Framing sustainability: defining the global context and aligning ecosystems

The Situation: Companies, governments, industries, and entire ecosystems must build and align roadmaps under the global sustainability context: reducing emissions to net-zero by 2050 and addressing all the other environmental, social, and governance (ESG) factors underpinning the 17 UN Sustainable Development Goals (SDGs). These roadmaps must start at the system level and break down to day-to-day operations within organizations. The most ambitious and influential organizations in an ecosystem must be the ones to drive collaboration and alignment to this global context.

Exhibit 1 is a framework breaking down the global sustainability context across ecosystems and throughout organizations. It is a starting point for mapping your current situation, the gaps, and the plans you need. Please do reach out to discuss the framework and how we can all work together, in whatever positions we find ourselves in, with the right people in the right rooms at the right times, to get to the level of collaboration and alignment we need.

Exhibit 1: The global sustainability context—broken down throughout ecosystems and organizations

*Many if not all of these elements are interlinked in various ways and cross over between decarbonization, E, S, and G
Source: HFS Research, 2022

Global progress and attitudes towards sustainability vary wildly

If you asked a series of people these questions, you would likely get different answers. What is sustainability? Is it different from ESG? Whose responsibility is it? How do we start? What impact can we have in our position? Sustainability means something different to everyone and every organization. We need to align across industries, geographies, and entire ecosystems.

Geography, industry, politics, and too many other factors to list affect the varying state of sustainability worldwide. But sustainability must start with the global context. It is an immense, systems-level problem facing us all. Sustainability will dominate the agenda for the next half-decade or more. It’s tough to predict exactly when or how it will manifest in any organization’s priorities. However, it is clear that getting ahead of the curve on regulations, customer demand, and other shifts in your ecosystem is by far the best practice. We will be publishing more soon on overcoming the “the commercial models aren’t there” excuse.

The advantage we have for addressing sustainability are goals. And the goals are becoming clearer. This is an advantage because it gives us focal points to align toward: the best examples are the 17 UN sustainable Development Goals (SDGs) in Exhibit 2. Alignment happens through roadmapping and acknowledging how materially impactful different stakeholders can be toward each goal through collaboration, alignment, and prioritization. But more on roadmapping and materiality later.

Exhibit 2: The 17 UN Sustainable Development Goals cover decarbonization and all other ESG factors that must underpin sustainability

Source: United Nations

Sustainability means being able to continue. The world’s current trajectory cannot continue—whether you consider climate change, horrific social and human rights issues like modern slavery, or the future financial readiness and resilience of companies and individuals globally. The SDGs are a starting point for businesses and governments at all levels to frame the global context and outline the outcomes we must meet. The goals are underpinned by ISO standards and mapped by targets and key performance indicators (KPIs). Sustainability must be integrated across environmental, social, and governance factors (refer back to Exhibit 1, discussed more below).

ESG is also used differently in different contexts. For example, in Europe, ESG is often used interchangeably with sustainability, and sustainability is often considered only environmental. In the US, ESG often refers to the reporting requirements of regulators and other stakeholders. In an ideal world, sustainability should cover all of ESG, and ESG should mean full sustainability. But, for now, we must all be careful and be clear on the context we’re speaking in and be clear in defining our use of these terms up front.

Another acronym, EHS (environmental, health, and safety), is also worth noting. It has been a semi-standard business term for well over 20 years. It grew mostly from the need for companies to disclose environmental spills, employee health and safety statistics, and so on. EHS firms are rapidly developing their capabilities and competing with those offering and developing broader sustainability services across consulting, technology, or managed business services. See the outline of our upcoming market analysis for more.

To roadmap, you need a goal, you need to know your starting point, and you need a detailed plan to achieve that goal

Sustainability roadmaps addressing decarbonization, the SDGs, and all of ESG must be systematically broken down throughout ecosystems, industries, regions, and organizations and driven by those at the highest levels in organizations, the CEO and board. Those at the highest levels in organizations must also lead the level of collaboration required throughout ecosystems so that all organizations, industries, and governments can align their plans over the coming decades.

