Six steps for creating a successful sustainability operating model

Many organisations now have a sustainability role, and one could say this is both progressive and expected. However, from experience, we have observed the temptation to appoint a senior sustainability role as a box ticking exercise, but it is imperative that such a decision is well considered. The risk is that box-ticking is not sustainable in the long term, nor is it likely to yield the expected organisational benefit. In this article we explore the approaches to sustainability operating models.

As organisations navigate their individual sustainability journeys, we consider two key questions that every organisation must address:

• why sustainability
• what is the ideal operating model.

Why sustainability?

We start by exploring the extent to which organisations have a clear sustainability philosophy aligned to their purpose and profit model?

Our society today tells us that every organisation should consider sustainability; we need to consider our impact on our environment, economy, and society. It is viewed as the right thing to do and there is immense pressure to act. However, any decision needs to be more than a knee jerk reaction. It must be guided by a clear philosophy, and path.

Does your organisation have a clear sustainability philosophy?

It is not sufficient to simply have a sustainability policy, you also need to have a well-articulated philosophy. An organisation’s sustainability philosophy sets out the beliefs that guide their commitment to sustainability.

For example, if an organisation’s philosophy is that sustainability risks and opportunities cannot be addressed by a single centralised team, its approach will be to seek to embed sustainability in its operating model. Conversely, where there is no clear philosophy, one is likely to find an incoherent approach to embedding sustainability.

Is your sustainability philosophy linked to profit and purpose?

Unfortunately, some organisations still equate sustainability with philanthropy and acts of goodness. While this may well be a part of the purpose, an organisation's sustainability philosophy should also include the need to achieve sustainable profits now and into the future. In simple terms, a profitable organisation needs to be a sustainable one and a sustainable organisation needs to be profitable; the secret is to identify the drivers that that promote profits sustainably.

What is the right sustainability operating model?

Once you are clear on your philosophy, there are five key steps every organisation needs to take.

1. Have a clear vision and strategy underpinned by some key design decisions

A clear philosophy paves the way to setting out your purpose and vision and painting a path to being a sustainable and sustainability minded organisation.

You then need to make some key design decisions to guide the design of the best fit sustainability operating model for your organisation. This will need to consider ownership, oversight and governance, the nature of the capability, resources, processes, systems, people, training, empowerment and enablement, key performance indicators (KPIs) and incentives, as well as management information (MI) and reporting.

2. Determine the right Executive Owner within your organisation

This is fundamentally about where within your organisation sustainability sits and who has ownership for ensuring that organisation goals are achieved.

On one hand, successful organisations focus less on where the function sits but more about the best positioning to ensure that the organisation’s sustainability philosophy is embedded in every department and individual in the organisation.

However, in practice, the right level and type of leadership and accountability remains an important consideration. Some roles are a visible demonstration of commitment, facilitate quick decision making and have the potential to maximise the level of embeddedness whilst avoiding initiatives being overwhelmed by bureaucracy.

For example, it might be appropriate for the most senior sustainability role to report into the Chief Executive Officer however, they are unlikely to have the time to be involved in day-to-day decisions given other CEO priorities.

The position of sustainability within an organisation will vary and there is no one size fits all approach. It should be strategically placed to maximise its impact, aligning with the organisation’s philosophy, strategy, and commitment to sustainability.

What we expect to see in more progressive organisations is the dedicated role of a Chief Sustainability Officer (CSO) reporting into the CEO and Board, with sustainability embedded into every function in the organisation.

3. Consider the best fit delivery models for your organisation

This decision is often informed by the maturity of the organisation. Few organisations end up where they started so you can start with your end state in mind and take intentional steps to achieve this.

For example, early-stage maturity would have a centralised team. The benefit is that a centralised function will enable a strategic focus on sustainability and the management of related risks and opportunities. They can drive accountability, performance management and reporting, provide an enabling environment for innovation, and enable the recruitment of specialist resources in social and governance matters, and especially nuanced environment matters.

As organisations mature and adopt a sustainable by default ethos, we anticipate a move towards more decentralised functions. This can take many forms from lean centralised functions to none at all. Many organisations are still maturing so we are yet to see many transitions from centralised to fully decentralised functions.

4. Consider how you propose to achieve cross-functional integration

Sustainability should not be the purview of one function, let alone one role or individual. It needs to be embedded into the DNA of the organisation with collaboration across teams and functions. While the gold standard is to be sustainable by design; with sustainability embedded into every aspect of your organisation, the path and pace for change will vary by organisation but every organisation should work towards cross functional integration.

Finally, consider the best fit change approach for your organisation and put a change management plan in place.

It is not sufficient to set up a sustainability function and expect it to be successful without change management.

This includes educating your people, your customers, investors, board and third parties; helping them consider what it means for them as individuals and for their relationship with you. Many are still contemplating their true position on sustainability and the extent to which they believe you and they can make a difference, so this should not be overlooked.

You should also look to perform a nuanced assessment of your stakeholders against a stakeholder archetype framework and formulate a plan to address their individual needs.

Establishing a sustainability strategy and supporting it with a team is a change management activity and needs to be planned accordingly. The right path and operating model will be driven by your philosophy and purpose.

Crowe can support you in taking deliberate steps as you embark on or continue your sustainability journey.

For more information on Crowe’s Sustainability Operating Model framework, contact Buki Obayiuwana, Alex Hindson or your usual Crowe contact.