July 31, 2012
Authors
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Managing Director of BSR Innovation Group, BSR
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Mark Little
Former Director, Healthcare, Advisory Services, BSR
Surveying the tumult of global business and the consternation of society, it is tempting to stand astride the corporate ramparts and declare, "The corporation is dead … long live the corporation!" Old models of doing business are being deposed while new models are ascendant. Powerful trends are converging to create profound implications for sustainability and corporate strategies. These forces include market dynamics, such as accelerating innovation cycles, disruptive technologies, emerging markets, value chain complexity, and regulatory and voluntary standards; sustainability dynamics, such as climate change, demographic shifts, and resource constraints; and stakeholder dynamics, such as the growing engagement of consumers, NGOs, and regulators. At the nexus of these trends, integrated corporate strategies address both sustainability challenges and rapidly changing market conditions to generate business value. Based on BSR's 20 years of developing such integrated strategies for dozens of companies and in collaboration with a panoply of stakeholders, we have created the "Four Cs" to help companies build integrated strategies by looking at customers, competitors, the corporation, and civil society and government.
Looking Outward for Insight
The Four Cs mark a major transition in the role and nature of corporate sustainability. For years, the companies that focused on sustainability were primarily small and culturally "green," like Ben & Jerry's or Tom's of Maine. Next, larger companies began to look at sustainability to identify opportunities like energy savings or to manage reputational risk. In the past decade, leaders have looked to use sustainability to turn a profit through approaches that are now popularly called "shared value." Yet the fundamental problems persist with unsustainable, cloistered, liability-driven business models focused on short-term quarterly financials. The Four Cs use sustainability to help companies open up and reach out to create more attuned, adaptive, and integrated strategies. Integrated strategies inspire companies to broaden their vision, assimilate external perspectives, and plan for intergenerational time frames—well beyond the typical three- to five-year window for strategic planning. (Unilever's Sustainable Living Plan does this effectively by creating a 10-year plan for "sustainable growth" that applies across the entire value chain.) In practice, looking outward can mean companies pursue efforts such as open innovation, supply chain capacity-building, customer outreach, transparency, and stakeholder conversations. The Four Cs also help companies identify where they can have most unique and powerful sustainability impacts, and how they can embed those efforts into their business models.
The Four Cs
BSR's Four Cs integrate sustainability into the traditional "Three Cs" of corporate strategy—customers, competitors, and corporation—and amplify this approach by additionally looking at the burgeoning influence of civil society and government. While the Three Cs form the bedrock of corporate strategy, they need to be shored up amid tectonic shifts in sustainability and business dynamics. To account for these shifts, the Four Cs approach explicitly connects sustainability and the business in mutually empowering cycles that use sustainability to inform the core business—and use the core business to inform sustainability. It is not simply a matter of looking at how the business can apply itself to sustainability issues or make money and do good with a "green" product. Nor is it about developing sustainability strategies that are merely aimed at mitigating negative consequences of a less sustainable business model. Instead, a company can unlock value through a rigorous interrogation of the business to identify compelling opportunities that support commercial objectives, reduce harm, and work toward net-positive financial and societal impact. The results create tangible benefits truly commensurate with the power and scale of a company's operations through enhanced product development, go-to-market strategies, user experiences, operational efficiency, and supply chain relationships.
Customers
The traditional Three Cs call on companies to assess customer segments to shape business strategy. Yet companies reach incomplete conclusions when assessing customers solely based on what they buy and what they are willing to pay. BSR suggests that companies use sustainability to look at a broader view of customer engagement, expectations, preferences, and segments:
- What conduct do customers expect of the company?
- How can the company's products/services meet customers' sustainability needs (realized or not)?
- How can the company use a sustainability mindset to spur innovation and reach customers in emerging markets?
- What sustainability characteristics do customers expect of the company's products/services, such as longevity, recyclability, energy efficiency, safety from toxicity, and privacy?
- In what ways are customers willing to be part of the solution in enabling sustainability outcomes (e.g. product take-back and more efficient product use)?
Competitors
The traditional framework suggests that companies assess competitors and differentiate themselves based on corporate image as well as operational characteristics such as cost structures. Looking at competitors through a sustainability lens allows companies to see new opportunities:
- How can sustainability create differentiation and competitive advantage?
- How have competitors' actions (internal and market-facing) on sustainability created value, differentiated, and improved their position?
- How are competitors demonstrating the authenticity of their sustainability commitments?
Corporation
Traditionally, companies use this "C" to assess their strengths and gaps in key functions. With a singular focus on how they are making money, companies can miss both opportunities and red flags—such as the risks of being too dependent on fossil fuels, water, commodities, and emerging market distributors/intermediaries. Companies can use the sustainability perspective to honestly evaluate where they are now and plan the leap to tomorrow in a more holistic, forward-looking way:
- How can the company use its core strengths or develop innovative products and services to address global challenges?
- How do sustainability challenges and opportunities affect the company's go-to-market strategy?
- How can a focus on sustainability streamline operations, mitigate risk, and generate net-positive impact?
- How does sustainability affect the company's incentive structure?
- How does sustainability help the company align with investors' interests?
Civil Society and Government
BSR's last "C" isn't accounted for in the traditional framework, but civil society and government are increasingly influential on business. Consider civil society campaigns on raw material sourcing, supply chain labor practices, sales and marketing tactics, and environmental impacts. Government and regulatory pressures such as the imminent U.S. Securities and Exchange Commission's ruling on conflict minerals, the California Transparency in Supply Chains Act, and France's new sustainability reporting requirements are also exerting pressure. The fourth "C" captures the enormous impacts of stakeholder pressures and enhances companies' understanding of the related risks and opportunities:
- How can the company proactively learn from civil society and partner on innovative solutions?
- What do civil society and government stakeholders expect of the company?
- How do sustainability challenges affect the company's role in society and its responsibilities to people, surrounding communities, and the environment?
- How can the company get ahead of policy/regulation?
- How can companies work together to go beyond compliance minimums to demonstrate excellence while maintaining competitiveness?
The New Corporate Leadership
While many companies have addressed components of the Four Cs, there is still a powerful opportunity for leadership companies to take a more holistic approach to creating net-positive value though integrated sustainability and corporate strategies. The great challenges and opportunities of global business—emerging markets, supply chains, talent wars, resource constraints, breakthrough innovation—all benefit from integrating a sustainability mindset. The Four Cs help companies strengthen, innovate, and differentiate themselves by building integrated strategies that look outward for insight and apply sustainability lessons back to the business. In the current business environment, some ways of doing business will be deposed while others will ascend. With an integrated strategy, companies can position themselves for long-term success.
Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.