Rethink Sustainable Business (3 of 7) Platforms & Enablers

Scope 1-6 sustainability impacts. Will be covered in detail further down.

Warm welcome my friend to this seven-part series, where we answer:

How can businesses accelerate their profits by building a better world?

In Part 2 we looked at chapter 1 (big opportunities, the future, and reasons to think in new ways) and kicked off chapter 2 with the AHA model. This time we’ll cover the platforms (purpose, leadership, and talent) and the two first enablers (value proposition and strategy). Let’s explore.

Platforms: Purpose 3.0, Leadership 3.0, Talent 3.0

Opportunity dances with those on the right dance floor.

Purpose and values 3.0: What legacy will you leave?

NEW WAY OF THINKING ABOUT PURPOSE: As an Industry Leader 3.0 we provide better value for all, recognizing that our positive impacts lead to better cash flow — acknowledged as ‘profit through purpose’.

START WITH WHY
This is the title of Simon Sinek’s book and the place to start for any leader. As noted earlier, already in 2019, 64% of people agreed that a company’s primary purpose should be making the world better; 64% also said it should be to make money for shareholders.

The why is then to place sustainability at the heart of company purpose and core values; as a driver for profit. An inspiring purpose for sustainability, when anchored deeply in the organization, enables passionate employees driven by a higher calling.

87% OPPORTUNITY
Today, only 13 of 100 companies have embedded purpose into their strategy for sustainability. EQT Partners, for example, describes themselves as a purpose-driven global investment organization that will align all investment decisions in support of achieving the Global Goals.

An Industry Leader 3.0 stands for and acts on something bigger than their products and services. What they sell is just a means to serve the world. In the end it just so happens that their cashflow enjoys that purpose as well.

HOLISTIC PURPOSE
Align the purpose with the needs of people and planet. Make sure it:

1. Takes up part of the leadership and board meeting agendas every time.
2. Significantly influences strategic decisions and investment choices.
3. Affects how the core competencies are shaped in line with strategy.
4. Shapes the core value proposition.
5. Contributes to increased growth and profitability.

Leadership and culture 3.0: What stories are your actions telling?

NEW WAY OF THINKING ABOUT LEADERSHIP: As an Industry Leader 3.0 — instead of adapting to changes around us or even getting stuck in business as usual — we lead the change towards a better world.

LEAD WITH PURPOSE
With purpose defined, it’s time to lead with that purpose. It will influence everything and everyone. Especially your company culture.

Impacting the world has moved swiftly up the executive agenda in recent years. 99% of CEOs agree that sustainability is vital to the future success of their company.

Amazon’s leadership principles, for example, state: Leaders create more than they consume and leave things better than how they found them.

As sustainability is becoming native to the next generation of people, the existing leadership is key in guiding the less enthusiastic through the cultural shift of new ways of thinking.

THE ORGANIZATION CANNOT EVOLVE PAST ITS CEO
The Industry Leader 3.0 CEO has a holistic view, is informed, and proactive. They educate the board in sustainability, grow its size, and add more diverse perspectives. They serve people, lead by example, and create leadership programs focusing on the five traits of purpose-driven leaders:

1. Humility: Have the humility to see the world as it is.
2. Audacity: Have the audacity to see the world as it can be.
3. Empathy: How would you design the world if your skin color, country, handicaps, and finances would randomly change tomorrow?
4. Integrity: Enable trust by being authentic and transparent with what you’ll do and then do that.
5. Courage: Thrive in uncertainty. Act, and people will follow.

Talent and organization 3.0: What about your company makes employees proud?

NEW WAY OF THINKING ABOUT TALENT: As an Industry Leader 3.0 we enable an inclusive, equitable, and diverse workforce that exponentially benefits others and helps the world flourish.

BENEFIT OTHERS
83% of employees think their employer is not doing enough about sustainability and 65% say they will more likely work for a company with much better sustainability policies.

To firmly root your company’s DNA in sustainability purpose and exponential impact, weave a benefit mindset across the full organizational fabric. Tesla, for example, are serious about inclusion and diversity in their organization of skilled and purpose-driven employees.

Recruit and shape a diverse, equitable, and inclusive workforce that looks like the world, as they will best serve the world. To give employees the right conditions to address the Global Goals, use the science-based Inner Development Goals to upskill them:

1. Being: relationship to self.
2. Thinking: cognitive skills.
3. Relating: caring for the world.
4. Collaborating: social skills.
5. Acting: driving change.

BENEFIT YOURSELF
Purpose-driven organizations report 30% higher levels of innovation and 40% higher levels of workforce retention than their peers. Keep the employees happy and fully engaged.

