Sustainability: Substance over greenwashing
Published January 17, 2024
- Sustainability
Sustainability has become a critical success factor and hallmark for companies. Growing pressure from customers, employees, regulators, and investors has increased the need to develop compelling sustainability strategies. However, many industries face significant challenges in putting these strategies into practice. Superficial sustainability promises are no longer enough – what’s needed is an authentic and well-founded approach that delivers measurable results. The risk of greenwashing is real.
Sustainability has become a key success factor in business. Companies increasingly showcase sustainable business practices, fair production methods, and environmentally certified products and services. They also demonstrate their social responsibility through specially designed CSR projects. This development aligns with rising customer expectations: younger generations, in particular, demand authentic sustainable commitment and base their consumer and employment decisions accordingly. For businesses, this creates mounting pressure to concretely demonstrate their sustainability promises and social responsibility.
Reality, however, presents a more nuanced picture: Many companies cannot readily adapt their business models to meet these requirements. A survey by Russell Reynolds Associates among German board members illustrates this discrepancy: 46% of respondents pursue sustainability initiatives primarily for marketing purposes – whether for improved image or competitive differentiation. Only 15% of board members view sustainability as a lever for increasing value creation. The temptation to resort to superficial greenwashing is significant. However, this strategy carries substantial risks, as critical stakeholders quickly see through surface-level sustainability promises.
ESG stands for Environmental, Social and Governance. It is an initiative launched by the United Nations in 2006 for voluntary commitments to integrate ESG factors into investment decisions and asset management, formalized through the signing of principles.
Companies that haven’t yet embedded sustainable practices in their DNA should undergo a genuine evaluation process before promoting sustainability.
Embedding sustainability into the corporate DNA
Examples of greenwashing still persist across nearly all sectors – from textiles and consumer goods to food and financial services providers. Whether intentional or not, the temptation to appear more sustainable than reality remains strong.
However, organizations that haven’t yet embedded sustainable practices in their DNA should remain steadfast and undergo a serious evaluation process before promoting ecological, social, and economic sustainability: Where are there genuine opportunities for more sustainable actions, and where would compromises be too significant? A first step might be making the company more environmentally friendly – for example, by offering employees a flexible mobility package instead of a company car. The possibilities are diverse. Let’s examine three industries as examples.
The role of sustainability in investment decisions is growing: More private and institutional investors are aligning their investments with sustainability criteria. According to Union Investment’s findings, the proportion of large investors pursuing sustainable investments increased from 64% in 2017 to 85% today. A Banking Association survey also revealed that investors increasingly expect both their investments and the providing institutions to implement sustainable climate and environmental protection practices.
This positive trend raises questions about the actual sustainability of financial institutions and their investment products. The EU Taxonomy Regulation, which took effect in 2022 as part of the EU Action Plan on Sustainable Finance, provides greater transparency. It defines six specific evaluation criteria, including climate protection, environmental protection, and transition to circular economy. These criteria now form the binding basis for classifying financial products as sustainable.
Enhanced requirements to verify investment sustainability levels present new challenges for the industry. In the absence of uniform rating standards, banks and financial service providers are developing their own ESG ratings. These aim to better evaluate financial products according to individual customer profiles and enable meaningful product comparisons. Simultaneously, financial institutions face increasing pressure to transparently communicate their own sustainability performance.
This transformation of the financial sector continues to gain momentum. Driven by policy, supervision and customer demand, the financial sector plays a key role in transitioning to a sustainable economy. For banks that authentically embed sustainability in their corporate strategy early on, this creates opportunities for differentiation and access to new, predominantly young target groups.
The mobility sector offers diverse opportunities for sustainability: alternative powertrains for cars, buses and trains, shifting traffic from road to rail, expanding public transit and reducing business travel.
Rail transport is establishing itself as a sustainable mobility pioneer. Deutsche Bahn is advancing analog and digital infrastructure expansion through its “New Network for Germany” investment program – with billions in investments from DB, federal and state governments. By 2040, all trains will operate on fully electrified routes or with alternative power sources like hydrogen. Swiss Federal Railways (SBB) aims for climate neutrality by 2030.
Road transport transformation is more complex. A successful mobility transition requires maximally interconnected and flexible solutions. Future mobility must be more environmentally friendly and space-efficient than individual transport while remaining continuously available. This is confirmed by the “Mobilitätswende 2030 – vom Linienbus zur öffentlichen Mobilität der Zukunft” study by the Fraunhofer Institute for Experimental Software Engineering IESE and for Material Flow and Logistics IML, commissioned by DB Regio.
Cities and districts play a key role in this transformation. They can provide crucial momentum through innovative on-demand and sharing concepts, mobility hubs at train stations, or bike sharing at public transit stops. Digital solutions like mobility platforms that bundle and simplify access to all transport options support this process. Unified fare systems offer additional incentives to switch from private to public transport.
Technologies, concepts and willingness to innovate exist – now consistent implementation is crucial. With appropriate political support, nothing stands in the way of a sustainable mobility future.
Online retail is closely linked to the mobility sector and faces similar sustainability challenges. Key concerns include the ecological and social responsibility of major platforms like Amazon and sustainable alternatives in package delivery. The industry continues to grow: In 2023, the German Federal Association of Parcel and Express Logistics (BIEK) alone recorded approximately 4.18 billion courier, express and parcel shipments. Market trends point upward – volumes are expected to reach around 4.7 billion shipments by 2028.
Today’s delivery system still relies on partially outdated infrastructure with long transport routes between package centers and recipients, exacerbating traffic problems and particulate pollution in urban areas. Forward-looking “Smart City Logistics” concepts therefore focus on low-emission delivery vehicles like e-vans and cargo bikes, with autonomous delivery robots as a future prospect. However, more efficient management of growing parcel flows is crucial. The “last mile” in particular offers optimization potential: Currently, delivery addresses are often visited multiple times daily by different parcel services – with corresponding negative impacts on emissions and traffic.
The solution lies in reducing inner-city delivery traffic. Micro-depots can serve as central transfer points for in-demand items and consolidate shipments from different providers for bundled deliveries. Simultaneously, digital transformation must be advanced. This enables optimized warehouse logistics, better networking between logistics companies for maximum vehicle utilization, and smarter route and delivery window planning. With these measures, the logistics industry can operate sustainably even with increasing shipment volumes.
Fundamentally reviewing the business model
The societal shift toward ecological and social sustainability is noticeable across all industries and continuously reinforced by growing demand. This development offers companies the opportunity to secure your future viability by consistently integrating environmental awareness, sustainability and responsibility into your operations. Surface-level sustainability promises are not an option.
An authentic sustainability transformation requires a fundamental review of the business model and corporate strategy. This involves identifying realistic scope for action and careful evaluation: Where can sustainability goals be aligned with efficiency and customer orientation? What measurable economic, ecological and social added value can these measures create? We can support you in this important strategic realignment!
Author
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Jan-Hendrik Uhlenberg
Partner – Germany, Hamburg
Wavestone
LinkedIn