Recently, you’ve probably been hearing more and more about SDGs, ESG, “decarbonized management”, and the “circular economy.” Corporate organizations around the world are becoming more proactive about environmental and social issues. Following the past decade of digital transformation (DX) buzz, sustainable transformation (SX) is gradually gaining traction.
But what is SX? For that matter, what is sustainability? Before attempting sustainable transformation, it’s important to have a basic understanding of what sustainability terms mean to you– as they vary, organization to organization, and person to person.
Then, take a look at some real life example of how SX has made waves in business.
What is Sustainable Development?
For those just getting started learning about sustainability and sustainable development, things can be a bit confusing. There are a number of terms that are very similar, like ESG, SDGs, and CSR. Let’s check the definitions of some typical terms here.
First of all, what is the definition of sustainable development? The most commonly cited definition is from the report “Our Common Future” published by the World Commission on Environment and Development (commonly known as the Brundtland Commission) in 1987.
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.Brundtland Commission
In other words, sustainable development is a means to reflect on the self-centered way humans have been treating the environment and using resources. There is a wide range of possibilities for human development, especially in the social and economic spheres, as long as it is in harmony with nature. Environmental protection does not mean that development and economic growth are not allowed, but it does attempt to find a good balance between environmental care and development.
Here are a few other frequently cited definitions:
A process of change in which the exploitation of resources, the direction of investments, the orientation of technological development, and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations.
The World Commission on Environment and Development
Sustainable development is a dynamic process that enables people to realize their potential and improve their quality of life in ways that simultaneously protect and enhance the earth’s life support systems.
Forum for the Future
What is Sustainability?
“Sustainability” refers to the state in which economic growth is achieved while maintaining or improving environmental and social values. This concept encompasses not only environmental sustainability, but also economic and social sustainability that meets the needs of modern economies and societies without compromising the planet’s natural resources or the needs of future generations.
Here is the definition from Except Integrated Sustainability Director, Tom Bosschaert:
Sustainability is the state of a complex, dynamic system. In this state, a system can continue to flourish resiliently, in harmony, without requiring inputs from outside its system boundaries.
Tom Bosschaert, Symbiosis in Development, Except Integrated Sustainability
Sustainable development, on the other hand, refers to the process of improving long-term economic well-being and quality of life without compromising the ability of future generations to meet their needs.
In other words, sustainability is often thought of as a long-term goal or state, and sustainable development refers to the various processes and methods for achieving it (e.g., sustainable agriculture and forestry, sustainable production and consumption, good government, research and technology transfer, education and training, etc.).
What are the SDGs?
SDGs refers to the Sustainable Development Goals (SDGs).
It consists of 17 goals (targets) and 169 targets, including numerical targets, set by the United Nations to create a sustainable society by 2030.
The current SDGs are the successor to the MDGs (Millennium Development Goals) agreed upon at the UN Summit in 2000. At the UN Earth Summit held in Rio, Brazil, in 2012, the UN Earth Summit unanimously decided to adopt the SDGs as the main development agenda for the next 15 years (2016-2030) to replace the MDGs, and the SDGs were officially adopted in September 2015.
With the change from the MDGs to the SDGs, the number of goals has more than doubled, and the SDGs not only continue the direction of the original MDGs, but also adjust the issues they focus on, broadening our thinking on concepts and issues such as universality in sustainability, integration and diversity, and transformation of society as a whole.
Why should we focus on sustainable transformation?
Have you ever heard of the “planetary limit” theory?
“Planetary Limits” is a theory proposed in 2009 by 28 scientists, including Johan Rockström, a renowned Swedish environmentalist. Planetary Limits defines nine processes with limit values that indicate the safe zone or degree, and states that if human activities exceed the acceptable range, the Earth’s systems will enter uncharted territory, resulting in major changes and irreversible consequences.
It points out that four of the nine areas that currently represent the limits of the earth to maintain normal functioning are currently overloaded. Specifically, it refers to biodiversity, climate change, and soil. The other five areas are also approaching critical values significantly in just a few years.
The COVID pandemic has also caused countries around the world to recognize the urgency of climate change and sustainable development, and to act accordingly. In May of this year, the Japanese Diet formally included the pledge announced by Prime Minister Yoshihide Kan, “to achieve carbon neutrality by 2050,” in an amendment to the Law Concerning the Promotion of Measures to Cope with Global Warming, which was unanimously passed by the Diet.
In addition, with the development of ESG investment, more and more companies are participating in “decarbonization management” by disclosing information and setting goals for their organizations related to climate change. Government agencies, NGOs, and many multinational corporations are already taking action to achieve their sustainability goals.
