New York Climate Week highlights the importance of critical thinking toward sustainability

In recent years, sustainability has increasingly had to cope with toughened market conditions, policy, and geopolitics. Meanwhile, despite technological advancements, many clean-energy options remain costly to deploy. All these factors are affecting how companies execute transition plans, requiring them to think more critically about their sustainability strategies.

That is reflected in this year’s New York Climate Week, where participants went beyond emphasising ambition and achievements to discussing what challenges we face to accelerate the energy transition and what innovative solutions we can embark on.

An insightful aspect to many New York Climate Week conversations centred on disruptive ways of doing business: committing to sustainability means getting used to the business as ‘unusual’, whether it is exploring the unknown, managing trial and error, or engaging in difficult but constructive conversations with clients. These changes may be costly to invest in and challenging to implement at the beginning. But in the long term, business as ‘unusual’ in sustainability can transform burden into benefits, as evidenced in later analyses.

The road toward sustainability is never linear, complicated by frequent policy and market disruptions. This therefore requires companies to practice sustainability with constantly refreshed minds. Sustainability goes beyond compliance to managing risks, harnessing opportunities, aligning customer demand, and creating value.

Companies have emphasised the importance of pursuing environmental stewardship, which lies beyond adhering to the most used sustainability measurements such as emissions reduction and renewable energy usage. And the notion of stewardship can be highly industry specific. In the food and agriculture sector, stewardship can represent strengthening soil health and improving water availability and quality. Doing this can not only enhance crop output and resiliency, but also prevent land degradation. This does not mean that the emissions metric should be discarded; rather, a wider range of considerations can together lead to a more holistic approach to sustainability that highlights sector materiality.

Some jurisdictions are encouraging this holistic thinking through sustainability disclosure requirements. The EU’s soon-to-be-mandatory Corporate Sustainability Reporting Directive (CSRD), for example, requires some 50,000 EU companies and at least 10,000 foreign companies to report in phases on sustainability metrics such as water, biodiversity, and circularity. In addition to complying to the law, companies can also benefit from using their own ESG data to refine sustainability strategies. These include improving sustainability strategy through gap analyses and increasing internal business efficiency. Standardized disclosure, coupled with enhanced ESG strategy, can also help companies enhance the access to capital.

According to a global study conducted by Bain & Company, around 60% of consumers have become more concerned about climate change in the past two years, with packaging and recyclability emerging as two main major considerations. This means that companies, especially those in the consumer goods and retail sectors, would appeal to sustainability-conscious consumers by closing the loop for the full product life cycle.

Meanwhile, however, anecdotal evidence shows that sustainability can move down the priority list if sustainable products are too costly or inconvenient to use. While it is debatable how much more expensive sustainable products can be and who should be bearing that cost increase, sustainability should not derail from being consumer-centric.

In the automotives industry, for example, companies can design electric vehicles (EVs) through leveraging their brands’ traditional selling points, whether it be luxury, coolness, or ease of use. While creating luxury/cool EVs relies on product design, one way to boost the ease of use is to partner with restaurants, shops or office buildings for EV charging. This can help consumers overcome their unwillingness to wait a long time charging EVs and narrow the infrastructure gap that countries like the US are facing.

On top of that, communication is key. Companies would benefit from laying out how their products are sustainable to consumers, as opposed to only having a sustainability label or certificate. Moreover, companies are starting to link sustainability with other benefits consumers care about. For instance, real estate sustainability efforts are being communicated to customers as a means to ensure economic security through increased energy efficiency. Real estate companies are also exploring the ‘S’ aspect of ESG through boosting affordable housing and creating value for local communities. All in all, sustainability is about operating businesses in ways toward consumers’ long-term wellbeing.