While consumers increasingly demand engagement with businesses based on values rather than value, the physical and material risk of climate change is fast becoming a reality for organizations. To meet these new demands and mitigate supply chain disruptions, organizations need to optimize their value chains to be more efficient and environmentally conscious.
With renewed ambitions set out to achieve sustainable outcomes—and ultimately, net positivity—it is imperative that businesses change their mindsets from ‘value chain’ to ‘value lifecycle’.
This requires rethinking supply chains from the bottom up to align with the targets set out in the UN Sustainable Development Goals (SDGs) and build a circular economy around their products; strengthening product and service delivery ecosystems across markets.
The mindset shift from ‘value chain’ to ‘value lifecycle’ looks beyond current take-make-waste extractive industrial systems to redefine best practice and value creation. In this way, the core principles of generating new value within the product lifecycle are inextricable from those that govern the design of both lean systems and circular economies.
Lean systems are defined by the following principles:
As advocated by The Ellen MacArthur Institute, the following three principles are the foundations of circular economies:
Many firms are now accustomed to collaborating with suppliers and partner networks in clarifying their vision and objectives. However, the sustainability agenda requires that executives broaden and deepen those links to extend to the entire value chain, taking ownership of impact even post-consumption.
To avoid reactive solutions that undermine the business case for sustainable practices, it is critical to understand where you are; assess existing capabilities and the impact of current initiatives within the greater system to establish a strategic direction—a starting point for this purposeful journey.
By deeply understanding the effectiveness of current governance structures and strategies, organizations can start internal and external dialogues to elevate the strategic climate debate and drive holistic decision-making that includes careful consideration of the links between business strategy and impact within the systems of change.
Setting the cornerstone for informed strategy development, this phase helps organizations avoid ineffective and expensive initiatives, building on existing capabilities and strengthening the case for sustainable solutions.
This can be done by mapping current initiatives across the value chain, using tools such as the ITONICS radar, portfolio mapping, and roadmapping tools. Connecting the dots, this will serve to highlight gaps, risks, and intersection points where stakeholder interests coincide with revenue models and potential opportunities.
Considering the full systems and their parts, teams must reevaluate how the issues and intersections evolve over time. These insights should inform a company-specific dynamic materiality matrix; where one axis demonstrates how important an issue is to the company from a value creation perspective, while the other axis indicates how important this issue is to collective stakeholder values sentiment.
Issues may evolve slowly, as with climate change and gender diversity, or more quickly, as with plastics in the oceans. Most ESG issues are industry-specific, however, when events such as the COVID-19 pandemic unfold within a very concentrated period of time, the issue can become material to every company in every industry, for benefit or loss.
An example of such is illustrated by the chart below which shows the level of Danone’s engagement on the x-axis, with collective stakeholder values sentiment at the y-axis:
Source: Danone
Such a tool serves to demonstrate the growth in evidence of why an issue or initiative should be prioritized, which puts pressure on companies to address the concern lest they forego consumer and employee interest. As a result, investors who comprehend the profitability implications are compelled to become more active in their engagement on the prioritized issue.
Overlaps in interest and materiality represent leverage points that demonstrate synergistic innovation potential and shared value.
Following the above example, Danone has made use of such to select the SDGs to which its organization will commit. This took into account their materiality matrix which highlights the most significant sustainability topics for their stakeholders and business performance. The material aspects identified emphasize the way Danone will significantly contribute to the following SDGs on which its activities have a moderate impact.
Danone also took into consideration the major initiatives the organization supports, such as the HeForShe and the RE100 Initiatives. They respectively show how Danone intends to contribute further to:
Finally, Danone also contributes to the following SDGs on which its activities have an indirect impact:
The systemic nature of sustainability issues and, by extension, solutions require an integrated, holistic approach. And beyond commitment lies action.
Organizations aiming to align their efforts internally, as well as with sustainability indicators such as the Sustainable Development Goals and ESG criteria, need transparency and the vantage of the big picture. Teams need the ability to zoom in to specific innovation pipelines—extract insights, allocate resources, and plan timelines.
Having the right tools to manage innovations, technologies, projects, and opportunities is vital to acting on your organization’s sustainability strategy in an increasingly uncertain and dynamic world. After all, what you can’t manage, you cannot change.
Get started by exploring the ITONICS Sustainability Radar to identify the trends, technologies, and risks that are relevant to your organization, customers, and future development. Discover the opportunities for sustainable innovation that lie within future scenarios through the application of strategic foresight.
The ITONICS Innovation Cloud allows you to build internal consensus and collaboration at all levels by connecting projects to an agile digital roadmap and therefore make better, informed decisions that support a more sustainable and prosperous future.
