Viewing sustainability as a win-win business opportunity
Professor of Strategic Management
The BP Chaired Professor of European Competitiveness
Karel Cool, co-director of the new INSEAD Business Sustainability Programme shares his belief that executives need to view sustainability as a win-win business opportunity – creating competitive advantage while doing good by society. With a personal passion for the field of research, and many years of experience in developing strategies and frameworks for companies transforming their business models, Professor Cool is enthusiastic to continue educating executives on this crucial subject matter.
The INSEAD Business Sustainability Programme recently launched, for which you are Co-director. Why is it so important for executives to learn about sustainability today?
Virtually 100% of the executives we work with or talk to are faced with ‘sustainability issues’. The confluence of new government regulations to address climate change and societal resource constraints, and the demands of many stakeholders (investors, NGOs, and employees) force companies to take note and to think how they need to deal with these urgent demands. Farsighted managers and companies see two opportunities. The first is to make a difference for society at a critical moment in time. The second is the business opportunity: if they can provide solutions for such pressing needs, there will be an important opportunity for their company – and their investors and employees!
As Professor of Strategic Management and with much of your research concentrated on competitive strategy, does this allow you to teach executives how to find competitive advantage within the sustainability paradigm?
There is good strategy and bad strategy - and good sustainability strategy and bad sustainability strategy. Executives will only be able to make a ‘sustainability difference’ if they know how to prioritise the key sustainability projects among the many they can pursue. This requires a reflection on the key strategic issues at the industry level, the sustainability needs their company is particularly well-equipped to address, and the implementation of these initiatives. This is a strategic analysis. Companies that succeed at fully integrating sustainability thinking into their strategic decision-making can develop a competitive advantage in this area and will have the best chance of excelling at meeting the sustainability demands of society – and investors.
Such a complex subject must be tricky to teach. What is your experience in educating businesses on sustainability?
I have been fortunate to work in this area for several years, among others helping the previous DONG Energy (Danish Oil and Natural Gas) turn into Ørsted, the Danish global leader in offshore wind power. There are no ‘off the shelf’ frameworks and tools to analyse and discuss sustainability opportunities from a strategic point of view, and I have had to develop new models to frame sustainability analysis. Over the past two years, I have used them with many audiences and applied them in several business settings. Executives are very eager to get models and tools to get to work on sustainability. My interactions with them and the applications have helped me refine the frameworks and sharpen the strategic sustainability analyses.
Personally, I find this a particularly important and rewarding area of research and practice. Not only is the issue close to my heart, it is also fantastic to see the enthusiasm that executives have for the sustainability issues and the thirst for frameworks and tools to get to this important work.
There is obviously much to consider when it comes to the subject. Are there frameworks and tools that can be used to help businesses during the decision-making process?
Sustainability demands often translate into higher costs for corporations. I often hear the complaint: “my product is sustainable, but the customer does not care” (read: is not willing to pay more than for the alternative). The strategic frameworks that I discuss help companies choose which sustainability needs they are best equipped to address (competitive advantage) and how they can be rewarded for their initiatives and product / service launches. It is important to consider whether a new business model is needed also.
During the INSEAD Business Sustainability Programme, my colleague Atalay Atasu addresses sustainability from an operation/technology point of view. The integration of the strategic and operation perspectives helps executives take informed sustainability decisions and actions.
Are there many organisations that have successfully implemented such strategies?
Companies from a wide variety of sectors are taking fascinating initiatives. This ranges from Michelin, the world leader in the tire industry, who has boldly stepped forward with a sustainability based strategy; to Ørsted in offshore wind power; to EcoVadis, the platform that helps companies find suppliers with sustainable products, and suppliers to reach out to companies worldwide; to Eastman Chemical who with its Tritan Renew technology not only has a BPA free ‘plastic’ product, but also has pioneered a recycling of the raw material that is used to make the plastic with a 50% recycled content, to Danfoss who now has a dedicated division called ‘Climate solutions’ to address the sustainability needs of their clients.
While we know that concrete strategies are great, execution and implementation is where the real impact happens. Is this covered in the programme too?
The programme integrates four key perspectives for developing and implementing successful sustainability initiatives: strategy, operations, accounting, and financing.
Firstly, the strategy part taught by myself helps executives frame the need as a business opportunity; then the operations part taught by Professor and Programme Co-director, Atalay Atasu, goes into specific models and perspectives on how to frame and execute the sustainability initiatives (e.g. circularity). The accounting part with Professor Peter Joos discusses how to financially measure and evaluate these initiatives and what needs to be done to change existing accounting practices. And finally, the finance part with Professor Lucie Tepla tackles the relation with the financial community and how to align the needs of investors and lenders with a corporation’s sustainability objectives and plans.