Sustainability is no longer a buzzword; it's a business imperative. As sustainability becomes increasingly integrated into corporate strategy, the need for a well-organized sustainability function within companies is more crucial than ever. This article aims to guide beginner sustainability managers on how to set up and lead a sustainability organization effectively within their companies. We draw insights from McKinsey's article "Organizing for sustainability success: Where, and how, leaders can start" to provide a comprehensive guide.
Why Organize for Sustainability?
Traditionally, sustainability was often relegated to corporate social responsibility (CSR) departments, focusing mainly on investor relations and public relations. However, the landscape has changed. Sustainability now involves significant business risks and opportunities, and it needs to be treated as a material business issue. Companies that still operate with the old mindset are likely to miss out on maximizing the value from their sustainability initiatives.
Key Strategies for Leaders
According to McKinsey, leaders can be most effective in driving sustainability when they:
1. Embed Sustainability in Corporate Strategy: Make sustainability a core component of your company's overall strategy.
2. Shape the Portfolio: Allocate capital and resources based on the company's sustainability-related priorities.
3. Scale Up Sustainable Practices: Approach sustainability as a large-scale change effort and be clear about which topics the company will prioritize.
Four Ways to Organize for Sustainability Success
1. Design According to Sustainability Topics
Instead of having a one-size-fits-all sustainability department, consider a modular organizational design that focuses on specific sustainability topics that are crucial for your company. This approach allows for agility and specialization.
2. Empower Your Central Team
A central sustainability team should have the decision-making authority to execute change, especially on priority topics that affect multiple functions. This team should also engage with the board of directors and be empowered to hold other departments accountable.
3. Choose the Right Structure
There is no one-size-fits-all structure for a sustainability organization. However, McKinsey outlines three models that have proven effective:
- Large Central Team: A large central team plans and maintains decision rights to most sustainability initiatives.
- Lean Central Team: A smaller central team sets the company-wide agenda, while business units develop specific initiatives.
- Agile or SWAT Teams: A central team deploys task forces to individual business units to help with planning and initial execution.
4. Prioritize Processes and Governance
Instead of focusing solely on reporting structures, prioritize designing robust processes and governance mechanisms. This includes decision-making processes, capital allocation for sustainability investments, and performance metrics specific to sustainability.
Questions to Consider
1. Have you assessed your company’s materiality data points with sustainability requirements?
2. Do you have the right data solutions and partners to start collecting the required sustainability data?
3. Are you ready to meet the reporting requirements of any sustainability regulations that apply to your industry?
Organizing for sustainability success is not a one-off task but an ongoing effort that requires strategic thinking, robust processes, and effective governance. By taking a structured approach to organizing your sustainability efforts, you can better position your company to capture value and manage risks in a systematic and transformational way.
- [McKinsey's Organizing for Sustainability Success](https://www.mckinsey.com/business-functions/organization/our-insights/organizing-for-sustainability-success-where-and-how-leaders-can-start)