SUSTAINABILITY AND

STRATEGIC AUDIT
 CORPORATE
SUSTAINABILITY
TRENDS
 For 2023, IMD expe s have identi ed a series of sustainability
trends that will drive fu her business transformation to create
value, manage risks, and recon gure industries and entire
systems to ensure we respect our planeta boundaries and
create a more inclusive and resilient economy.

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 “ Not harmful” is not enough
• While there is a lot of net-zero targets (which is dif ferent to
zero) the more leading-edge brands are moving from doing no
harm to actively doing good. T hey recognize just reducing the
impact they have and going forward isn’t enough, ideally, they
need to adopt approaches that reverse the harm done in the
past – from not bad to net good to now regenerate.
• IKEA is one brand moving in this direction – its ambitions for
2030 include “ Become circular and climate positive, and
regenerate resources while growing the IKEA business. Create a
positive social impact for eve one across the IKEA value chain”
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 Two brand purposes
• In recent years brands have rapidly moved from a brand vision
to a brand purpose. What we are seeing now is an increasing
number of brands that have not one, but two purposes – an
overall brand purpose and a brand sustainability purpose.
• T here are also dif ferent layers to sustainability aims, often at
both a corporate and a brand.
• P&G and its por tfolio of brands is just one organization where
this is happening.

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 From E to ESG
• Sustainability is more than the environment for brands; A
broader three-pronged de nition has been increasingly adopted.
• T he scope of what is def ined as sustainability has broadened
from E to ESG. Sustainability is no longer limited to the
environment but now includes Social and Governance as well.
Social includes eve thing from health and wellness for employees
to fair sourcing, while Governance covers issues like anti-
competitive behavior to tax or rather tax avoidance.

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 From E to ESG
• Mars now embraces and is acting on this wider de nition

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 Talking the talk, whilst walking the
walk
• Brands have learnt about the danger of green-washing, but as
they are increasingly getting their houses in order, they have
realized that they need to f ind new and true-to-their-brand
ways of talking about what they are doing.
• Unilever allows its brands to develop their own initiatives and
talk about them in that brand’s unique tone of voice. Sur fand
the Cleaner Planet Plan
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 e best brands are built from within
• Increasing brands are recognizing the impor tance of having a
coherent sustainability strategy, not just for customers, but for
employees too. It plays an impor tant role in retention and, even
more impo antly, recruitment.
• In this era of the Great Resignation, sustainability is an impo ant
draw for socially-conscious candidates. Many people have
reviewed what they are doing with their lives, and if moving to a
new job, want one at a company that is ‘doing more good than
harm’
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 e best brands are built from within
• GSK is just one of many companies that have moved to shout
about their commitment knowing their impor ta nce in
recruitment and retention.
• If these considerations aren’t on your radar for your brand,
they need to be. As someone wise said, “doing nothing is not
an option.”

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 HOW BUSINESS AND NATURE CAN WORK TOGETHER TO ACHIEVE
SUSTAINABLE DEVELOPMENT

