MIT Sloan Management Review

Owens Corning, the
innovator in fiber glass
technology, has evolved
through all three phases
of sustainability develop-
ment, led from the beginning
by its first ever chief
sustainability officer.

O’Brien-Bernini. “Some people are motivated by their personal commitment around climate change, others to the bottom line. In my role, I actually don’t care what motivates people as long as it drives us to our goal.”

Phase 3 — Expanding Boundaries The need for commercial orientation continues unabated but is now matched by a strong strategic orientation. As the organization continuously raises the bar and leverages sustainability to create competitive advantage, it increasingly views sustainability as a strategic opportunity and gauges its progress with metrics that reach beyond the short and medium term. As such, the sustainability leader must be adept at anticipating and evaluating long-term sustainability trends, spotting new opportunities and developing strategies to reposition the organization to benefit from them. The goal is to embed sustainability in the organization’s DNA, much like quality or financial control, such that it is a core value and the organization is unconsciously proactive about it.

The sustainability leader now needs to extend the commercial orientation of the previous phase and bring to it a strong strategic orientation. This combination requires the synthesis of multiple and frequently conflicting trends to develop a coherent long-term strategy that manages trade-offs and ensures that the organization is aligned with key sustainability principles for years to come. Consider, for example, an aviation manufacturer that looked 20 years ahead to see how its market was likely to evolve. Industry projections had suggested that over the next two decades the number of planes in the air would increase from 18,000 to 36,000, but the company decided to challenge those projections in the context of sustainability. What if more airports or runways aren’t built? What if contiguous land masses that have high-speed rail between large cities make it illegal to fly between those metropolitan areas? What if companies need to start pricing carbon? “The commercial impact is difficult to estimate, but it’s crucial to get a handle on,” says that company’s head of sustainability.

Sustainability leaders in Phase 3 must evolve into futurists, pursuing long-term investments and partnerships that strengthen and transform organizational assets. They need to be inquisitive and reflective, asking tough questions that probe the core

purpose of the organization: What are the ways in which we can profitably run our business without fear of environmental degradation or social inequity? How can we anticipate, influence and benefit from regulatory changes that relate to sustainability? How can we leverage sustainability to create differentiation and competitive advantage in our markets?

The answers to such questions will often require sustainability leaders to establish a more sophisticated (and frequently unconventional) level of engagement with external stakeholders such as competitors, NGOs and other organizations that might well have been viewed as adversarial in the past. When McDonald’s Corp. eliminated Styro-foam from the packaging of its fast foods, for example, it did so by partnering with the Environmental Defense Fund. Other multinationals like Wal-Mart and major private equity companies like the Carlyle Group L.P. are now working with the EDF around initiatives designed to minimize the environmental impact of their businesses.

In Phase 3, the sustainability leader must often advocate for new approaches and practices that run counter to how the organization has long conducted its business. For example, the leader might need to challenge the way in which investments are typically viewed by arguing for an adjustment to traditional “hurdle rates” when considering initiatives that would generate a significant return, but over a longer time period. “We have to … develop sustainable, waste-free product[s] designed for manufacturability and recyclability for tomorrow,” says the CSO of a global high-tech company. “We couldn’t do that if we had not changed the way we look at our financial model, because in many cases it means paying more up front for supply parts that have superior LCA [life cycle analysis] characteristics and lifetime costs.” Decisions are still made in favor of the commercially optimal solution but, thanks to an expanded time horizon, the burden of up-front costs can be more substantially reduced by factoring in the long-term benefits. In addition (and as importantly), longer time horizons force companies to consider the dangers of making decisions that benefit the short term but might provoke a consumer backlash further down the road.