In January 2021, the Global Impact at Scale: 2020 Corporate Action on ESG Issues and Social Investments report was released by the Chief Executives for Corporate Purpose (CECP), a global organization of more than 200 companies around the world. The report shows that 81% of companies have integrated the SDGs into their business strategies and routines, and 78% have included the SDGs in their business development reports for senior management. In addition, 19% of the 168 companies have set specific quantitative targets for multiple SDG goals.
In the future, a company’s ability to successfully transform itself into a sustainable business will be a prerequisite for its survival. Now, to continue, I would like to introduce some specific examples of sustainable transformation.
Philips: “Lighting as a Service” Business Model Transformation
One of the most iconic examples of sustainable transformation is the case of Philips. Philips, which started by selling light bulbs, began to transform its products into services in 2011 with the concept of “Light as a service,” an innovative service called “Pay per Lux” which is currently being used at Schiphol Airport.
Philips designed 3,700 LED luminaires and lighting equipment to meet the airport’s needs and signed a 15-year lease agreement with Schiphol Airport for the lighting service solution. Philips takes ownership of the lighting equipment and manages and maintains it for the duration of the contract, while the airport simply pays a fixed monthly service fee. Philips uses network technology to monitor the operating status and power consumption of the lighting equipment, and dispatches a repair team immediately in the event of a malfunction to ensure that the lighting equipment is maintained at optimal energy efficiency. Replacement lamps will be recycled directly by Philips.
When a manufacturer regains ownership of a product, the company’s behavior changes. Philips wants to keep the cost of repairing or replacing its products during the contract period as low as possible. Therefore, it needs to design its products to be more robust and easier to disassemble and repair. The source of revenue has shifted from gross profit from mass production to the value of serving customers with a fixed monthly service fee. This allows companies to design better products and reduce repair costs.
With Philips managing and repairing the lighting, Schiphol Airport’s electricity consumption has been cut in half, saving money on electricity bills and reducing its carbon footprint. In other words, we can provide better products and services for less money.
In the past, one-off sales and purchases were based on the expectation that customers would come back to buy a new one when it broke. However, with the change in business models, companies are no longer pursuing short-term profits, but rather focusing on “making money in the long run” by improving the quality of equipment and services, and developing more efficient lighting technologies. Customers and service providers can now move from a one-time transaction to a lifelong partnership.
IKEA : A Better IKEA Catalogue – Changing the World’s Printing Industry
Another good example is IKEA, one of the companies that originated sustainable business transformation. In fact, sustainability is already a core value of IKEA. For example, some specific initiatives include increasing the percentage of plant-based foods in their food products and introducing a “furniture rental” service where IKEA takes care of recycling and restoration, which not only extends the life of the furniture, but also reduces the consumption of raw materials and breaks the linear sales model to develop a circular economy. It’s a circular economy.
And these values are not only reflected in changes to their own product designs and business models, but also in related industries and supply chains.
Many of you may have had the experience of receiving an IKEA catalog, either passively or actively. In fact, more than 200 million copies of these catalogs are printed annually, making it one of the largest annual print runs of paper products in the world.
With the help of sustainability consultants at Except, IKEA systematically analyzed and reviewed its catalog production process based on his Symbiosis in Development (SiD) framework to improve the use of existing information. In addition, the company implemented a big data analysis tool to display environmental data indicators for buyers, suppliers, and retailers so that they can make better decisions at critical points in the product lifecycle. By doing so, they were able to select the right suppliers and improve the sustainability performance of their catalogs.
Through these efforts, IKEA catalogs not only received Forest Stewardship Council (FSC) certification in 2014, but also saw a 28% decrease in CO2 emissions per book from 2014 to 2016. By choosing suppliers with a lower environmental footprint, we also reduced our energy consumption for printing by 5% per book.
The impact of this change spans the entire lifecycle of the catalog, creating significant sustainable benefits in terms of energy, waste and water savings, which have increased every year since the first year. It also has a further impact on the printing industry as a whole, since IKEA catalogs are very voluminous and there are a large number of stakeholders involved in the entire production process.
What can we do to achieve sustainability? Though most people are aware of the need to take action, it is difficult to take the first steps into an unknown territory.
Our advice, first and foremost, is to be open to the opinions and feedback of industry experts. If you’re not sure how to get started, take a look at the Symbiosis in Development (SiD) Quick Guide, a sustainable strategy guide design methodology developed by Except, a Dutch sustainability consultancy, which has been leading the world in sustainability for 20 years. We have also translated the SiD Quick Guide in Japanese. Please feel free to check out these resources as we all continue to grow together on a path towards a sustainable future.