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 Histo
• Several decades of experience and research by pioneering
companies and organizations such as the World Business
Council for Sustainable Development, the World Economic
Forum, the International Finance Corporation, the United
Nations (UN) Global Compact, the former International
Business Leaders Forum, Business for Social Responsibility,
the International Chamber of Commerce, the UN
Development Programme and others have shed light on the
nature of the fundamental role that business plays in
sustainable development.
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 e core contribution of business to
development
• Business investment, operations, and value chains create
jobs, generate
technology incomes,
transfer, build
build human
physical capital,
and suppo
institutional
infrastructure,
customers and of f
e r products and ser v
i ces
’ needs and aspirations, as evidenced by their
that meet
willingness
information to
and pay—including
communications food, water,
technology, sanitation,
healthcare,
energy, education, and more.
•multiplier
Each of these
ef f
e contributions,
cts. For instance,in turn,
suppor has
t
i ng development
technology
transfer
the may
receiving improve
end, the
allowing productivity
them to winand
new quality of
customers, f i
r ms on
grow
their businesses, and create new jobs
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 • . Improved sanitation may reduce the incidence of disease,
saving people money they might otherwise have had to spend
on drugs and doctors’ fees, and reducing the time they need to
take o work—enhancing their disposable incomes and nancial
security, opening the door to greater investment in nutritious
food or quality education for their children, who may be able to
obtain more highly skilled jobs or open businesses of their own
in the future.
• T he comparative advantage of business in development is
that—when the core business investments, operations, and value
chains that trigger them are pro table— these contributions and
multiplier ef fects are f inancially sustainable, and potentially
scalable.
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 e case for enhancing business’
contribution to development
• Unfor tunately, companies’ development multipliers often fail
to reach the scale or leverage they might be capable of, due to
a combination of market failures, governance gaps, and other
bottlenecks.
• And they can also be counteracted by negative impacts of
private investment such as human rights abuses, environmental
degradation, worker health and safety risks, tax avoidance or
investment contracts that unfairly disadvantage host countries
and communities.
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 • ere is a strong rationale for companies to act decisively to
minimize their negative development impacts and maximize
the positive ones.
• e bene ts include value protection and value creation,
managing costs and risks and capturing oppo unities.
• According to the World Business Council for Sustainable
Development, speci c drivers include:
• Obtaining or maintaining license to operate,
• Improving the business enabling environment,
• Strengthening operations and value chains, and
• Fueling product and se ice innovation.
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 Mechanisms for enhancing business’
contribution to development

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 1.o FirstCore business
and foremost, business investment, operations, and value
chains are the most powe ul levers at a company’s disposal to
drive sustainable development because—when they are
responsible and pro table—they are nancially self-sustaining,
with the potential to generate impact on an ongoing basis, at
scale.
o Companies’ investments, operations, and value chains a ect
sustainable development whether they are intended to or not.
e rst step is to understand a company’s impacts, both positive
and negative. en steps can be taken rst and foremost to
minimize the negative, and then to maximize the positive. is
means that adherence to environmental, social, and human rights
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good corporate
title citizenship is a 18
 1.o Beyond
Corethisbusiness
commitment to responsible business practices,
there is untapped potential for companies to create shared value
and build more inclusive and sustainable value chains through
innovation in technologies, products, ser vices and business
models.

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 2.o SocialSocial investment
investment includes contributions of money, employee
time, and products or se ices in-kind that are not expected to
generate commercial oppo unities or nancial returns—at least
not directly or in the sho term.
o Many people consider core business and social investment
distinct and even mutually exclusive alternatives. But in practice,
we often see these two levers used in combination.
o For example, social investment can be used to fund new
business activities that are experimental or that have lower
returns or longer payback periods than traditional commercial
investment criteria typically require.
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 2.o SocialSocial investment
investment can also be used to fund activities that
strengthen the operating environment for a company’s core
business.
o For example, funding education or healthcare for farming
families may make agricultural supply chains more stable, and
funding small business suppo in the vicinity of a mine may
reduce economic dependence and demands on the company.
o In addition, social investment can be used to fund data
collection, research and analysis on the links between business
and development, which in turn can provide evidence to suppo
investment in new business models and enabling policy reforms.
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 3. Public advocacy and policy
dialogue
o Finally, companies can contribute to sustainable development
through public advocacy and policy dialogue that inf luences
awareness and attitudes on impo ant issues, changes consumer
behavior, bridges governance gaps, improves the policy and
regulator yenvironment, and suppor ts more systemic change at
the local, national, or global levels.
o T his lever, too, is often used in combination with—and to
enhance the impact of—core business and social investment
activities. Care must be taken that public advocacy and policy
dialogue are consistent with, and not undermined by, a
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company ’s more traditional lobbying positions and activities.
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 HOW SUSTAINABILITY TRENDS CAN CONTRIBUTE SIGNIFICANTLY TO
THE ECONOMY

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 We’re constantly being told that we have to do our par tto make this
world a cleaner, greener, more sustainable environment – so
businesses can grow, thrive, f lo urish, and last. But how does
sustainability actually ef fect the economy? What impact does it have
when we are given new targets and goals to aim for, or restrictions on
what can or can’t be done?
T here has recently been discussion over the CO2 targets, and how
farmers may be at risk because their herds of cattle would put them
over the targeted amounts, and therefore have to be reduced – which
would have the knock-on ef fect of reducing the availability of meat
and dair yproducts, as well as secondar yproducts that come from the
by-products and processes.

