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Sustainability strategy: no longer sustainable?

Companies have always had to adapt to external change, adjusting strategies back towards long-term goals, says Huw Maggs, deputy managing director and head of strategy at Salterbaxter

The frequency, speed and depth at which some companies are having to adapt to rising societal concerns
is unprecedented.

We expect this pressure to increase significantly in the next few years as more consumers, employees and investors, fed by the media and fuelled by an increasingly mainstream activist movement, wake up to the breadth of challenges we face, and the role of business in their creation and resolution.

Strategic planning requires businesses to consider numerous moves ahead. This has always been a challenge but, as the World Economic Forum observed in the run-up to its Davos summit in January, the accelerated pace of change is making it virtually impossible to plan ahead. This is particularly acute for strategic planning around sustainability issues and calls for new approaches.

This is about future-proofing strategies so they are set up to drive long-term business transformation in line with future external shifts

Wake-up call for business

Take single-use plastics. A single 2017 documentary led to a global backlash with the potential to reduce the average earnings of consumer plastic packaging manufacturers by 14 per cent.

We have subsequently seen more than 250 packaging producers, brands, retailers and recyclers, representing 20 per cent of all plastic packaging produced globally, sign up to the Ellen MacArthur Foundation’s global commitment with implications not only for individual packaging portfolios, but the entire global plastic packaging system.

Another example is climate change. The divestment movement of the last three to four years, now totalling $6.24 trillion, has built awareness and momentum behind more widespread action.

We’ve seen big strides from companies and institutional investors, and the spark that could light the touch paper of large-scale public interest may be just around the corner.

Companies that benchmarked and developed what they thought were ambitious climate programmes back in 2015 will now find they are no longer fit for purpose.

In May, the United Nations issued a stark warning to policymakers across the planet, urging them to step up efforts to reverse the alarming decline of the natural world and the knock-on impacts to economies, food security and global health. Could biodiversity be the next big burning issue?

It’s impossible to ignore the pace and scale at which sustainable development challenges have entered the mainstream consciousness over the last 18 months.

Shifting forces

All this points to another important signal of what lies ahead. At the centre of this change is a powerful group of young people born after the mid-nineties. They are the fabled next generation that we’ve been talking about for the last 30 years. For them, issues like climate change or water scarcity will play out in their lifetime.

This generation and those following behind are making their voices heard and are increasingly voting with their wallets; by 2020 they will account for 40 per cent of global consumers.

This has captured the attention of the media creating a feedback loop and amplifying social and environmental issues like never before. Investors are also taking note; Citibank’s 60-page 2018 report exploring the risks and opportunities for plastic producers from seismic shifts in consumer demand points to investor sensitivity around the single-use plastics issue.

Investors are now far better equipped to translate this into action and not just through active ownership. Sustainable investing has grown increasingly mainstream and investment managers can now quickly align their clients’ portfolios away from unsustainable companies or sectors.

Companies need to be more in tune with external events than ever before as non-governmental and mainstream agendas continue to align and grow.

Not only must companies get much better at anticipating how the landscape is likely to evolve over longer timeframes, they must also set themselves up to predict and respond over shorter wavelengths. Wherever possible, they must be willing to get out in front of issues and actively shape a progressive future agenda.

It’s this skillset, which enables companies to thrive in the new and unknown, that sits at the heart of the Salterbaxter’s Active Strategies approach.

To shift away from static, standalone strategy on a page to a more flexible approach that gives your company the ability to predict, respond to and shape external events, please visit salterbaxter.com

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