This engagement also plays a vital role in strengthening the bridge between employee efforts and company strategy; one of the enablers. Speaking of which, with the right dance floor in place it is time to reveal the three enablers that will aid you in entertaining your dance audience.

Enablers: Value proposition 3.0, Strategy 3.0, Business Model 3.0

An audience pays for experience and value.

Value proposition 3.0: What about your offered value makes the world better?

NEW WAY OF THINKING ABOUT VALUE PROPOSITION: As an Industry Leader 3.0 we provide the world with products and services that simply are better — simpler, cheaper, and more attractive — while net-positive.

IF YOU WANT TO BE PART OF THE FUTURE, AVOID DEFINING THE PAST
Clayton Christensen explains in his book The Innovator’s Dilemma that companies often invest so much in their core business that they dare not shift their value proposition. But as impact-native companies emerge, with sustainability as an explicit part of their value proposition, and raising the bar of customer expectations, it is about time to rethink the old ways.

Not least since 79% of customers are changing their purchase preferences due to sustainability reasons.

RETHINK THE TRIPLE BOTTOM LINE
From one dilemma to another. Triple bottom line — the idea of balancing profits with sustainability — is limited.

Why? The answer is hidden in the question: Are you profitable due to or despite sustainability?

Even the person behind the triple bottom line approach has admitted that it rarely delivers anything useful.

If leaders want to succeed in this exponentially changing world, the triple bottom line will not be enough.

What about instead leveraging sustainability as a driver for profit — and profit as a tool for sustainability? Warm welcome to the net-positive world.

THE SKY IS THE LIMIT
Sustainability has traditionally been about, at most, reaching net-zero by reducing all the negative impacts of everyday operations. The holistic footprint. However, this is today too narrow of a vision. One Chinese idiom states that: The frog at the bottom of the well thinks the sky is only as big as the hole of that well.

In the well the frog will at best focus on reducing its negative impacts until they reach net-zero. But if we bring it out of the well its vision will widen. Seeing the entire sky, the frog will also understand its ability to increase its positive impacts. Its holistic handprint.

Also, what if the sum of all the impacts is net-positive? Meaning that the value proposition enables giving back more to the world than it takes out from it — and still is the more profitable one?

Net-positive: positive sum of all impacts

This is the big shift. Here is where the Industry Leader 3.0 excels.

Houdini, for example, are working to minimize their negative footprint, move beyond zero, and leave an entirely positive impact on the world.

Industry Leaders 3.0 leverage their purpose, identifies the needs of the customer and the world through the Global Goals, and delivers on those needs in a net-positive way.

The focus shifts from company-first (inside-out) to world-first (outside-in). Instead of asking how a car can be better optimized, the outside-in perspective asks what the most net-positive way of providing mobility is.

ENABLE FLOURISHING LIFESTYLES
Understanding the customer needs is most effective when embracing the entirety of their identity in relation to sustainability. Their lifestyles, beliefs, cultural context, aspirations, values, and purpose for buying what they buy.

Help them achieve flourishing net-positive lifestyles and it will be the start of a beautiful new friendship.

PUT A DENT IN THE UNIVERSE BY A NET-POSITIVE VALUE PROPOSITION
88% of customers want companies to help them live sustainably and adopt a net-positive identity. Simultaneously, most customers believe that they need to reduce or eliminate the things they enjoy in life to be net-positive.

Industry Leaders 3.0, however, are not engaging customers on net-positive explicitly but playing up the benefits of a better product or service; something that is simpler, cheaper, and more attractive — while net-positive. That is the value proposition that will bring home a big slice of the twelve trillion-dollar opportunity.

Industry Leaders 3.0, at heart, nudge customers toward making net-positive choices; because they want it and because it is better for them — and the world.

With the value proposition defined, how might we make it start dancing?

Strategy 3.0: What if you give more to get more?

NEW WAY OF THINKING ABOUT STRATEGY: As an Industry Leader 3.0 we let the Global Goals and net-positive impact guide our global, long-term, and solution-driven strategy.

HEARTPRINT
In many ways Industry Leaders 3.0 represent a return to the original reason why companies were created. Unilever, for example, was created to stop rampant epidemics and child deaths during the harsh poverty of Victorian England. This urge to save the world is something they have brought back in their strategy.

Strategy 3.0 imprints the Global Goals and net-positive impact at its heart. Here they are integrated in everything the company does and viewed as a strategic advantage rather than a cost.

This heartprint will shift the strategy in three major ways.

