Digital transformation can turn sustainability into your winning business strategy

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It’s past time for businesses to get serious about their sustainability efforts. Governments, shareholders, employees and consumers all want businesses to make environmental concerns integral to their decision-making. In fact, research from IBM’s Institute for Business Value (IBV) finds that 50% of consumers say they’re willing to pay a premium for sustainable brands.

But there’s an evident gap between good intentions and meaningful action: In the same IBV study, fewer than one in three consumers report that sustainable products made up more than half of their last purchase. There’s a gap on the business side too: only 35% of surveyed businesses have acted on their strategies in this area.

But what if digital business transformation could go hand in hand with sustainability transformation? For the new report “Sustainability as a transformative catalyst,” the IBV surveyed 1,958 executives across a variety of manufacturing-oriented industries in 32 countries. As the study found, by integrating their sustainability and digital transformation efforts, a small group of “transformative trailblazers” has emerged.

These firms demonstrate how to narrow the gap between intent and action, outperforming on innovation while achieving better sustainability outcomes and revenue growth. Between 2018 and the first half of 2021, these firms saw an estimated cumulative revenue growth of 51% — a difference of nine percentage points over their next-best-performing peers.

Only 39% of firms are developing more energy-efficient products and services

The increase in government regulation and rise in consumer expectations around sustainability make it clear: organizations today must consider the environmental impact of their activities at every level. And the changes they make must also be factored into pricing.

But trailblazers aside, many are not ready to do this. While half of the firms surveyed have initiatives in place to improve sustainability reporting, less than half indicate that they are willing to change existing business practices at the expense of profits. And only 39% of companies are developing more energy-efficient products and services.

Even so, businesses are aware that solutions are out there, and organizations often state that they have the technological solutions to achieve sustainability. Executives cite mobile, Internet of Things (IoT), cloud technologies and AI as essential to achieving sustainability goals. The issue lies with implementation.

This is where the “transformative trailblazers” come in. By integrating their sustainability and digital transformation efforts, these firms are using sustainability to differentiate themselves in the marketplace and create business value.

Key traits of transformational trailblazers

Transformative trailblazers share several features. First, they understand that sustainability is fundamentally a business transformation play, driving change and innovation. They are therefore significantly more likely to take advantage of emerging technologies such as AI, hybrid cloud and blockchain.

As a result, these firms regard sustainability not as an “add-on” but as a strategy to infuse into the core fabric of the organization. Technology is central to achieving these initiatives, which means the CIO has a central role to play. In fact, at these firms the CIO frequently shares responsibility for the sustainability agenda with the COO, helping the business integrate sustainability and digital transformation operationally as well as in their corporate governance.

Transformational trailblazers also step outside their organizations to collaborate closely with ecosystems and supply chains, working closely with business partners to achieve their sustainability goals together.

One case in point is electric utility multinational Iberdrola. As part of its commitment to achieving carbon neutrality globally by 2050, the company needed to ensure that 70% of its core suppliers will implement effective sustainable development policies and standards by 2022.

Working in partnership with IBM and SAP, Iberdrola successfully implemented buying protocols and catalogs of pre-approved products and services in its procurement processes. As a result, the company can verify that each department makes purchases at a unified price and follows the correct contract conditions.

Meanwhile, for suppliers that don’t meet Iberdrola’s sustainability objectives initially, the scoring tool is used to provide a clear set of actions to improve their business model sustainability.

Listening to employees and customers is key to achieving sustainability success

Engaging with ecosystems and supply chains is crucial to the success of transformational trailblazers, but there is another important component: listening.

The IBV found that businesses that engage employees and customers receive crucial input for shaping their sustainability agenda. Nobody has a monopoly on good ideas, so being open to many opinions can help firms identify the best opportunities for innovative new products and services.

Achieving sustainability isn’t easy. But there is a path forward. Those who understand that sustainability and business transformation go hand in hand are well positioned to become leaders within their industries.

In this radically changed business landscape, IBM is partnering with organizations to deliver five levers of digital advantage that are designed to predict and shape data-driven outcomes, automate at scale for productivity and efficiency, secure all touchpoints all the time, modernize infrastructures and transform with new technology-driven digital business models.

For a deep dive into how you can achieve business and sustainability success, read the IBV’s full report, “Sustainability as a transformative catalyst.”

Learn more about how sustainability can become part of your transformation strategy.

The IBM Institute for Business Value delivers thought leadership and insights to drive business value.