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 Businesses are having to innovate and make material changes to both
their processes and their practices, in order to remain viable as these
restrictions take place.
Sustainability does have both f iscal and economic benef its, and the
changes being implemented now are designed to ensure long-term
and suppo able growth.

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 What Fiscal and Economic Bene ts
Does Sustainability Have?
o New ways of approaching business, and more cost-e ective practices can
lead to increased economic activities, and the lowered costs and savings
can be used to develop new areas of business (stimulating growth) or to
enrich the workforce (which has the ef fect of increasing local indust
and economic development).
o Unease over rises in energy and water costs, maintenance and operation
costs, and taxes can cause uncer tainty in the markets, and lead to issues,
but as consumer conf idence in the businesses settles and levels, these
areas of impact can be overcome.
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 What Fiscal and Economic Bene ts
Does Sustainability Have?
o When sustainable development is used to help industries grow and adapt
to new challenges, it can provide protection for natural resources and
increased availability of materials – which spur additional savings,
revenue growth, and fu her economic development.
o From a consumer perspective, sustainable innovations are of fering a
wider range of products, options, and an interest in increased spending.

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 What Fiscal and Economic Bene ts
Does Sustainability Have?
o ere has been signi cant growth in the interest consumers are aiming at
sustainable businesses, and the consumer consciousness is largely
positively focused on those that are making sustainable changes.
o Customers are generally more willing and happier to pay increased costs
for goods and se ices which have been sustainably or ethically created –
and as businesses innovate to lower wastage, reduce single use materials,
and improve their products, consumer engagement has continued to
grow and drive more sizeable marketing oppo unities.
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 What Should Economic
Sustainability Be Aiming For?
T he term ‘economic sustainability’ essentially refers to the practice of
innovating, developing, and suppor ting long-term economic growth in a
way that doesn ’ t negatively impact the community in a way that is
environmental, cultural, or social.
Some of the most impactful economic sustainability approaches have
focused on:
o Reducing land usage
o Making supply chains more ef ficient with less resources required to
operate or maintain them
o Reducing harmful emissions and pollutants in eve stage of the business
o Balance economic growth and oppor tunities with less environmental
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 What Should Economic
Sustainability Be Aiming For?
Economic sustainability is suppor ted by economic viability, environmental
protection, and social equity.
T here is still a long way to go in order to make it truly universal, and for
businesses to be sustainable as standard – but organizations such as the
UN with their Sustainable Development Goals (SDGs) and UNFCCC’s Paris
Agreement, are bringing quantif iable and measurable standards into the
mainstream, with the idea of increasing legislation and governmental
engagement.
Businesses of all shapes and sizes are f inding that it’s in their best interest
to be more sustainable and rethink the way they handle ever ything from
production through to after se ice.
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 What Should Economic
Sustainability Be Aiming For?
T hese changes aren’t going to happen overnight, and it will take a lot of
time, money, dedication, and discussion to truly reach a sustainable
situation that suppo s both businesses and consumers and doesn’t destroy
industries who can’t keep pace with those at the front.
But just because it’s hard, doesn’t mean that it should be set aside. T he
more focus is given to sustainable innovation and working with the
economy, the easier it will become for companies to change their business
practices and thrive in a world that wants to see ever yone doing their best,
and suppo ing each other.
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 HOW TO APPLY SUSTAINABILITY TRENDS SO THAT SUSTAINABLE
DEVELOPMENT