SHIFT ONE: GLOBAL GARDEN
If you haven’t already, go beyond your local backyard. Make the world your garden. National economies are more tightly connected than ever due to globalization. You’re part of the global economy. Admit it in your strategy.

SHIFT TWO: 20-YEAR VISION
Go beyond the next quarter or 3-year strategy. Think in terms of decades. All else is a distraction. However, that is easier said than done. In the uncertain circumstances of this fast-paced world, many investors will look for liquidity and short-term gains until companies start proving financial results from their net-positive efforts.

Industry Leaders 3.0 are long-term in their ambition, which enables them to see more opportunities than challenges toward net-positive, while boosting profit.

They also rethink value and ensure that the incentive structure aligns with their long-term ambition for the company, customers, and the world.

Reimagine what business you’re in long-term. Breakthrough Energy Ventures, for example, has a 20-year time horizon. It is backed by notable partners such as Bill Gates, Abigail Johnson, Jack Ma, Vinod Khosla, and Jeff Bezos. About 90% of their portfolio consists of ventures geared toward the Global Goals. So far, they have raised more than $2 billion.

With longer investment horizons your business opportunities will be put in a broader perspective and make room for the third shift.

SHIFT THREE: HOLISTIC NET-POSITIVE STRATEGY
To go beyond a net-zero strategy, Paul Polman and Andrew Winston in their book Net Positive, look at impact not only from a climate action angle, but from a holistic viewpoint; including the societal and people perspectives.

They mention six scopes. Each scope exponentially scales your impact. It is usually helpful to think of them as divided up in two different groups: footprint and handprint.

FOOTPRINT: SCOPE 1–3
These scopes look at the problems you can reduce and roughly control.

Scope 1: Reduce direct emissions from own operations; company cars, and more. Secure employee safety.

Scope 2: Reduce indirect emissions related to purchasing heat, steam, electricity, and cooling. Increase employee well-being.

Scope 3: Reduce indirect emissions from supply-chain and value-chain, such as product usage. Increase supplier and customer well-being.

This is vital as it eases the foot from your strategy break. But if you get stuck here, you’ll at best reach net-zero and end up with a risk-driven strategy focused on cost reductions.

HANDPRINT: SCOPE 4–6
These scopes look at the solutions you can provide and roughly influence.

With the foot off the break, you can now put the pedal to the metal to accelerate your innovation-driven strategy for green revenues.

Scope 4: Provide solutions to avoid communal and sector emissions. Increase community well-being.

Scope 5: Provide solutions to avoid global emissions. Influence policy and influence the systems of well-being, such as healthcare and food.

Scope 6: Provide solutions to rethink a societal consumption-based culture and energy-intensive lifestyles. Influence the well-being of the natural world and flourishing lifestyles.

A BIG SCOPE OF NET-POSITIVE
IKEA have a People and Planet Positive strategy to achieve the big positive changes they want to see in the world, and for the entire IKEA ecosystem.

In a focused manner, Industry Leaders 3.0 embrace the full scope (1–6). This is their holistic net-positive strategy; to maximize their value proposition of giving back more to the world than they take out. And, like Microsoft, they look at their scope through the lens of time and compensate for their historic emissions since their company was founded.

There are examples of companies where the potential impact of their core business on emissions in society is magnitudes more important than their own emissions. Investment banks are one. Another is the consultancy sector. But for many companies this is very difficult. Especially those with significant investments in equipment and manufacturing facilities. This is also why many companies hesitate to make the sustainable transitions that might look obvious from the outside.

But difficult isn’t impossible and many leaders are exploring new ways. To start the transition several companies are, for example, applying an internal carbon tax and using those funds to invest in net-positive efforts.

The scope of your impact will be the major differentiator for deciding the scope of your shareholder returns. When giving more, you get more.

BEYOND PROBLEM REDUCTION
Unfortunately, investors and policy makers often still view companies as sources of emissions, rather than providers of solutions. This places incentives on leaders to reduce their risks instead of opportunity pursuits.

Fortunately, companies have what it takes to be the big players in the emerging green markets. Renewable energy, precision fermentation, and virtual mobility, for example, have all been driven by companies providing solutions rather than just focusing on by reducing their problems.

FROM STRATEGY TO INNOVATION
Customers and investors are embracing solution-driven companies. And those that have started are the early birds to capture the biggest piece of the $12 trillion opportunity.

This green oxygen in their financials they in turn leverage to further nourish, sustain, and accelerate their net-positive business model.

Strategic power starts with innovation and ends with market size. Having landed in a global, long-term, and holistic net-positive strategy, it is time to create a solution-driven portfolio.

How do we do that? We go to the most exciting place of all — business model innovation.

See you in the next one.

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