SX

Sustainability management is achieved through business transformation. That is why all-around materialities disconnected from the business will degrade the quality of management.

The first step towards value-generating management for companies is to rediscover their purpose in society, redesign their business portfolio around social transformations in line with that purpose, and transform their business models. Companies must then enhance their capabilities and drive business transformation. The key is to put in place organizations, personnel, and intellectual property portfolios that contribute to the business strategy.

It is important that these approaches are produced as a complete value-generation management story, rather than as discrete actions. Companies must convince stakeholders of their story, get their buy-in, and work to increase value.

Introducing new management controls alone cannot improve corporate value. New management controls will create “changes” by highlighting new issues, measures, outcomes to those measures, and the resulting updates to future scenarios. Companies must communicate this information properly to all stakeholders.

Companies must avoid communicating in all-around and qualitative terms.  They can gain buy-in from stakeholders by providing reasons that include quantitative data, ensuring unity and coherence between financials and non-financials, and creating growth expectations by showing the feasibility of what the company is doing.

This means focusing on deepening and driving an array of initiatives such as developing GX, the circular economy, human and intellectual capital, and creating new businesses from social issues. It also involves understanding the outcomes of these initiatives and disclosing their impact on future finances and capital profitability. This is the best path forward for sharing with stakeholders and understanding the mechanisms that drive corporate value.