Three strategies for companies to embrace sustainability regulation

As companies assess the impacts that sustainability regulation will have on their business, the first crucial step is a thorough assessment of their environmental impact. This starts by getting data under control. According to the GHD Sustainability Monitor 2024, 25 percent of executives said they need clearer metrics and reporting to achieve sustainability goals. Regulations are also data driven and that means businesses need to understand and validate their data to better prepare for what’s ahead. This ensures decisions are not only well-informed but also grounded in accurate and reliable information. Organisations must also make sure the data used for sustainability planning is not only accurate, but also reflects the current state of their operations. They must be transparent about their data collection methodologies, sources, and any limitations or uncertainties associated with the data.

The next step is taking that data and conducting a gap assessment, looking at the sustainability actions already underway and where gaps exist to meet regulatory requirements. This involves scrutinising every aspect of their operations, from supply chain practices, energy consumption, waste management and beyond. Robust assessment tools, including data analytics, artificial intelligence and Internet of Things devices, can help companies quantify their carbon footprint, water usage, and overall environmental performance. These tools enable real-time monitoring and analysis, providing accurate insights into resource consumption patterns and emissions, enabling organizations to assess and comprehend their existing environmental impact. The gap assessment should extend beyond internal operations to include suppliers and partners. Collaborating with the supply chain to evaluate and enhance their sustainability practices strengthens collaboration and ensures compliance with regulations.

For companies new to sustainability assessments, putting resources into these evaluations is a crucial step. Sixty-one percent of executives surveyed in the GHD Sustainability Monitor 2024 say they have challenges in responding to environmental regulations. But while it may be tempting to take a wait and see approach, it’s important to focus on the value the process will bring to the business, regardless of potential regulation. Understanding and dealing with environmental risks not only aids compliance, but it also makes a business more resilient overall which will lead to better business performance.

Armed with a clear understanding of their environmental impact, companies can move on to the second aspect of preparing for sustainability regulation: strategic planning. This involves setting ambitious but achievable sustainability goals aligned with regulatory expectations.

While a business may incur upfront costs, the long-term benefits of sustainability initiatives in terms of risk mitigation, brand reputation, and stakeholder trust far outweigh the initial investments. Beyond that, as companies invest time in understanding the financial landscape of sustainability, they may unlock a number of growth opportunities. A company might find better ways to improve operational efficiency. For example, businesses looking at reducing greenhouse gas emissions have sometimes found they didn’t realise the actual size of their vehicle fleet. By aligning financial goals with sustainable practices, organisations can identify areas where environmental responsibility intersects with economic possibility.

Some businesses may be tempted to not conduct sustainability planning due to the uncertainty of how they will operate in a net zero world. Uncertainty often arises from an unclear path to success, including lofty long-term goals and too many decisions that need to be made to get there. The key is to focus on what is certain and use standard approaches to sustainability planning. What smaller goals can a business set to start to enact change? What can a business control that will put it on the path towards sustainability? A material assessment is one way to answer these questions. This process, unique to every business, helps organisations identify and prioritise the environmental, social, and governance issues that have the most impact on their business and stakeholders. By concentrating on manageable and measurable initiatives, companies can build momentum and gradually instill a culture of sustainability while laying the foundation for more comprehensive sustainability strategies.

Recognising that sustainability challenges are systemic, companies must adopt a collective approach to drive meaningful change. When asked about sustainability measures that are important and need action, 42 percent of executives responded, “acting in the best interest of our stakeholders.” To do that, it takes breaking down traditional silos and encouraging cross-functional cooperation internally and externally. Fostering collaboration between sustainability teams, risk management, and operations holds the key to a more comprehensive and effective evaluation of sustainability practices. It enables organisations to identify areas where these initiatives can mitigate risks and enhance operational efficiency simultaneously. For example, implementing sustainable supply chain practices not only aligns with environmental goals but also reduces the risk of supply chain disruptions.

Effective collaboration extends beyond individual organisations to encompass partnerships with industry peers, government and even competitors. Industry alliances and collaborative initiatives can create shared standards, best practices, and frameworks that streamline compliance efforts. Engaging in dialogues with regulators and participating in industry forums enable companies to contribute to the development of effective and realistic regulations. Proactive collaboration with sustainability-focused organisations fosters a positive public image and provides valuable insights into emerging trends and expectations.

The convergence of global sustainability challenges and regulatory mandates necessitates a proactive and strategic approach from businesses. By conducting thorough assessments, embedding sustainability into their DNA through strategic planning, and fostering collaboration, companies can position themselves as forward thinking organisations. Beyond compliance, these pillars lay the foundation for a sustainable and resilient future, where businesses play a pivotal role in creating positive environmental and social impacts while continuing to thrive in a more sustainable and equitable world.

Download the GHD Sustainability Monitor 2024 to read insights from executives, leaders, clients and sustainability advisors on the way forward to reduce the disconnect between strategy and execution.