Culture can drive sustainability while you build a transition plan

The Situation: Organizations realize the importance of sustainability and its links to their business functions, but they must do so much more. One UK supermarket outshines its competitors with a dedicated 15-year-old sustainability team, procurement processes with embedded sustainability, and a CEO-led mandate ensuring a culture complementing its transition plan and ambition.

A central pillar of HFS’ presentation at COP26, November’s UN climate summit, was the disconnect between organizational-level sustainability roadmaps and the priorities of functional leaders throughout those organizations. Procurement was the most dramatic case (see Exhibit 1). Sustainability is a top-three priority for more than half of executives and sustainability leaders but only 22% of procurement leaders. That is a problem on two fronts. First, CEOs, boards, and sustainability leaders are not cascading their roadmaps throughout their organizations. Second, organizations will have to change under the context of global sustainability to decarbonize and address the 17 UN Goals; a tipping point is imminent, and procurement teams are not ready for the mandates from above they are soon to receive.

We spoke to the head of property and technology innovation at a leading UK supermarket to learn how it managed its sustainability initiatives, impacted procurement, and used culture as a vital element in its successful sustainability transition. Culture helped the company buy time (but not replace it) when organizational-level roadmaps and organization-wide processes weren’t yet fully detailed with sustainability metrics and accountability.

Exhibit 1: Organizations overestimate sustainability’s position in procurement priorities

Sample: 353 enterprise leaders of $1 billion-plus enterprises across industries, geographies, and functions
Source: HFS Research in partnership with Accenture, 2021

Sustainability efforts are different for supermarkets vs. other retailers

Sustainability was born out of “efficiency combined with doing the right thing” for this UK supermarket. Supermarkets operate on a much larger and more diverse scale than many organizations, with a vast mix of large and small buildings to manage. They receive deliveries all day, and they need to heat and cool a huge infrastructure. This supermarket is embedding its net-zero trajectory through managing the logistics of vehicle fleets, its steady-state operations, and the building of new stores meeting higher sustainability across ESG and other initiatives. It is targeting completion well before 2050, the minimum set by the Paris Agreement to limit global warming to well below 2 degrees, ideally 1.5 degrees.

A waste reduction mindset is inherent to procurement; use it for sustainability

Our conversation outlined how the supermarket is turning this waste mindset toward sustainability. In terms of energy, for example, recent price increases mean it must think well in advance, more so than usual, on whether to purchase renewable energy. Can the supermarket justify the purchase alongside the organization’s broader roadmap if there is a substantial price difference? This decision point illustrates the importance of embedding organizational-level sustainability plans into all functions and having defined processes, metrics, and accountability, enabling clarity and helping ESG ambitions to become a reality. This formal road mapping and execution is happening in the supermarket, but for now, it is addressing large parts of the challenge through culture.

For this supermarket, there’s a delay in implementing concrete metrics throughout the organization. For example, sustainability is currently unofficially weighted at roughly 30% in its procurement processes; two to three years ago, the guidance was “acceptable quality at the lowest price,” with no mention of sustainability. So, there is progress. The supermarket fully expects quality, cost, and sustainability to become baked into value chain demand and regulation soon—and feels it is ready for a watershed moment.

The sustainability team is encouraging the supermarket to consider the carbon footprint value of carbon in all decisions. The company also has business case templates for the impact of sustainability factors on the customer, employees, and finances across different organizational functions, like procurement. The aim is for the whole company to think about carbon and sustainability across ESG factors in the same way. Carbon reduction targets are being mapped to employees’ performance goals.

CEO-led messaging must tie culture and formal plans together

A corporate responsibility (CR) team leads the core messaging and brings the corporate sustainability program together—including reporting on the company plan—but it’s the entire business that “does” sustainability, so there must be a mandate from someone who influences the entire business. Sustainability has become a reality for this supermarket across all sourcing categories in procurement and other departments. “Sustainability is not centralized—it’s a part of all our jobs,” said our interviewee. CR works with the strategy team for the top-down structure and governance, and various business teams report to CR about how they’re embedding the organizational plan into their work. The CR team communicates progress to the board and CEO. Information flows from the top-down and bottom-up.

The Bottom Line: Culture is key, but formalized transition roadmaps and processes must come into place quickly.

More than 80% of organizations don’t have the plan they need for sustainability (see our separate take). Culture can move an organization toward sustainability, even one dragging its heels on transition planning. But movement via culture and via planning must happen in tandem. The CEO must be the ultimate owner of sustainability, and the mandate for sustainability to become “native” at every level of the organization must be clear. The disconnect between organizational-level sustainability roadmaps and the priorities of functional leaders throughout those organizations happens when the organizational-level roadmap does not translate into metrics, targets, accountability, and incentives throughout all functions. These must be embedded into the culture, and no one should doubt that sustainability is being driven from the top. The right combination of formal planning, processes, and culture can eliminate excuses for not aligning every part of the organization to the global sustainability context.