years. The ‘why’ behind this is not simple. The fact that the business case for implementing sustainability initiatives is generally largely misunderstood no doubt plays a role – only 14% of Australian executives believe it’s clear and only 35% say their company is designing more sustainable business models.
So, what is truly holding Australian businesses back from action? The study diagnosed some of the dimensions contributing to the ‘Ambition vs Action Gap’.
Sustainability seen as a cost centre, rather than a value creator
Sustainability is currently seen as a financial compliance obligation, rather than a long-term investment – only half (53%) of Australian businesses actually believe the cost of pursuing sustainability initiatives outweighs the potential benefits.
A not insignificant 61% of Australian executives believe sustainability initiatives are a financial burden you simply must bear to do business, according to the research. This is in stark contrast to the Netherlands and Italy, where only 44% of executives see a focus on sustainability as a financial burden.
Recruitment and upskilling on sustainability isn’t a priority
Creating an ESG-friendly culture requires eco-friendly employees. Yet despite the main driver of sustainability initiatives coming from the pressure of current employees, only 45% of these organisations say they are actively recruiting and hiring new talent with strong sustainability skills and only 41% believe upskilling/reskilling on hard sustainability skills (e.g., renewable energy, carbon accounting, environmental science/engineering) is a top priority for their companies. So, whilst 66% of Australian executives state aligning with current and future employee demands is the #1 motivating factor for their business, once again we see the ‘Ambition vs Action Gap’ in full display.
Combating biodiversity loss isn’t a focus
It’s clear that biodiversity loss isn’t a focus. Only 39% say their organisations invest in conserving natural habitats (such as rainforests) and only 48% are reducing the use of packaging materials in their products. Given Australia’s fragile ecosystem, it’s important business leaders are more connected to the role their products and services play in impacting natural ecosystems. Right now, 52% of executives say their companies monitor the conversion of natural ecosystem changes on their owned or managed land. This needs to be far greater.
Redesigning products for sustainability aren’t a priority
There’s clearly a long way to go when it comes to the design and creation of products and services with only 39% of executives saying their organisations are redesigning products to remove fossil fuel feedstock sources (such as coal). In addition, only 48% are prioritising sourcing raw materials locally.
Despite these barriers we are seeing positive signs emerging from what we call ‘Sustainability Frontrunners’ – organisations that have progressed to a greater degree than their peers in implementing sustainable practices, have witnessed 83% higher revenue per employee from 2020 to 2021 compared to the average. In the same time period, ‘Sustainability beginners’ realised a revenue per employee 13% below the average.
It’s clear emerging technology is seen as a gateway to more tangible action to deliver robust sustainability initiatives. 80% of Australian executives believe tech innovation to help manage supply chain sourcing and logistics will be the most disruptive sustainability trend over the next three years. Supply chain, sourcing, and logistics via Blockchain and smart contract technology managing complex supply chain challenges is viewed as the #1 disruptive sustainability trend to influence business in Australia.
While it is encouraging to see that Australian organisations are recognising the importance of becoming sustainable and setting ambitious net-zero targets and eco-initiatives, there is a gap between their long-term ambitions and short-term actions. CEOs and CMOs must pivot their business model to one that addresses issues of environmental impact, elevating sustainability and ESG alignment as a top three business priority, thinking beyond net zero to expand the sustainability strategy beyond climate change to consider things like biodiversity loss. In addition the fact that sustainability is often seen as a cost centre rather than a value creator and a financial compliance obligation rather than a long-term investment is hindering progress.
Dan Pankraz is strategy partner at The Works, part of Capgemini.
