What is success for business in 2030?
Sustainability-driven network effect is creating a new reality for business
Spurred on by the impending climate crisis, we are witnessing a dramatic shift from ambitious declarations to determined action. This change is largely driven by a generational shift with new value systems replacing the old, with science-based efforts driving companies to couple profitability with purpose. A new reality is sweeping the corporate landscape, with companies redefining what success will look like in 2030.
by Charles Golding
[First published in Neste, Journey to Zero, Finland , May, 2021]
The future of companies, individuals and entire societies is shaped by a rapidly moving climate crisis, sustainability-driven changes in the investment world and the surrounding consumer environment. This change is largely propelled by a generational shift, with new habits and value systems and governmental actors and institutions that are creating downward pressure for immediate action on climate.
Against the backdrop of this, we explore, through the prism of multinationals, growth companies and industry thought leaders, the changing business and societal landscapes. The rise of new modes of thinking coupled with a generational shift has led to the emergence of companies that are actively rethinking or redefining age-old concepts. The stars are now aligned to create a new definitional framework with entirely new benchmarks, be it profitability or success. As with most things new, the switch from one indicator of success (profits) to multiple ones is driven by global preferences with corresponding initiatives from the business world. Global investors are keenly observing this change and subsequently, taking action.
Just last year, Larry Fink, the chairman and CEO of BlackRock, the world’s biggest asset manager, announced a long-term commitment to sustainability and value creation. “Climate change has become a defining factor in companies’ long-term prospects … But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.” Considering such tectonic shifts in investor activity, much of the attention will have to focus on how change is managed. While steps are being taken to reach stability - a global, growing consensus on sustainability goals and their implications on our understanding of profits and success - we are still currently in a nascent, largely unstable stage. For Dr Marcius Extavour, a leading innovator working at the cutting-edge of science, technology, and Vice President, Energy & Climate of the NRG COSIA Carbon XPRIZE, value-creation is all about change management. To move towards a steady state, individual actors - be it investors or multinationals - should form a synergistic effort and manage change on all fronts.
“We are trying to get to a steady state, which means we have to change something. And that means we have to change and we have to do something different from the way we did it yesterday. And this can be a difficult step in implementing a new practice, organizational chart or management structure.”
Phrased differently, the journey to a steady future requires pressure from global actors. In many ways, by systematically pursuing sustainability goals, the UN has been able to influence key decision-makers and multinationals to adapt new modes of thinking. The leap towards stability took a step forward with the launch of the United Nations’ Sustainable Development Goals (SDGs) in 2015. The goals would serve as a "blueprint to achieve a better and more sustainable future for all.”
This was perhaps the first globally significant step towards the change that we are seeing today. New initiatives that look at companies as part of the societal and planetary ecosystems have started to address the planet’s most persistent challenges. Instead of accepting the status quo of companies operating in a cycle of profit forecasts and quarterly announcements, the SDGs put forth a forceful plea that companies, individuals and entire societies should exist in a symbiotic relationship with the planet. In other words, one interconnected web that, in order to function, needs the participation of all.
Prompted by the UN's set of objectives, new initiatives that look at companies holistically as part of the societal and planetary ecosystems, have started to address the planet’s most persistent challenges.
Initiatives, such as the Science Based Targets Initiative (SBTi) - a joint initiative by Carbon Disclosure Project (CDP), the UN Global Compact (UNGC), the World Resources Institute (WRI) and WWF - was crafted to encourage a zero-carbon economy and drive sustainable growth through science-based emissions reduction targets.
SBTi has quickly become an operations manual for companies in a variety of industries to set science-based targets. In many ways, SBTi and similar initiatives have convinced companies to understand that their responsibilities are not dissimilar to those of governments. Imagine: Fortune 500 companies competing to be part of a club that is redefining what a successful company looks like. Further signalling the acceleration towards circularity among powerful multinationals, a recent initiative launched by Google, Microsoft and Dell and led by the World Business Council for Sustainable Development (WBCS) and the World Economic Forum aims to create a circular economy for electronics by 2030. This is yet another example of companies creating purpose-driven mechanisms to assert influence over their immediate surroundings, signalling to future generations that profitability is rooted in purpose.
Brendan Edgerton, Director, Circular Economy at WBCSD indicated that in order to succeed, all global actors must play a role. "What we're trying to do is make sure that when one company is going in one direction, another company isn't going in a different direction with the same goal."
