Companies: Sustainability must be economically viable

Polycrisis shifts priorities, but sustainable transformation remains equally or even more important than three years ago
Focus on opportunities: Three out of four companies surveyed are concentrating on tapping new markets and business areas
Regulation consumes resources, with the CSRD directive in particular drawing criticism
Seven levers help adapt sustainability strategies to changing conditions

The sense of optimism surrounding sustainable transformation at the beginning of this decade has given way to a more sober perspective. While companies are staying the course, they are now placing greater emphasis on economic viability. This is the result of in-depth discussions with around 20 top executives from German and Austrian companies for the study “Sustainability: On the Path to Economic Viability” conducted by the international consulting firm Bain & Company and the FUTURE Institute for Sustainable Transformation at Frankfurt School of Finance & Management. Interviewees included leaders from listed corporations such as SAP and RWE, globally active manufacturers like Nestlé and Procter & Gamble, as well as large family-owned businesses and upper mid-sized companies.

High satisfaction with progress to date

More than 90 percent of participants consider sustainable transformation to be just as important—or even more important—than at the time of the first study three years ago. “German and Austrian companies are staying the course on sustainability despite the current challenging environment,” observes Bain partner and co-author Karl Strempel. This is also reflected in the fact that 60 percent of respondents are satisfied with their company’s progress so far, and 30 percent are even very satisfied. Sustainability has now become an integral part of corporate strategy in many organizations, and such projects are expected to meet the same criteria as other investments.

The stronger emphasis on economic viability is partly a result of the current polycrisis, which is shaped by geopolitical, economic, and social factors. Another reason, according to Joern Soyke, Executive Director of the FUTURE Institute and co-author, is that “so far, many private and commercial customers are only willing to pay a limited premium for sustainable products and services. Only affordable sustainability is truly sustainable.” Against this backdrop, companies need to invest more in their sales teams to better identify and target customer segments that are already willing to pay more for sustainability.

Affordable sustainability offers companies a wide range of opportunities. Around three quarters of the companies involved in the study are therefore focusing their transformation efforts on developing new business areas and markets. This includes expanding the marketing of environmentally sustainable products, aligning portfolios more closely with ESG criteria, and establishing dedicated subsidiaries for areas such as the circular economy or sustainable consulting. Participants believe they are well positioned internally for this transformation, with sustainability teams and governance structures largely described as effective and impactful.

Dissatisfaction with excessive regulation

However, increasingly dense regulation is consuming time and resources. The EU’s Corporate Sustainability Reporting Directive (CSRD), with its extensive requirements, has been particularly criticized. Executives also see declining societal support—due to shifting priorities in the context of the polycrisis—as a barrier to further progress in sustainability.

The study also identifies potential drivers for accelerating change. In addition to technological innovation and the provision of sufficient public and private capital, a higher CO₂ price is seen as crucial. Sustainability expert Soyke calls for a rethink: “A cross-country, predictable, and steadily rising price for CO₂ emissions could achieve more than regulatory requirements that are often not geared toward implementation.”

Reviewing sustainability strategies – seven levers

Current developments in regulation and customer behavior, as well as the ongoing polycrisis, require companies to review and adapt their sustainability strategies. The study identifies seven levers to adjust ambition and speed of implementation and to optimize measures in terms of economic viability and financing. These include targeted innovation activities, increased cooperation, and better utilization of market opportunities in sales.

Depending on market opportunities, it may be advisable in some cases to accelerate sustainable transformation. In other industries, however, it may be more appropriate to take a more differentiated view of individual ESG topics or to focus on fewer but highly value-creating sustainability aspects, while also reassessing the pace of transformation.

“Sustainable transformation remains a mammoth task,” emphasizes Bain partner Strempel, who leads the Sustainability & Responsibility practice in the DACH region. Based on experience from numerous projects in Asia, the Americas, and Europe, Bain has developed a framework to orchestrate the necessary holistic transformation. It incorporates both strategic and financial perspectives and provides a suitable framework in light of the likely prolonged polycrisis. Strempel calls on businesses to stay the course: “The sooner companies combine sustainability and economic viability, the sooner they can gain a competitive advantage globally.”

About Bain & Company

Bain & Company is a leading global management consulting firm that supports decision-makers worldwide in shaping the future. With 65 offices in 40 countries, we are close to our clients. We work with them to outperform the competition and set new standards in their industries. Partnerships within our ecosystem of digital innovators complement our expertise and ensure that we deliver better, faster, and more sustainable results for our clients. Over the next ten years, we will invest more than one billion US dollars globally in pro bono projects. We support organizations addressing challenges in education, the environment, and economic development, and those committed to equality in all its forms. EcoVadis, the leading platform for environmental, social, and ethical performance ratings in global supply chains, has awarded us a platinum medal, placing us among the top 1 percent of companies evaluated. Since our founding in 1973, we have measured our success by the success of our clients and are proud to have the highest recommendation rate in the consulting industry. More information: www.bain.de, www.bain.at, www.bain-company.ch

About the FUTURE Institute for Sustainable Transformation

The FUTURE Institute for Sustainable Transformation at Frankfurt School of Finance & Management is a research- and action-oriented institution dedicated to promoting sustainability across industries and society as a whole. Its goal is to translate academic research into concrete business strategies. The institute focuses on turning sustainability from a concept into actionable measures and provides solutions based on rigorous scientific research. Its approach centers on reducing environmental impact (footprint), increasing positive societal contributions (handprint), and fostering collective action through education and collaboration (heartprint). Through thought leadership, applied research, and education, the FUTURE Institute supports organizations on their path toward sustainability, promotes measurable positive change, and encourages cross-sector collaboration. More information: www.future-fs.de

Press Contact

Patrick Pelster
Bain & Company
Phone: +49 89 5123 1524
patrick.pelster@bain.com