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Organizing for sustainability success: Where, and how, leaders can start

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As sustainability becomes more of a strategic and operational imperative, executives must lead the way to set up a sustainability organization that’s right for their companies

Sustainability and environmental, social, and governance (ESG) issues affect how all companies do business—and increasingly so in recent years. 1 More companies, and their investors, are recognizing sustainability as a strategic priority that involves significant business risks and opportunities. But historically, few companies have organizational structures that are designed to treat sustainability as a material business issue. Instead, sustainability activities—and the organizations that support them—have focused primarily on investor relations, PR, and corporate social responsibility.

The “sustainability organizations” that still operate that way (and there are many) are tasked with managing stakeholder communications, target setting, and reporting. While those tasks are important, they are also insufficient for sustainability organizations to be successful. Our experience suggests that success is more likely when executives empower sustainability organizations to engage proactively and strategically hold them responsible for creating measurable impact. Only then will companies be able to maximize the value at stake from their sustainability initiatives.

Sustainability is no longer an issue of compliance for most companies but rather a strategic and operational one. Once senior leaders integrate sustainability into their corporate strategy, they will benefit from having a dedicated organization to support their sustainability efforts. There is no right structure that applies to every company; each will need a structure of its own and will likely need to adjust this structure as business conditions and requirements change. A well-designed sustainability organization, we find, can give the company the capabilities that it needs to capture value and manage risks from sustainability in a systematic and even transformational way.

This article was originally published on the McKinsey & Company’s website.

Date: August 10, 2021

Author: Aaron De Smet; Wenting Gao; Kimberly Henderson; Thomas Hundertmark

Tags: ESG Strategy, McKinsey

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