Opinion article by Ovidiu Popescu, Partner, Leader of the Energy and Sustainability Practices, and Mihai Ventoniuc, Senior Consultant Sustainability, Deloitte Romania
Many organizations still tend to reduce sustainability to yet another reporting obligation, a “tick” in the annual compliance calendar. In addition, the legislative proposals in the Omnibus package, published by the EU Commission on February 26 and which, if adopted and applied in their original form, could remove from the Corporate Sustainability Reporting Directive (CSRD) scope more than 80% of the companies initially targeted in the EU and more than 90% in Romania, seem to induce a wave of green deterrence and, moreover, the tendency to pit sustainability and economic competitiveness against each other.
However, the experience of the pioneers of corporate sustainability, as well as several industry studies, tell a different story: when practiced authentically and consistently, sustainability becomes a key element of performers and a tool through which companies can improve their operational processes, better manage risks, optimize costs and create long-term value.
From theory to competitive advantage
The authentic integration of ESG (Environmental, Social, Governance) factors into business strategy is not limited to a strong annual report, but consists of concrete, systematic operational decisions, professional planning, which accompany and influence financial performance. The latest edition of the CxO Sustainability Survey, conducted by Deloitte among top executives of over 2,100 companies in 27 countries, shows that 70% of respondents expect a significant impact of climate change on their strategies and operations in the next three years, but also that organizations that have promptly taken climate action and implemented impact measurement tools are starting to associate tangible financial benefits to green initiatives (37%), and have mentioned them in this edition of the report ahead of benefits related to brand and reputation. According to the same report, business leaders also mention meeting consumers’ and employees’ expectations in the top five benefits of sustainability initiatives, which points to an already relevant social trend linked to the preference for “cleaner” and “greener”.
Why? Because sustainability creates efficiency: from optimizing resource consumption, to reducing waste, to an organizational culture focusing on responsibility and innovation. In 2009, one of the largest energy companies in Europe decided to change its business model by transitioning from “black” energy (hydrocarbons), with a share of 85% in production, to “green” energy by 2030; in 2020, the balance had already been reversed, with the company reporting a production of 90% renewable energy, while becoming a world leader in the development of wind projects, with a market share of 30%. Another outstanding example is one of the world’s largest FMCG companies, which has been using operations impact assessment tools (Life Cycle Assessment and Overall Business Impact Assessment) since the 1990s, contributing to the fact that, according to company’s own reports, in 2018, 75% of its entire growth was generated by sustainable brands.
Key investments: analysis, financial and human resources, time
Sustainability cannot be a stand-alone project or a way to react to market changes, and building a more sustainable business requires constant commitment and involvement at all levels of the organization.
With or without the burden of reporting obligations, the first steps are related to the assessment of operations and business strategy in terms of sustainability principles to identify risks and opportunities throughout the value chain. The Double Materiality Assessment (DMA) is the structured tool that, applied professionally, over a reasonable period – not under the pressure of a deadline – provides an up-to-date picture of the business performance and further potential from an alternative perspective, whose key word is efficiency.
At the same time, at least as important is the adaptation of the organizational culture, stimulating the commitment of the teams through transparent information and training on the key concepts for the transition, best practices and concrete ideas for action, applicable to the industry and their specific activity.
And although the market needs examples and success stories, the communication and promotion of sustainable action must be only an accessory to effective measures, a means and not an end by itself.
In conclusion, sustainability is less about what and how we report and more about towards what goals and how we build. Beyond regulations and changes of their provisions and compliance timeline, in an increasingly volatile economic climate, a company’s ability to understand and integrate sustainable principles into its business model will make the difference between survival and growth. Those who act thoroughly and on time will create and lead market trends, will be prepared to respond to the rigors of investors and strengthen their competitive advantage in a global economy where resources are increasingly limited and difficult to access, supply chains, increasingly fragmented, and pressure from customers and employees, higher.
