By Tim Longstaff

A sustainable corporate strategy that answers the challenges of carbon emissions and climate change is defining the conversations of the next decade. Yet, many businesses are still ill-equipped to respond, whether by taking it as a matter of personal belief or treating it as an “afterthought” of their corporate planning. We believe that the environmental issues must lay at the heart of the competitive strategy. In this report, we help businesses understand where they currently are and what role they could play in the future. We do this by listing external and internal dynamics that must be considered when planning their environmental strategies and presenting actionable recommendations.

The five core dynamics that significantly contribute to how the environmental challenges will be faced are:

• Environmental concern is widespread, led by the young
  The issue is driven by young people, but should not be seen as only “hype” — it is now at the forefront of public consciousness, a theme in political discourse and cause for widespread protests.
  
• Increasing shareholder scrutiny on ESG issues
  Concern for the environment is a fundamental pillar of corporate sustainability, thus, a key to securing capital.
  
• Climate change no longer framed as a matter of belief
  The belief-based approach must change, giving way to a more objective and transparent approach which reflects the business criticality of environmental issues.
  
• Often ill-defined environmental and sustainability roles
  Instead of diluted responsibilities and agendas, management of environmental interests must be owned by an individual with a clear jurisdiction, that reports independently and directly to the CEO.
  
• Some industries lack best practices in environmental matters
  As some industries have not been affected by climate change until recently, their best practices are less complete. In these situations, individual companies must prioritize innovation and learn along the way.

How should businesses respond to the above?

Roland Berger tailors a unique approach for each of their clients, with specific recommendations based on the quadrant framework that locates companies depending on the pressures behind their environmental strategies and how they have responded to it.

• Bleeding edge: companies that had to take carbon emissions as their strategic issue a long time ago, due to pressure by the regulators. One way to respond to upcoming environmental realities is by reappraising in which markets they participate in, and the nature of products and services they sell.
  
• The climate anxious: so far, their material impact on climate change has not been in sharp focus for them. Increasingly, as they are influenced by society or a threat of capital relocation, their focus should shift to a scenario preparation that thoroughly evaluates their market participation strategy.
  
• The largely oblivious: some sectors have so far considered climate change as not in their scope of interest. Instead of being solely pushed by ESG reporting, these businesses should already start mapping their current environmental impact and try to find strategic opportunities to differentiate based on environmental issues and performances.
  
• Carbon explorers: companies that already took proactive steps to market themselves as industries of tomorrow, as motivated by competitive opportunity. The next step to move forward is exploring new initiatives on environmental issues in a way others have not, and make it their unique competitive advantage.