Future of business 2030: ESG strategy is shaping the world of business
This first installment in our future of business 2030 series sets the stage for the biggest changes supply chains will need to make to keep their competitive edge.
Deutsche Bank estimates 95% of all investment decisions will incorporate environmental, sustainability, and governance (ESG) strategies by 2035, according to a recent article about investor expectations. ESG strategies are choices guided by environmental impact, sustainability standards, and governance decisions affecting business operations. Companies today recognize the benefits of ESG strategies to inform the trajectory of their business into 2030 and beyond, but most fail to find the key to operationalizing the changes needed.
Anaplan sees several critical issues inhibiting the operationalization of ESG strategies, and we’ve developed a series of assets to help leaders address them, including an eBook, infographic, and blog series. These will help businesses prepare for the next decade, enabling active planning rather than reactive mitigation.
Untangling what consumers want is more complicated than ever. Supply expectation is extreme. Customers want to buy a product, have detailed tracking information, and have their product in-hand by the shipping estimate – likely much shorter than ever before.
Consumers also have more places to express demand, from Amazon, buy-online pickup in-store (BOPIS), and companies’ direct e-commerce sites. In 2030, it will be status quo for orders to come from multiple geographical locations, creating a complex warehousing challenge. For instance, a brand now needs to consider how much supply they need to fulfill orders of a product purchased in-store, online, and using BOPIS. At any time, retailers could have a surplus of items ready to ship to online buyers but a shortage of those same items for in-store buyers.
Additionally, if an organization is trying to shape demand to reduce a surplus of a product, it will become harder to identify where best to spend marketing dollars.
Facing product and material shortages and long lead times, weaknesses in supply chain operations are now clear after an unprecedented pandemic. For instance, the automotive industry is projected to lose a staggering $210 billion in 2021 revenue due to a microchip shortage originating from factory closures related to COVID-19.
Unpredictability is a hallmark of escalating climate change consequences. Hurricanes, earthquakes, and wildfires are threatening a fragile natural and economic ecosystem.
These increasingly frequent natural disasters and uncontrollable events affecting supply chains worldwide lay clear the impact of climate change, which will only get worse without meaningful change in global behavior. Only 4% of chief supply chain officers feel their organization is future-ready, according to a research report on the future of supply chain operations. Leaders need to address the core supply chain issue at hand: the inability to manage volatility.
Sustainable business practices come down to three elements critical for success: people, planet, and profit. Leadership will need to redefine what they consider the bottom line, taking into account opportunities created and reputational impacts, rather than only fixating on financial performance.
Simply stating a corporate ESG goal to react to a consumer desire isn’t enough. Consumers want to see action behind the pledge, and leadership will need to demonstrate value-aligned operations, such as sustainable sourcing, humane labor conditions, and socially responsible governance. To meet the ESG goals necessary for survival in 2030, leaders need to activate plans to reach sustainability goals and ensure they’re operating ethically, both environmentally and humanely, to contribute to the UN’s plea for more corporate responsibility.
Consumers will also expect more environmentally conscious products, and some manufacturers might not be suited to meet those needs. Unless there is an overall global motion to activate ESG strategy, availability of sustainability-adequate manufacturers, suppliers, and distributers could decrease by 2030.
With more holistic goals achievable through an operationalized ESG strategy, companies will benefit from internal innovation to solve supply chain inefficiencies, attract and retain more talent energized by progressive and responsible operations, and ultimately make gains in reputation, consumer loyalty, and profit margins (when done correctly).
Prior to COVID-19 and its related employment shake-ups and remote work, mental health benefits and a healthy work-life balance were considered perks of progressive, top-tier employers. Now they’re status quo and will continue to evolve in the future of business 2030. According to its press release, Gartner “By the end of 2021, 51% of all knowledge workers worldwide are expected to be working remotely, up from 27% of knowledge workers in 2019.”
The business world is facing “The Great Resignation,” with a record number of open jobs and dramatic talent scarcity, but it’s not enough to react to just today’s workforce challenges. The minimum wage is no longer considered livable, and businesses will need to rethink what they consider a reasonable wage. Being unaware of burnout and inflexibility for employees requiring childcare and the complications they bring will increasingly contribute to attrition. Companies are now at the mercy of talent, and status quo workforce planning strategies aren’t sufficient.
Companies will need to play a more active role to ensure they achieve their ESG goals and are able to support the health and well-being of their workforces. By simply reacting to worker expectations rather than planning for the future of business in 2030, leaders will face the consequences of being considered “traditional.”
Artificial intelligence and automated decision-making
Today, artificial intelligence (AI) is a tool to create a competitive edge. AI helps operationalize streamlined and confident decision-making by connecting internal and external data to uncover actionable planning insights through forecasting and “what-if” scenario planning. This 360-degree transparency from all internal departments and all external vendors enables better visibility and transparency into daily operations.
With this transparency, businesses are better able to operationalize ESG strategies by uncovering risks, finding alternatives for more sustainable or environmentally friendly solutions, and providing demonstrated work toward ESG goals to consumers and internal staff. This won’t be a nice-to-have in 2030. It will be a hallmark of the future of business.
Companies will need to consider whether to hire and build proprietary technology or buy pre-developed solutions like Anaplan, with an eye toward the future of business and the solution’s ability to keep pace. And, on the journey to 2030, the use cases for AI will multiply, from keeping a closer eye on the mechanical performance of production equipment to predicting and solving unforeseeable events like the ones described earlier.
Organizational leaders know it’s exceedingly difficult to operationalize ESG strategies. What they also need to know is, it will be absolutely critical to do so to stay competitive in 2030. By learning from distractions to proactive planning for more transparency, connectivity, and foresight, businesses can truly put ESG plans into practice.
Anaplan connects leaders across the enterprise value chain, enabling them to work together to respond to emerging business challenges, improve business resilience, and drive sustainable performance.
Next time, we’ll explore the external factors impacting ESG operationalization and what leaders need to consider when planning to move from strategy to execution.