CAN BE TRULY ACHIEVED

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 Net zero: e race moves forward
o T he global focus on achieving net-zero emissions—the point which
human-caused greenhouse gas emissions are balanced by an
equivalent amount removed from the atmosphere—has intensif ied
in recent years.
o Many countries have committed to reaching net zero by 2050,
aligning with the Paris Agreement’s goal to limit global warming to
well below 2 degrees Celsius. And businesses across various
sectors are setting rigorous sustainability goals, investing in
renewable energy sources and developing innovative solutions to
reduce their carbon footprint.
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 Net zero: e race moves forward
o T he global focus on achieving net-zero emissions—the point which
human-caused greenhouse gas emissions are balanced by an
equivalent amount removed from the atmosphere—has intensif ied
in recent years.
o Many countries have committed to reaching net zero by 2050,
aligning with the Paris Agreement’s goal to limit global warming to
well below 2 degrees Celsius. And businesses across various
sectors are setting rigorous sustainability goals, investing in
renewable energy sources and developing innovative solutions to
reduce their carbon footprint.
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In pursuit of net zero, organizations will focus their sustainability
e o s on two paths in 2024:
o Clean energy: T he transition from fossil fuels to renewable energy
sources is central to sustainability strategies and net zero initiatives,
and was a central issue last year at the United Nations’ COP28
climate summit. As par tof their energy transition plans, many
countries are increasing their use of clean energy—that is, power
generated from recyclable and regenerating sources, such as solar,
wind, geothermal and more—to reduce their carbon footprint.
Companies are investing in renewable energy projects and
implementing energy-ef ficient technologies and practices. T hese
ef for ts often go hand in hand with broader corporate sustainability
initiatives and can lead to signif icant cost savings and improved
environmental pe ormance.
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o Sustainable supply chains: Driven by increasing consumer demand
for sustainable products and heightened awareness of the
environmental impact of producing and shipping goods, more
businesses are looking to make their supply chain operations more
sustainable. is may include using more eco-friendly packaging or
production materials and reducing waste, as well as human-
centered ef for ts such as ensuring fair labor practices and safe work
environments. T he se changes often require rethinking
organizational practices and developing new par tn erships.
Businesses are increasingly aware that their impact goes beyond
their own operations; as a result, they’re taking steps to address
Scope 3 carbon emissions, or those emitted by other operators in
their value chain.
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 Sustainability repo ing:
Accountability on the record
o T his may be the biggest year yet in sustainability repor ting. T he
European Union’s Corporate Sustainability Repor ting Directive
(CSRD), which requires companies in Europe and beyond to make
annual repor ts on the environmental and social impact of their
business activities, came into e ect in Janua . In addition to CSRD,
California has new mandator yrepor ting rules coming into play in
2024, while countries around the world are on the verge of
implementing their own non-f in ancial disclosure and
documentation requirements.
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 Sustainability repo ing:
Accountability on the record
o Investors, regulators and stakeholders are increasingly demanding
that companies disclose their exposure to climate-related risks ,
such as dependence on fossil fuels or vulnerability to weather
events. T hrough both mandator yrepor ting and volunta
disclosures, companies can identify and manage climate-related
risks, and provide valuable information to investors and other
stakeholders for greater transparency.

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 Sustainability repo ing:
Accountability on the record
o Repor ti ng is also becoming critical to corporate social
responsibility initiatives. As more companies set broad
environmental, social and governance (ESG) goals, f inding a way to
track and accurately document progress is increasingly impor tant.
T he transparency provided by regular and thorough repor ting is
one way to help avoid greenwashing, or misleading claims about
sustainability and environmental impact. With regulated
documentation, consumers, governments and other stakeholders
can make better decisions based on trustwo hy information.
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 Sustainability repo ing:
Accountability on the record
o But compliance with the broad array of mandator yrepor ting rules
around the globe can be confusing and complicated. One sur vey
found that 81% of companies were creating new roles and
responsibilities to accommodate the growing number of disclosure
requirements, while 99% of companies said they were somewhat or
ver ylikely to invest in more technologies and tools related to ESG
repor ting. For example, some are turning to software solutions that
can more easily capture, manage and repo ESG data.
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 Circular economy: When waste is a
resource
o Waste not, want not: the circular economy model, which aims to
minimize unnecessar ywaste and make the most of resources, is
booming. Instead of seeing things as disposable, it encourages the
reuse and recycling of products. Research expects that
transitioning to a circular economy could generate USD 4.5 trillion
in economic bene ts by 2030.