In addition to multinationals, new changemakers, such as the Certified B Corporation are tackling inequalities to steer companies towards new modes of thinking by equally evaluating companies’ business models' impact on workers, community, environment, customers and the entire supply chain. We may see initiatives such as Corp B further accelerate the number of companies coveting new business models that couple profits with goals such as diversity and the environment.
Imagine, Fortune 500 companies competing to be part of a club that is redefining what a successful company looks like. These emerging network effects should be seen as an indication of a state of stability. After all, behind all viral ideas is a sense of being left behind, or FOMO (Fear of missing out).
Indeed, the Corp B status and the changing zeitgeist have coincided with the rise of Gen Z, a group unburdened by past sins and for which sustainability is ingrained in the past, present and future.
With a buying power of more than $140 billion a year in the US alone, Gen Z is defining consumer habits and preferences for many decades to come. This generation seeks purpose, whether brands or life choices. It has expectations beyond what is expected, and refuses to accept that profitability is the only yardstick of success that matters. Today’s consumers and tomorrow’s leaders, Gen Z will radically transform the corporate culture of the future.
According to Dr. Adenike Akinsemolu, a Nigerian Environmental sustainability advocate and the founder of The Green Institute, “Gen Z is more civilized and has an excellent ability to discern value and interest faster as they can flip through and analyse content at the speed of light. Therefore every brand must present value, as efficiently and quickly as possible.”
To support this sentiment, a recent study by fintech company Sezzle on consumer attitudes in the US, - which recently attained a B Corp status - showed that for a whopping 81% of Gen Z respondents, it is important to buy from brands that align with consumers’ social values while 80% stated that they would happily pay more for a sustainable product. The consumer behaviour of Gen Z is indicative of the kind of company culture we can expect to see in 2030. The dynamic between a powerful Gen Z and purpose-driven companies is paving the way to a new, steady culture where companies and consumers have a symbiotic relationship. More importantly and with far-reaching implications, Gen Z will be tomorrow’s decision-makers. In many ways, the consumer behaviour of Gen Z is indicative of the kind of company culture we can expect to see in 2030.
Gen Z is already having an impact on a number of industries. According to a recent Gartner study, though only having entered the workforce in recent years, Gen Z is expected to have a massive impact on how we think of supply chains. The Gen Z effect in supply chains is visible in several ways: digitalization of processes will mean that all human low-value activities in the supply chain will be largely automated.
In other words, Gen Z’s impact is seen, not only in sustainability, but also in optimization and improvement of entire industries.
Optimization of processes - bringing value to industries - is consistent with how Gen Z behaves as consumers - by expecting value from brands - and should be seen as a strong indication of how drastic the speed and impact of future workforces will be on a number of industries.
What does a purpose-driven company look like in 2030? For Minna Aila, SVP, Sustainability and Corporate Affairs at Neste, being purpose-driven is a given. Neste, recently ranked as the world’s 4th most sustainable company on the Corporate Knights’ Global 100 list, has long embraced sustainability-thinking with targets that go beyond quarterly balance sheets.
“Not many companies exist that have introduced sustainability targets as long term incentives for their management. We are actually looking at our climate targets when we reward our people.” With the growth of financial power and influence of both the millennials and Gen Z, successful companies will seek economic and social stability over the next decades. Simply put, it’ll be good for business.
Why is the world a better place when your company exists and what would the world miss if it did not exist? However, with the impending climate crisis, the entire corporate world will have to rethink their place in the world. For Aila, we can reach this new reality if companies ask themselves a few simple questions: why is the world a better place when your company exists and what would the world miss if it did not exist?
Though perhaps leading to some level of existential fear, most companies, by asking these simple questions will be better prepared to face the growing demands of new value systems that drive purchasing decisions.
However, as seen in aforementioned examples, the change is a multi-generational effort. From marketing to action. The internal house cleaning, alignment of values and recalibration of priorities are not simply a matter of marketing.
“You must not just have a list of values, you must avoid a gap between those values of talking the talk and walking the walk. If the gap is visible, it immediately decreases the trust,” says Aila.
Indeed, the time for marketing ploys is over. With Gen Z on the rise, new sustainability-driven investment strategies, the emergence of zero emissions reduction plans, multinational awakening to the climate crisis, we are most certainly on the cusp of a new reality. The actions taken by a growing number of companies coupled with pressure from intergovernmental organizations such as the UN, could very well create a network effect currently percolating beneath the surface.
Indeed, the new framework of success will likely expand as we start measuring different entities - government or private - not only based on their ability to generate profits for their shareholders, but also, what their impact on society and the planet will be.