How stakeholder alignment on sustainability unlocks a competitive advantage

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Ellyn Shook, Chief Leadership and Human Resources Officer, Accenture, Peter Lacy, Global Sustainability Services Lead and Chief Responsibility Officer, Accenture, Cyrus Suntook, Strategy Senior Manager, Responsible Leadership Fellow, Accenture & Jill Rademacher, Head of the Forum Foundations, World Economic Forum

• Sustainability has become a key source of competitive advantage.
• But executive-stakeholder consensus gaps weaken the link between sustainability and profitability.
• By strengthening their “Sustainability DNA”, leadership teams can improve engagement with stakeholders, while creating financial value and positive environmental and social impact.

A new era of business competitiveness is emerging. Success will be determined by the ability ofleadership teams to transform their organizations via the twin engines of technology and sustainability. This change demands a new set of individual and organizational capabilities that fuse environmental and social impact with shareholder value. But new evidence from Accenture and the World Economic Forum suggests that a critical element of the equation – cultivating closer stakeholder relationships – remains largely untapped.

The bonds between sustainability and financial performance are strengthening. Leadership teams see revenues growing where they build products and services to address social challenges. They see costs falling when they increase employee engagement and use resources more efficiently. Their organizations thrive in environments which foster compassion, loyalty and trust.

But for the relationship to become symbiotic, organizations need to become truly stakeholder-centric. However, our research confirms that many leadership teams have yet to fully commit to engaging with and learning from the people they are trying to help and influence. This exacerbates the current lack of good sustainability data, leading to “consensus gaps” developing between what organizations do and what stakeholders want.

Today more than ever, it is critical to understand the day-to-day practicalities of stakeholders’ lives – not simply their opinion of what we are already doing.—Vasu Vats, Vice President – Xeljanz Global Commercial Lead, Pfizer.

Moving sustainability from being “bolted on” to “built in” requires fundamental organizational change. Accenture and the Forum have identified the maturity of the core capabilities and practices required to embrace such change, which we call “Sustainability DNA”. Such transformation requires comprehensive planning, measurement and management. And while leadership teams are broadly convinced that they are on track to operate more sustainably, employees – key change-makers in organizations – tend to disagree. For example, 68% of leaders think they have a robust sustainability plan in place, while only 21% of employees hold that view.

Sustainability is rarely a top-tier priority

So why do these consensus gaps exist? We find that shaping more sustainable and equitable operations presents a dilemma to many leadership teams: 73% of executives recognize that it’s abusiness imperative, but 58% believe operating more sustainably involves a trade-off with growth. And when forced to choose, executives show a clear preference for more traditional business priorities. The upshot is that just a quarter of organizations have sustainability goals systemically in place across their entire operations.

The risk of this lack of focus is that, as company actions continue to fall short of stated intent and expectations, stakeholder loyalty and trust evaporate. Already, less than half of employees (49%) believe senior leaders “walk the talk” on sustainability. And where employees lack the communication channels or psychological safety to speak out, executives are unlikely to get a true read on their sentiment, making consensus gaps even harder to identify and close.

The consequences for companies could be severe: employees may disengage or even leave; customers and investors may spend their money elsewhere; local communities may campaign and disrupt business operations. This will push organizations further from both their financial and sustainability goals.

The opportunity cost of persistent consensus gaps

What’s more, this misalignment comes at a price. Sustainability can drive profitability in a myriad of ways, from boosting customer loyalty to improving employee productivity. But to unlock its potential, leadership teams need to understand what stakeholders need and want and then embed those perspectives into day-to-day decision-making. Our latest analysis reveals that companies with stronger positive alignment between executives and employees (top quartile) are financially outperforming those where alignment is weakest (bottom quartile) by 13%.

Entrepreneurs, especially the most recent generation of founders, are discerning about the investors on their capital tables. We see this in the questions they are asking investors about their social purpose credentials. My sense is that every founder will have passed on at least one investor because their values didn’t align.—Catherine Lenson, Managing Partner & Chief People Officer, SoftBank Investment Advisers.

The opportunity is clear: sustainability has become a powerfulsource of competitive advantage, building both shareholder and stakeholder value. But to unlock it, leadership teams need to build stronger stakeholder relationships at the core of their organizations, underpinned by technologies that allow them to quickly gauge and interpret different perspectives. Only then can they shape truly sustainable organizations which deliver financial value in tandem with positive environmental and social impact.

The three-step path outlined in Shaping the Sustainable Organization can help leaders to start:

• Diagnose: Understand the strength of your Sustainability DNA through feedback from multiple stakeholder sets to see where the consensus gaps lie. Tools such as the Sustainable Organization Diagnostic could be used by multiple stakeholder groups.
• Define: Identify key interventions to boost stakeholder alignment and key actors of change, looking at how to close specific consensus gaps.
• Develop: Build a roadmap for sustainable and equitable change with clear KPIs, setting out your plan to close gaps. Guided by accurate and transparent data, communicate progress to ensure positive stakeholder engagement in future challenges.

For more information about the report visit: Shaping the Sustainable Organization.