The are several gaps that need to be addressed in order for businesses to meet their sustainability goals, according to research.
- 93% of senior leaders across IT, finance and ESG say sustainability is important to commercial success.
- 37% of senior leaders believe sustainability is “very integrated” into the core of their business.
- 23% of senior management teams allocate significant capital to deliver on sustainability.
The report identifies four key gaps — data quality, cross-functional collaboration, capital allocation, and implementation — as limitations to integrating sustainability into core business functions. The report, which is co-authored by University of Oxford Professor Robert Eccles and NYU Stern Professor Alison Taylor, surveyed more than 200 professionals — including 76 C-suite executives — across North America, Europe, and Asia.
Here’s some more details on the four key gaps identified in the report — capital, implementation, integration, and data — that stand in the way of making sustainability meaningful to corporate strategy and value creation.
Undertstanding the four gaps
- The capital gap: Despite high importance, capital is limited — Over 90% of survey respondents say that sustainability is “very important” (67%) or “fairly important” (26%) to commercial success. The research shows that about 50% of senior management teams say they are highly focused on sustainability risks, opportunities, and impacts, yet only about half of those cases are getting the level of capital necessary to mitigate the risks, seize the opportunities, or manage their impacts.
- The implementation gap: Sustainability is seen as creating value mainly through reputation, not operations — Respondents believe sustainability delivers the most value in areas of marketing and PR, namely enhancing the company’s brand and reputation, strengthening stakeholder and community relationships, and facilitating partnerships and collaborations. These areas are focused on perception, are difficult to associate with monetary value, and are divorced from operation.
- The integration gap: Low collaboration limits progress — Without sufficient capital or alignment among teams, sustainability integration is also likely to suffer. Despite the stated importance of sustainability to commercial success, only 37% of respondents believe sustainability is “very integrated” into the core of their business. Low integration of sustainability into key functions, such as finance and technology, means there is less opportunity for people on the sustainability team to understand the commercial opportunities for the business. While these functions are seen as important for making substantive progress on sustainability within businesses (86% for finance and 75% for technology), senior leaders perceive limited collaboration between these areas and the sustainability function. However, despite the low baseline, most respondents report an increase in collaboration over the past two years (70% with finance and 63% with technology).
- The data gap: Poor data quality on sustainability performance hinders value creation — Technology can help track and manage sustainability risks, opportunities, and impacts, so long as there’s high-quality data to analyze. As many as 80% of respondents say that high-quality data on sustainability performance is “very important” for realizing the full value of sustainability, and 15% say it is “fairly important”. Yet only 8% say they currently have “very high-quality” data, with another 19% saying they have “high-quality” data. Lack of data makes it harder for businesses to test hypotheses about how sustainability is creating value. Given this challenge, nearly two-thirds of respondents say they have increased funding in data collection and management solutions for sustainability during the past two years (63%), and plan to do so for the next two (65%).
A deeper look into the data gap reveals that 95% of leaders consider access to high-quality data on sustainability performance to be important for unlocking the full value of sustainability. However, access to high-quality data is a challenge, and fewer than three in ten (27%) executives say they currently have high-quality sustainability data at their disposal.
The report notes that about two-thirds of leaders report that they have increased funding during the past two years for data collection and management solutions to help bridge the data gap, and they expect to increase it further for the next two years.
The report provides the following recommendation for businesses looking to close the four major gaps:
- Capital Gap: It’s not enough for senior management to list sustainability as a focus area. Allocate sufficient capital to sustainability initiatives, and hold teams accountable for the action they take.
- Implementation Gap: Make a stronger case for the impact sustainability has on the core operational and commercial focus areas of innovation, costs, and sales, not just relationships; align with the measurable areas that guide capital allocation.
- Integration Gap: Deliver a stronger case and build buy-in by better integrating key functions, especially finance and technology, which have the expertise and tools to help measure and manage progress in line with senior management team expectations.
- Data Gap: Harness better data to build out the business case and meet growing compliance demands while ensuring the data is used as a tool for guiding, challenging, and validating strategic decisions, not just reporting and compliance.
To learn more about the Sustainable Value Creation report, you can visit here.