Home Seven BetsSustainability + profit

The trend: Sustainability promises are just beginning to show progress

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Integrating sustainability goals into operational metrics among the myriad of standards continues to be a limiting factor.

Many businesses set out aggressive decarbonization targets before they knew exactly how those would be achieved—and now those commitments need to be operationalized and become economically viable.

While 86%

of CEOs say their organization has a sustainability strategy in place

Only 35%

have acted on it

Our insights

The actions organizations take today will define the health of society and the planet for future generations. As economic pressures intensify, sustainability budgets are being stress tested. At the same time, increasing regulatory requirements demand greater transparency in ESG reporting. Activist investors are pushing their priorities on both sides of the debate and carbon reduction targets are being scrutinized.

As a result, leaders are searching for specific ways to achieve more concrete sustainability targets, extend their reach, and operationalize their sustainability projects.

While almost three in four organizations have set net-zero emissions targets, fewer than 10% of executives say their organization has prioritized biodiversity-related sustainability goals, such as preserving life on land or below water. Businesses will need to choose a specific area of impact that aligns with their purpose. They need to align business strategy with consumer demand and social, governance, and decarbonization targets.

For example, research from the IBM Institute for Business Value revealed that individuals are invested in a wide variety of issues beyond decarbonization, including clean water (92%), deforestation (91%), and biodiversity (91%). And roughly four in five consumers say sustainability is important to them when choosing a brand. By focusing on the elements of the “quadruple bottom line”—people, planet, profits, and purpose—that matters most to them, organizations can build trust with consumers, investors, employees, and business partners, and actually make progress in alignment with their business strategy.

To state the obvious, the choices consumers make every day have a significant impact on actual carbon emissions. Therefore, to accelerate carbon reduction in a sustained way, every sustainability strategy needs to address how to effectively change employee and consumer behavior. We have seen a number of effective tactics, some as simple as showing consumers the carbon footprint of their choices when selecting a specific product or service.

This can be as granular as the Sustainable Travel Approval Tool (STAT), which IBM created in partnership with a professional services firm to empower employees to make carbon-wise travel choices. In a pilot, STAT helped the firm meet emissions goals two years ahead of schedule.

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Meet the authors

John Granger, Senior Vice President, IBM Consulting

Jesus Mantas, Senior Managing Partner, IBM Consulting

Salima Lin, Vice President and Senior Partner, Strategy, Transformation, and Thought Leadership, IBM

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Originally published 08 May 2023

The priorities

Too many executives still see sustainability and profitability as conflicting, rather than complementary—even though 80% of CEOs say they expect sustainability investments to deliver business results within five years. To make that vision a reality, businesses need to operationalize their goals today—and adopt technology to support automation, transparency and accountability. These can lead to fast-paced progress.

CIOs now cite sustainability as the top area where technology will have the greatest impact over the next three years. However, almost half (44%) of CEOs said a lack of data insights is a top challenge in achieving their objectives.

Executives can leverage automation to track sustainability metrics, emphasizing transparency, long-term objectives, and new sources of value.

To set and reach sustainability targets, organizations need to engage with supply chain and ecosystem partners early and often, redesign supply chains for circularity, and increase transparency and accountability across the value chain. Consider Scope 3 emissions: cloud-based platforms can make it easier to track third-party emissions—which come from upstream and downstream sources—as well as waste, energy usage, and other sustainability metrics.

Transparency builds trust. While consumers are skeptical and keep a keen eye out for “greenwashing” campaigns, honesty builds trust-based relationships with principled customers for years to come.

Executives should seize this opportunity to guide their own sustainability narrative. By offering clear, transparent information about their sustainability and social responsibility initiatives—and their yearly progress on those goals—companies can help people make informed choices and build loyalty with a new breed of purpose-driven consumers.

The bet

Avoid false choices between sustainability and profit—deliver both

Actions to take

Roll out technology platforms that can provide the data needed to record, report, and act.

Expect a Chief Sustainability Officer (CSO) and Chief Financial Officer (CFO) to create the balanced sustainability/profitability roadmap.

Make sustainability goals operational in each functional and business area.

Consider reducing your IT carbon footprint with green IT solutions that reduce up to 30% of computing cost.

Visualize carbon and other sustainable metrics in the key decision processes to establish operational accountability, and to realize energy efficiency and sustainability targets.

Include Scope 3 data instrumentation early in the design process and engage with ecosystem partners to ensure shared purpose and accountability.

Design for sustainability to reduce up to 80% of the lifetime carbon footprint of your products and services.

Change workflows to maximize adoption of sustainable choices, inspired by behavioral economics.

Work with ecosystem partners to offer sustainable choices that are both convenient and transparent to clients and consumers.

See the bet in action

Iberdrola scores its supply chain suppliers on sustainability

Sustainability goals are only meaningful if companies can measure their progress, but many still struggle to assess their impact. That’s why Iberdrola is bringing shrouded supply chain sustainability data into the light.

“Sustainability is in our DNA,” says Ramón Zumárraga Gorostiza, Director of Purchasing Services at Iberdrola. “That’s why we’ve made it our mission to provide affordable, clean energy to as many people as we possibly can, while ensuring that our business model is environmentally sustainable, competitive, and profitable.”

Serving over 100 million energy customers in countries across Europe, as well as the US, Brazil, Australia, and Mexico, Iberdrola plays a leading role in helping businesses and communities build a more sustainable future.

Iberdrola set the ambitious goal of ensuring that 70% of its core suppliers have put in place effective sustainable development policies and standards by the year 2022. To achieve this, the company looked for ways to improve its supplier relationships, monitor and measure progress, and make smarter, more efficient purchasing decisions.

Its existing supplier relationship management (SRM) solution offered limited governance features for company-wide purchasing and, most importantly, provided no capability to assess new and existing suppliers against sustainability criteria.

Iberdrola chose to retire its on-premises SRM system and move to SAP® Ariba® cloud solutions with the support of IBM Consulting.

Leveraging the API-connectivity of SAP Ariba, Iberdrola worked with IBM to implement a third-party solution that helps the company score suppliers on their commitment to sustainability and responsible corporate governance.

“Integrating SAP Ariba with our supplier sustainability scoring tool gives us a detailed view of the environmental impact of our supply chain,” explains Zumárraga Gorostiza. “Using this information, we can make sure that all of our suppliers are as equally committed to environmental sustainability as we are.”