Framework for Leaders to Sustainable Transformation

By | Last Updated: 16 April 2024

In the wake of pressing global challenges, businesses are increasingly recognizing the urgency of integrating sustainability, climate action and social impact into their core strategies. Based on the Yunus Social Business Transformation Framework, we share an invaluable blueprint for this journey, advocating for a paradigm shift from traditional corporate practices to a more sustainable and impact-focused approach. This extended curated blog-post delves deeper into the transformation flywheel, providing leaders with actionable insights and data-driven evidence to navigate this pivotal shift.

Credits: Yunus Social Business GmbH and gGmbH 2023

Dimension Traditional Approach New Approach
𝙄𝙢𝙥𝙖𝙘𝙩 𝘼𝙘𝙘𝙤𝙪𝙣𝙩𝙖𝙗𝙞𝙡𝙞𝙩𝙮 Companies externalize their negative impacts on society and the environment, maintaining purely transactional economic relationships and focusing on maximizing profits for shareholders. Firms take responsibility for their entire value chain's impacts, aiming for long-term stability and resilience by integrating business innovation that addresses social and environmental challenges.
𝙇𝙖𝙨𝙩𝙞𝙣𝙜 𝘾𝙤𝙢𝙢𝙞𝙩𝙢𝙚𝙣𝙩𝙨 Focus on short-term gains and quarterly profits, often at the expense of long-term value creation and sustainable practices. Embrace a long-term orientation that reinforces impact internalizing mindsets, prioritizing complex, interconnected environmental and social problems solutions.
𝘾𝙤𝙡𝙡𝙖𝙗𝙤𝙧𝙖𝙩𝙞𝙫𝙚 𝙎𝙮𝙨𝙩𝙚𝙢𝙨 𝙏𝙝𝙞𝙣𝙠𝙞𝙣𝙜 Operate in competitive silos, maximizing shareholder profits, and often neglecting broader societal and environmental responsibilities. Embrace systemic thinking and partnerships, recognizing that today's complex challenges require collective action across sectors and industries for lasting impact.

Credits: Yunus Social Business GmbH and gGmbH 2023

Here, we explore how the transformation flywheel can be applied across eight corporate functions to drive sustainable, climate action and socially impactful business practices.

1. Leadership: Steering Towards Impact

Leadership extends beyond setting the strategic direction; it encapsulates the essence of impact in the corporate ethos. Leaders must champion the cause, articulating the intertwined narrative of business and impact. With 85% of executives acknowledging the importance of adopting an impact-centric approach, the leadership function is pivotal in nurturing a culture that harmonizes profit with purpose.

  • Communicates externally and internally about the business and impact narrative, with a focus on risks and opportunities for environmental and societal impact.
  • Creates an impact-ready board (competence, diversity and external advisory boards drawn from non-traditional stakeholders (NGOs and intermediary organisations), for example.
  • Creates internal incentives and leads by example, balancing short term trade-offs between profit and purpose with a long-term value creation plan hat decouples growth from E and S risks and links it to opportunities for positive value creation.
  • Consistent communication on impact by all leaders builds culture.
  • Directly engages with investors on ESG and impact

2. Strategic Planning: The Blueprint for Impact

Strategic planning is the linchpin in aligning business growth with positive social and environmental outcomes. It's about scanning for impact gaps and setting ambitious yet achievable goals. A recent study highlighted that companies with integrated impact goals witnessed a 12% higher valuation than their counterparts, underscoring the significance of strategic impact alignment.

  • Impact plays a role in strategic planning to decouple growth from negative impact and link it to positive impact creation.
  • Sets science-based company targets against industry benchmarks (not in isolation of them).
  • Has a coherent “how” for achieving those goals with short and long term KPIs.
  • Adopts double materiality, assessing and planning for business impact on environment and society (in addition to impact of E and S risks on business).
  • Regular scans the social and natural business environment to assess risks and opportunities for positive impact. Materiality assessment includes feedback from “non traditional stakeholders” like NGOs and activist investors.
  • Cascades impact driven strategy down to functions, supplementing leadership support for impact strategy with bottom up internal buy-in.

3. Communication and Marketing: The Voice of Transformation

In today's transparent digital age, communication and marketing go hand in hand with a company's impact journey. Authentic storytelling, grounded in tangible impact achievements, resonates deeply with consumers and stakeholders. A survey revealed that 78% of consumers are more likely to purchase from companies that detail their impact initiatives, highlighting the importance of effective impact communication.

  • Collaboratively (internally and externally) creates a transformation narrative about positive value creation that reflects systems thinking – solving for the ecosystem, not just the company.
  • Authentically markets products and services and their impact to communities, involving other stakeholders.
  • Sends messages that reflect a balance between impact and profitability not one at the cost of the other.
  • Proactively embraces certifications like B-Corp as signals of intent.
  • Focuses on transparency, even in the absence of positive information.

