Most large corporations have already declared net-zero CO2 emission targets with varying ambition levels. Yet even if these targets will be met, which recent studies have cast into doubt, it might not be enough to avoid some of the worst impacts of climate change on our planet. That is since, in addition to cutting all emissions to net zero, we will also need to manage and remove significant amounts of past emissions from the atmosphere.
It is also important to note that sustainability is more than CO2 emissions alone. We have to tackle many more fronts besides the immediate threat of global warming if we are to leave a replenishing global ecology to the next generation. For example, managing plastic waste, reducing the impact on habitats by managing resource extraction, and preventing instability caused by poverty and inequality are all increasingly seen as fundamental to sustainable global development.
Therefore, companies will need to move beyond net-zero, called the “Triple Bottom Line .” This effectively amounts to “Doing Less Bad” or “No Harm .” And instead, work towards “Triple Top Line” as a path towards a better future — this means actively “Doing Good .” In other words, the challenge for the industry will be to think like impact entrepreneurs who do not only aim to build a profitable business but to actively address a systemic ecological and social problem in doing so. Corporate citizens have to become net positive contributors to the planet and society.
Photo by Appolinary Kalashnikova on Unsplash
Corporate Sustainability Ventures
As in Digital Transformation over the last decade, the core of organizations today is understandably occupied with their goal of net-zero emissions as an initial step. However, from getting the needed data (which is hard enough) to managing the sustainability transformation at the core of the whole supply chain, corporations have a challenging task ahead of them as their shareholders are not interested in sustainability and profit trade-offs but rather working towards both at the same time.
Meanwhile, as mentioned by McKinsey and Company, an additional layer of complexity is that most of these problems cannot be solved by one company alone and require collective approaches. However, the good news is that many of the largest companies are actively solving these issues.
Yet there is one thing that most of them are having a hard time modifying — which is the business model itself.
A sustainability manager at a Chemicals company will look at all current Scope 1, 2, and 3 emissions, quantify them, and make plans to reduce them, but only in the business of selling Chemicals. Today, their mandate does not include coming up with new business models that could work radically differently and have a Triple Top Line profile. But, of course, this is pretty much nobody’s mandate in today’s organizations. And yet, in a world affected by VUCA (Volatility, uncertainty, complexity, and ambiguity), reviewing one’s core business and investing in the business of the future will be needed to ensure the survival of the whole organization.
We argue that these bold explorations are best done in the form of new risk-aligned investable ventures, with teams that can run independent of the core business and the existing needs, pressures, and cost structures. New venture organizations, when governed well, can successfully master the balancing act of leveraging core assets to build a new vision for what a business could be while dealing effectively with the corporate antibodies that will come to attack it. As mentioned by McKinsey and Company, doing so right will require clearing the decks, setting up the right environment, revolutionizing the partnership and investment approach, or making smaller, educated investments (as opposed to bets).
What could that potentially look like?
Chemicals: A new venture might explore a circular economy business model, in which a client only pays for the amount of material in circulation at any point in time. The incentives would radically shift to reclaiming and repurposing the material in circulation as often as possible while drastically increasing the margins of the business as critical processes required can be moved to the customer’s facilities and everything in circulation is provided as a service, rather than traditional material sales — including performance guarantees of the material for the purpose it serves.
Whitegoods: A new venture could offer bulky, high-CapEx white goods, such as air conditioners, washing machines, or refrigerators, as a service rather than for direct purchase. The service stack would include remote condition monitoring, predictive and preventive servicing, and the ability to up or down-grade as required. The industrial design of units would shift to a modular stack, which allows for straightforward repairs to extend the lifetime and easy reuse of individual parts at the end of a machine’s lifecycle into the following lifecycle.
Agriculture: A new venture might explore the option for consumers to buy into a harvest before it happens fractionally, distributing risk globally and decentralizing the risk finance for smallholder farmers. In return, they can directly (D2C) receive the fresh produce the harvest has yielded, increasing earnings for farmers, or trade on the proceeds of their investment.
There are many ways in which the current systems could be reinvented, with a view on sustainability and impact. Triple Top Line organizations decouple economic growth from resource usage and consumption to find new paradigms that can be sustained through replenishing cycles common in the natural world. However, it is clear that transforming the current core right away into any of these directions is very risky and a move only few can afford.
Therefore, a corporate venture approach can introduce much-needed optionality and the ability to explore many potential futures with small, incremental bets while not betting the house.
Interested to learn more about sustainability ventures? Drop us a line: contact@wright.partners