I often use the Maslow Pyramid analogy, in a business context, to illustrate the need of solid foundations to achieve transformation. In a nutshell, Maslow established a hierarchy of needs (e.g., physiological, safety, belongingness) that individuals must fulfill to achieve an ultimate goal: self-actualization.
At the top of the companies’ “ESG Pyramid” are “total business models”, which seamlessly combine financial and societal benefit. Achieving this final stage means to answer “yes” to the question: “Would the world be a worse place if my business no longer existed?”
Emissions management is the foundation of the ESG Pyramid. Companies are overcoming data and methodological challenges to estimate their emissions footprint and to define reduction targets and action plans. This, together with the demanding carbon market dynamics, is accelerating the integration of emissions management in the companies’ operational systems and priorities. This systematization is very good news indeed. It facilitates the deployment of resources to deal with climate change and fosters the engagement of internal and external stakeholders in the businesses’ sustainability journey.
However, an exclusive short-term focus of companies on emissions management, thus not working in parallel in embedding sustainability into strategy, could have an important opportunity cost. Total business models’ development requires collaborative experimentation and time to mature.
An effective way forward to address this challenge is to put in place a comprehensive set of strategic courses of action, such as the following:
- Verbalize and reinforce the positive societal impact of the current business.
- Find inspiration in decarbonizing startups and social entrepreneurs.
- Develop and test ventures aligned with the circular economy.
- Explore entry into adjacent sectors under environmental transformation.
- Enhance talent and wellbeing policies with people-centric practices.
Total business models don’t emerge from one day to the other. Like innovation, progress on sustainability needs to work in several business priorities and time horizons simultaneously. The challenge is to climb the ESG Pyramid as fast as possible, without compromising the robustness of its foundations.