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 Circular economy: When waste is a
resource
o Businesses play a crucial role in promoting the circular economy
by redesigning products to be more durable, reusable or recyclable,
cutting down resource consumption and reducing waste
throughout the product life cycle. Retailers, par ticularly in the
fashion industr y, are increasingly embracing circular business
models: rental and resale programs of fer oppor tunities for growth,
while repair ser vices of fer an alternative to landf ill disposal. Other
businesses are getting involved by providing avenues for
extending product life or plans for recycling or refurbishment.
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 Biodiversity: Embracing nature-
positive
o Biodiversity loss, one of the impacts of climate change and ecosystem
disruption, poses a signif icant threat to Ear th ’ s future. T he World
Economic Forum’s Global Risks Repor tranks biodiversity loss among the
top f ive threats to humanity in the next decade, with over half of the
world’s GDP being moderately or highly dependent on nature.
o E o s to prese e biodiversity and natural resources gained momentum in
December 2022, when countries signed a global biodiversity framework at
the United Nations’ COP15 summit. Governments, businesses, and non-
prof it organizations globally are implementing initiatives such as
establishing protected areas, restoring degraded ecosystems and
promoting sustainable agriculture and forest practices.
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 Biodiversity: Embracing nature-
positive
o T hey re also turning to a new perspective: nature positive. Similar to
’ “ ”
“carbon neutral” in the context of emissions, nature positive refers to
stopping, avoiding and reversing environmental destruction. T his can be
quantif ied by measuring metrics like tree cover, habitat integrity and
number of species, and is guided by sustainable development principles.
T he goal is for there to be more nature by 2030 than there is
today—which means taking actionable steps in 2024.

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 Sustainable technology: New ways
to do more
o With a boom in ar tif icial intelligence (AI), machine learning (ML) and a
host of other advanced technologies, 2024 is poised to be the year for
tech-driven sustainability. As companies consider their climate impact in
the coming year, several tools and capabilities can help guide key
sustainability goals:
1. Ar tif icial intelligence: AI can help optimize energy consumption, reduce
emissions and suppor tdecision-making processes in sustainability
strategy development. Some organizations are leveraging AI’s capabilities
to pursue their own sustainability—for example, to provide more accurate
climate predictions, optimize energy use in buildings or identify areas of
waste or ine ciency in the supply chain.
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 Sustainable technology: New ways
to do more
2. Industr y4.0: Manufacturers are integrating new technologies, including
Internet of T hings (IoT), cloud computing and AI and machine learning, into
their production facilities and throughout their operations. T he sma
factories that make up Industr y4.0 have capabilities that lead to increased
automation, predictive maintenance, self-optimization of process
improvements and e ciencies that reduce both emissions and overall costs.

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 Sustainable technology: New ways
to do more
3. Software solutions: As mentioned, software solutions can help companies
navigate the increasingly complex web of mandator yESG repor ting
requirements. T he IBM Envizi ESG Suite, for example, can collect hundreds
of data types ef ficiently, analyze data across silos and deliver audit-ready
repor ts easily—a process that would otherwise be labor and cost intensive.
Environment, health and safety (EHS) software can streamline data
collection and incident repor ting, track safety inspections and cer tif ications,
and guide risk assessment and mitigation, while environmental intelligence
software can monitor weather for potential disruptions and inform decision-
making.

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thank you