The sustainability era brings a host of new challenges, but it’s not uncharted territory. The last decade of digital transformation provides a problem-solving blueprint to profitably address planetary woes while fixing business pain points. We call this approach sustainable transformation, the successor to digital transformation.
"I tell boards all the time that this is not old school environmentalism,” said Evan Harvey, Global Head of Sustainability at NASDAQ. “This is not just about reporting carbon usage or hedging against investor activism. Sustainability is a real management discipline."
This new wave of transformation enables companies to take the powers of digital technologies and focus their energy on clearer, more ambitious goals.
"Companies that have embarked on their digital transformations required a vision, required technology, required data, and required a culture that embraces change," said Jitendra Kavathekar, a Global Vice President at Salesforce, who leads the firm's partnership with Accenture as well its broader portfolio of sustainability collaborations. "If you've already gone through that or are going through it, you've got all that's necessary to think about sustainability as a key driver for your vision.”
Where Growth Meets Net-Zero
Sustainable transformation is about using new technologies to compete in a way that also mitigates existential business risks like climate change. It's about fusing purpose and profit in every product or service.
The challenge is, under the market's current rules, purpose and profit don't naturally overlap in all places or over all timeframes. Policy changes are needed to address this, and businesses should aggressively advocate for them. But in the meantime, strong business cases exist for sustainable transformation goals in the places where they already converge.
The largest profit-purpose overlaps that companies can act on today include:
- Decarbonization through clean energy independence.
- Supply chain reliability and waste reduction through resource independence.
- Resilience that future-proofs businesses and adapts to climate impacts.
Beyond Digital-Transformation-as-Usual
Just as no organization was untouched by the oil revolution, no company will dodge the fundamental changes required for sustainable transformation. Things can’t stay the same when human survival depends on cutting global emissions by 50% this decade.
To harness the untapped possibilities of clean technology, we must go beyond digital-transformation-as-usual, which author John Hagel likens to "just helping caterpillars walk faster," not transforming them into an “unrecognizable butterfly.” Tectonic business model shifts and product overhauls are the main goals of sustainable transformation, not merely an aspiration.
If you sell products today, you’ll likely find yourself transforming those products into services tomorrow. If your organization provides services, you’ll see business customers increasingly demanding outcomes, and consumers demanding experiences. There will also be entirely new models of value creation and delivery we won’t fully realize until a few years into the transition.
As Phil De Luna, carbon tech innovator and Adjunct Professor at the University of Toronto puts it, “Reaching net-zero hinges on innovation. As a species, we need goalposts to reach. On the journey, we find new discoveries along the way."
A transition to sustainable, digital business models is the journey companies must take to discover these new innovations. Nearly every one of the models has four common goals:
1) Eliminate waste by tying revenue to the true value provided to end users.
Costs of inefficiency that were once unknowingly borne by customers when they bought products outright or paid for time-based services will now be the responsibility of sellers. Companies that can use data and automation to cut fat from their processes while more directly addressing core customer needs will outprice competitors and reap healthier profits.
2) Prioritize more direct and longer-term customer relationships.
Long-term data collection and analysis is essential. Data helps companies better understand how customers use their products, enables the creation of digital features for physical goods and predicts when they may break. Lasting customer relationships also mean longer-term, predictable customer payments that better match long-term investment horizons.
3) Focus on hardware as much as software.
Much of the easy wins around software adoption and integration have already been scooped up. Reimagining the things made from atoms, not bits and bytes, and fusing them together with intelligent programming is the order of the day. For B2B companies, this can mean streamlining every part of internal processes and the way the company interfaces with customers. For B2C, it also means migrating the seamless and adaptive experiences we expect online into the physical world.
4) Take an ecosystem view of transformation, not an industry one.
Transformation requires working with unlikely players outside of your space and finding places where competitors can collaborate. Companies will need to invest in partners and suppliers so they aren’t innovation bottlenecks—or find ways to work around them. They’ll need to team up with complementary providers to create more holistic suites of offerings or experiences. Firms must join forces to make long-term promises to purchase renewable power and recycled materials to send powerful demand signals and scale the market.
Learning from Digital Missteps
To deal with the scale and scope of sustainable transformation, we must learn from the mistakes made during the digital transformation era. Sahir Zaveri, founder and CEO of sustainable eyewear manufacturer King Children, explains:
“If you look at how big corporations initially responded to digital disruption, the approach was, ‘how do we layer in the use of software and digital capabilities to augment what we're already doing?’ But that is a recipe for failure. Companies that used software as the foundation for their business models instead of treating it like an add-on ended up winning. Sustainable transformation is the same. If you try to add sustainability as an additional layer to your existing activities instead of putting it at the core of your strategy, you end up losing.”
This, then, is the moral of the sustainable transformation story. Sustainability has to sit at the core of your strategy – alongside digital technologies. In the most volatile decade in memory, a company must be sustainable in order to be competitive and sustainable transformation gives every organization a blueprint to make this a reality.
