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Ready, set, go! A roadmap for sustainable business transformation

Published 22 April 2022 in Brain circuits • 2 min read

From the conversations we are having with executives and board members in the financial sector, net zero commitments start with understanding how a company aligns itself with respect to scope 1, 2 (buildings, transportation of employees, electricity, waste management, etc.) and scope 3 (financial products).

“Setting” commitments are an important first step, execution of net zero strategies is where the rubber meets the road. From our perspective, net zero commitments need to be accompanied with proper incentives. For instance, tying capital to ESG KPIs via sustainability-linked loans can help to accelerate corporate timelines, as well as provide transparency, toward net zero commitments. These commitments help accelerate the cultural transformation that is needed to back up the commitments with change in behavior.

In September 2020, Chanel issued €600 million of bonds with an unusual catch: if the company fails to meet its sustainability goals, it will have to pay penalties to investors. Chanel’s bond sale consisted of two separate deals for €300 million each. The first commits the company to cutting its greenhouse-gas emissions in half by 2030 and reducing emissions in its supply chain by 10 percent. The second pledges to transition to 100 percent renewable electricity across the company’s operations by 2025 (to find out more about implementing sustainable transformation, check out our CHANEL case study).

Getting ready and Setting commitments is obviously an important first step to align stakeholders around sustainable transformation. But commitments require follow-up and execution to effectively drive change. Allocation of resources, changes in organizational architecture, engagement with key stakeholders needs to follow up.

Are you ready to GO? For a guide on how social innovation can accelerate corporate sustainability timelines, check out our center whitepaper “Mobilizing private capital for impact

Authors

Vanina Farber - IMD Professor

Vanina Farber

elea Professor of Social Innovation, IMD

Vanina Farber is an economist and political scientist specializing in social innovation, sustainability, impact investment and sustainable finance with also almost 20 years of teaching, researching and consultancy experience, working with academic institutions, multinational corporations, and international organizations. She is the holder of the elea Chair for Social Innovation and the Program Director of IMD’s Executive MBA program and IMD’s Driving Innovative Finance for Impact program.

Patrick Reichert

Research Fellow at the elea Chair for Social Innovation

Patrick conducts research at the intersection of entrepreneurship, finance, and social impact, with a particular focus on the mechanisms and logics that investors use to seed investment in social organizations. He is a research fellow at the elea Chair for Social Innovation.

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