4. Supply Chain: The Backbone of Sustainable Operations

Transforming the supply chain into a force for good entails meticulous selection and collaboration with suppliers who share the same vision for impact. An impactful supply chain not only minimizes environmental footprints but also enhances social welfare across the ecosystem. Companies that have integrated sustainable practices in their supply chains report a reduction in costs by up to 16% and an increase in brand loyalty.

  • Engages collaboratively with stakeholders in its value chain to find opportunities for mutual value creation. 
  • Sets and communicates targets for a responsible supply chain and actively scouts and integrates suppliers who support these.
  • Adapts procurement policies and requirements to reflect financial, as well as ESG considerations for suppliers. 
  • Goes beyond its immediate supply chain to scan and set  quantifiable goals for the industry using roadmaps that it  implements collaboratively.
  • Engages and educates internal business partners to increase demand for socially and environmentally responsible suppliers. 

5. Product and Service Innovation: The Engine of Change

Innovation in products and services is crucial for addressing societal and environmental challenges. By fostering a culture of social intrapreneurship, companies can unlock new avenues for impact. Data indicates that products developed with sustainability criteria have a 25% higher market success rate than conventional products.

  • Creates social and environmental lighthouse products and services to support and showcase the company's impact, both externally and internally.
  • Ensures and maximises impact alignment for all existing and new products and services.
  • Creates a bottom-up, intrapreneurial, enabling environment and culture for social innovation, including sandboxes of innovation inside the organisation.
  • Product leadership helps investors and other stakeholders to understand the materiality of social innovation as part of the transformation agenda.
  • Supports impact innovation top-down with permanent structures, enough resources and a reporting line to the CEO and Board.
  • Hires and supports “social intrapreneurs” and empowers them with freedom to roam the organisations and create disruptive change.

6. Accounting and Reporting: The Metrics of Impact

Integrating impact into accounting and reporting practices ensures accountability and transparency. By adopting frameworks such as the Impact-Weighted Accounts Initiative, companies can provide a holistic view of their social and environmental performance, attracting a new breed of impact-focused investors.

  • Aims for integrated accounting and reporting to embed impact through hybrid metrics and impact weighted accounts that reflect industry benchmarks based on science-based targets and a systems thinking lens. 
  • Reflects actions against material risks and positive contributions to SDGs. 
  • Does not publish a separate sustainability report but integrates impact reporting into essential company reporting.
  • Tracks and reports transparently on what is material (double materiality), not just what is easy to measure. Tracks Scope 3  emissions, for example.
  • Adopts true cost accounting for strategic decisions, such as living wages and a realistic carbon price. 

Cultivating a base of mission-aligned investors and embedding impact into the company's legal structure are essential steps toward solidifying commitment to long-term value creation. With ESG investments expected to reach $53 trillion by 2025, aligning with impact-driven investors is not just ethical but also economically prudent.

  • Proactively curates long-term, mission-aligned investors (together with leadership). 
  • Reflects forward looking information in ESG communication not  just policies, focusing on a long-term perspectives with disclosure of investments made in innovation for the future. For example,  investors are not ust informed about the percentage of “green”  revenue or about offsetting negative effects but they are shown how investments are used to transition the company. 
  • Company engages with investor groups, and non-traditional  investor coalitions. For example, faith based investors and societal  stakeholders on ESG best practices across the industry.
  • Considers legal structures like Perpetual Purpose Trust or Enterprise a mission and certifications like B-Corp to structurally embed impact and create public accountability.

8. Human Resources: Cultivating an Impact-Driven Teams

Human Resources plays a critical role in embedding a culture of impact through strategic hiring, incentivizing, and professional development practices. Organizations leading in impact orientation report a 34% higher employee engagement level, illustrating the vital link between impact culture and teams motivation.

  • Enables employee awareness of impact topics and creates opportunities for upskilling on ESG through practical education, volunteering, and social intrapreneurship.
  • Head of Sustainability is a “serious” position, reports to the board and has adequate resources. 
  • Creates and maintains an organisational structure that reflects a point person in every function that reports back to sustainability. 
  • Positions impact as part of the company culture and not as a separate department, deep embedment to avoid mission drift from leadership transition.
  • Creates and adapts incentives for profit and impact that are linked to managing risks and incentivising innovation towards SDGs Non-binary metrics to discourage tradeoffs between interrelated goals, for example.
  • Creates long-term management incentives that are linked to impact goals (risks  and innovation) and are non discretionary and significant (not a token amount).

By leveraging the insights and strategies outlined in the presented framework organizations can embark on this transformative journey with a clear roadmap and the tools needed to succeed. 

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