Roadmaps for achieving goals, including the SDGs, often don’t reflect the interdependence between them or the positive and negative trade-offs, reinforcements, and feedback loops. This is not straightforward to address—but it is a crucial pitfall to avoid.

An example of the importance of roadmapping and having a goal is the last 10-15 years, which have seen organizations chase digital transformation, often without a picture of the endpoint. Digital was sharply contextualized during the pandemic, as were many ways organizations and industries could transform rapidly under a shared goal.

Starting with the global sustainability context, you can position everything you do under it; you can also assess the gaps

Roadmaps must outline how organizations get from where they are now toward their organizational goals while addressing the global sustainability context. Coming back to the concept of materiality (essentially, relative importance)—you need to know what to do, when to do it, what to prioritize, what not to prioritize, and the extent that you can push competitively in confidence that you’re within ESG boundaries. This avoids a common pitfall of sustainability that often frustrates many working in the field: Organizations and governments just do things because they seem sustainable or sound good. And while those things might be perfectly good, if they don’t align with a broader plan, it is difficult to know if it is the best use of time and resources—or even if a particular action goes far enough.

The SDGs in Exhibit 2 are great for the ambition and breadth of tackling almost every problem facing the world. Breaking things down simultaneously by ESG factors can be more helpful for an organizational context (see Exhibit 1). Then it’s a case of breaking this global context down throughout organizations once you have a roadmap that aligns to this context, ideally one that your whole ecosystem aligns with. Industry dynamics and geopolitics must also factor in. That means that CEOs and boards, in partnership with a clear focal point for sustainability (a chief sustainability officer or something similar), must create metrics, targets, accountability, and incentives at the right levels to see the roadmap implemented. There is a far-too-common disconnect between organizational-level roadmaps and leaders’ priorities throughout those organizations; this was a central pillar of our presentation to COP26, the UN climate summit, in November of last year.

Aligning under the global sustainability context is a powerful way of visualizing the problems we need to solve, how organizations and solutions fit under that context, and what’s missing

Detailed roadmapping helps us outline the scale of a particular solution (think in percentage terms of the overall context—for example, globally, we emit about 50 billion tons of emissions per year, and we need to get that to net-zero by 2050). It also illustrates where responsibility lies across ecosystems and within organizations; for example, what targets and incentives do the supply chain, procurement, finance, and other organizational teams need to execute the overall roadmap?

I also find it helpful in any conversation, especially in an industry or area I’m less familiar with, to think, “Does this (insert thing here, for example, an investment fund) align with the global sustainability context?” And equally critically, “Is there a detailed strategy to implement plans and monitor ongoing progress?”

The Bottom Line: To align to the global sustainability context, we need focused collaboration throughout ecosystems. Everyone needs to be involved. The major ecosystem players must use their positions to lead.

A chicken-and-egg situation is developing with sustainability, concerning collaboration and transition planning. Can one firm holding a leading position in its ecosystem in a challenging and regulated industry like financial services or oil and gas move first and fully disclose a transition plan that others can follow without having gone through extensive collaboration and alignment with its competitors and other major ecosystem players first? We’ll be attempting to answer this in more detail in our market analysis referenced above, to be published at the end of July, and in broader industry-based research. I think the answer is yes, but also that a high level of collaboration is desperately needed in parallel. Conversations, including a few in the financial services space, suggest that moving first is possible, even in such a risk-averse and regulated industry. I desperately hope we can achieve this soon in all manner of industries. But ask me again after COP27 this November, when governments have promised to bring forward the roadmaps they largely failed to bring to COP26.

I want to make a final note to give a slightly different take on sustainability and the global context. As important as it is to have detailed roadmaps and goals, on some level, and at risk of being overly philosophical, it’s sometimes good to think of sustainability as simply anything that moves us toward the sort of world we want to live in.