Why setting sustainability targets in the corporate strategy may be key to thrive!
Can sustainability investments create competitive advantages and build barriers to entry?
… AND Is it possible to simultaneously drive profitable business cases while meeting sustainability targets?
If so, how is new technology in R&D and operations acting as a “Pivotal Force” to both set and meet Sustainability targets?
The answer to these key questions to make sustainability actionable in technology organizations may not be far away…
PICTURE: Henri Ojala, EDRMedeso Finland
The recent merger announcement between the two Finnish industrial flagships Cargotec and KoneCranes delivered an inspirational message.
From the outset, the respective corporate leaders highlighted how influential the idea of sustainability had been in their merger move. The new yet-unnamed company will build its success strategy on sustainability, R&D and technology, in this order. To me, as a representative of a high-tech company, this sounded very encouraging. It was one step further towards the acknowledgement of this megatrend is here to stay, and moreover, is a top priority of successful organisations.
It’s becoming more commonplace to find sustainability as a key factor in business operations. A combination of pressure from customers, consumers, financial markets, countries, environmental organizations, etc., push the agenda forward, setting expectations. Increasingly, annual reports acknowledge the important role sustainability has played, showing the sensitivity of companies towards their corporate responsibilities and the importance they place on fulfilling 21st century regulatory standards. Until now, I have been cautious of the ‘greenwashing’ effect, but now times really seem to be changing and sustainability is becoming an integral part of business strategy.
“…now times really seem to have changed and sustainability is becoming a part of business strategies. ”
Sustainability as a competitive advantage
If indeed sustainability is now set higher in the strategic agenda, how do we equate business with sustainability objectives? It’s not so simple. Moreover, how can the key areas of R&D and high-tech competence deliver value to owners? My inspiration is fueled by the question of how to simultaneously achieve targets and drive ROI to satisfy both profitable business scenarios and sustainability targets.
Can sustainability investments create competitive advantage and a USP? Yes, they can. Markets reward you if you can exceed the set sustainability targets and decrease environmental risks, by giving you loans with lower interest rates and investing in your company, through green funds business angels etc.
In many sectors, investment in new and sustainable tech must be implemented quickly or you run out of opportunity. Powerlines need to be electrified or cars and equipment remain unsold. Materials must be recyclable. Equipment must last longer. What we have already witnessed is that this change in focus requires patience, implementation across the entire business and long-term vision. Simply put we must drive investment in sustainability everywhere we can even if it costs a little extra today and the three-year ROI is not what it used to be.
A point to note here is the strategic timeline. When business strategies are normally made for 3-5 years, sustainability targets are set to some 30 or more years, beyond the days of the current management team. However, it’s important to note that current day targets can be future-proofed and common KPI’s found – if there’s a will. One useful approach to make this achievable is to work in partnership with customers, identifying common, core sustainability targets.
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Applying new technologies
Our company is working with our high-tech customers feeling, learning and supporting their product and concept strategies. One thing I’ve learned is that it is a company’s ability to apply new technologies that is a common denominator in successfully combining business cases and sustainability targets. This differentiates companies and their capability to make business sustainable in the future. Of course, there must be an undertaking to plan for the future, invest in your people, but also to partner with the right technology providers to implement your strategies. Nowadays, the sky’s the limit when it comes to innovation and imagination. There is a combination of great partnerships and new technologies at hand and development is rapid. But we need to begin on the strategic path now, to make the most of what’s available.
““There is a need to continually demonstrate the value. We owe it to our leaders.” ”
As such, company R&D plays a pivotal role, it is R&D that conceptualizes and delivers product development, applying new technology in this process.
However, in order to place technology and R&D at the core of a business strategy, investment choices must be considered. This is not a straightforward and easy decision to make. But, if your products and processes succeed, the benefits from this investment will follow.
How to incorporate Sustainability in the R&D agenda
A couple of examples of sustainability and business cases that result in high value in terms of holistic R&D:
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Better product planning, fewer components: savings in logistics, installation and assembly
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Better materials management: lighter materials, higher quality, fulfilment of the sustainability requirements
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Replacing of expensive physical testing and increasing digital simulation: savings in laboratory and prototype costs
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Using equipment data to estimate product life-time and maintenance cycles: savings in work time, travelling, logistics, CO2 emissions
Figure : Percieved Business Drivers for increased use of simulations within your company (n=39) according to participants at the Simulation Leadership Forum, session 1 in September 2020. (Source)Making sustainability decisions is not straight-forward and not to be taken lightly, not in a world dominated by politics, and not as pure business cases. But we can take steps together as partners and networks finding targets to address both business and sustainability, breaking organization silos and thinking value chains in the higher system level. The Management of Cargotec and KoneCranes is showing us an inspiring, bold example and I am really looking forward to seeing them realise their ambitions and targets.
