To become a successful sustainable business, more structure is needed for ESG
Just as you outline a business canvas when steering your company in a new direction, a solid architecture is also essential here. Designing an ‘enterprise architecture’ for your ESG strategy is called Green Architecture Design - or GREAN for short. Such an architecture helps ensure you don’t get stuck in reporting and scoring but rather integrate your efforts into the organization itself.
Defining capabilities
Due to the CSRD, we need to focus on sustainability, as recommendations will become mandatory by 2026. According to Professor Florian Hoos of the Swiss Institute for Management Development (IMD), 80% of European organizations have no idea what the CSRD entails. “The changes the EU is demanding remain hard to measure, yet they are profound.”
Moreover, no one seems to ask: How will we accomplish what we aim to do? What are our capabilities in this area? Professor James Thewissen (UCL) previously analyzed current ESG reports. He found that while there is significant investment in Environment and Social, little attention is given to Governance. As a result, sustainability is still too often represented by isolated initiatives. Organizations lack a vision to connect these efforts. Even venture capital funds invest more in Environment and Social, leaving Governance underemphasized.
The model for becoming a sustainable business operates on strategic, tactical, and operational levels. Yet, the tactical phase is too often skipped. In times of crisis, tactical planning is quickly deprioritized. For example, the strategy for social sustainability cannot be directly translated into action points. It requires a cultural shift that takes time. In business terms: top-down strategy meets bottom-up initiatives. These are different building blocks that need to be embedded in governance, legal frameworks, participatory management, and so on.
How do we turn the tide for ESG?
We need to develop a much more holistic perspective. What do we want to achieve in two or three years? What value do we want to create with our ESG initiatives, and what return can we offer investors? It’s a misconception that ESG delivers insufficient returns—we simply don’t measure it effectively. While it requires short-term effort, the long-term vision will yield results. Twenty years ago, harmful CFCs were still used in refrigerators, and diesel cars dominated the market.
If we want to preserve our knowledge economy, Europe must dare to invest in Social and Governance. According to a report by Commission President Ursula Von der Leyen and former ECB President Mario Draghi, Europe has spent too long focusing on industries like automotive and too little on diversification and ESG. Batteries and solar panels are barely produced in Europe. Knowledge is leaking away from the old continent.
A holistic perspective
To remain resilient, we must make environmental efforts. But if we want to advance Environmental and Social Sustainability and connect the foundation of an organization with its leadership, Governance must also be included in the strategic exercise.
The concept of People, Planet, and Profit has existed for 20 years. Align it with your organization—not just with your latest quarterly figures. The goal is to build organizations where even our grandchildren will want to work. Ecology and inclusion are far more ingrained in their generation than in previous ones. Such a generational shift requires a holistic perspective and both short- and long-term plans.
