What strategies are companies adopting to ensure long-term business success and profitability as they experience constant business disruptions like COVID, supply chain instability, and now armed conflict in Ukraine? What impacts do these events, coupled with increased environmental, social, and governance (ESG) pressure, have on their business? How are they transforming to overcome growing risk? Read our 4th annual survey for insights.
Please enjoy the summary* below. For the full research, please visit our sponsor Dassault Systèmes (registration required).
For related research, please read our prior survey results: Business Sustainability and Transformation Strategies 2021, Business Sustainability and Survival 2020, and Executive Strategies for Long-Term Business Success 2019.
Table of Contents
- Business Risks and Disruption are Expanding
- European Conflict Adds to Existing Challenges*
- Fundamentals and Strategy Drivers Largely Unchanged*
- Focus on Long-Term Business Sustainability
- Increased Attention to ESG*
- Drivers of Increased ESG Focus*
- Companies Report Ambitious ESG Plans
- Companies Report Putting ESG Plans into Action*
- Adopting Technologies to Support the Pillars*
- Conclusions and Recommendations
- About the Research*
- Acknowledgments*
Risk and Disruption Persist, ESG Pressure Grows
Business Risk and Disruption Continue to Climb
“Business is all about risk taking and managing uncertainties and turbulence,” said billionaire industrialist Gautam Adani. Managing disruption may never have been more important than over the last decade. Starting in 2019, our research series, Executive Strategies for Long-Term Business Success, reported significant growth in business risk and disruption. The survey series then tracked related business trends, as companies shifting focus to survive the COVID-19 pandemic in 2020. Then, in 2021, companies leveraged digital technologies to emerge more agile and resilient to disruption. This year finds business risk and disruption increasing again, highlighted by supply chain disruption, energy shortages, and labor shortfalls. In addition, the conflict in Ukraine is creating extensive global market impacts.
Increasing Urgency on Sustainability Issues
Beyond these disruptions, the 2022 survey finds increasing business pressure related to environmental, social, and governance (ESG) concerns. Environmental compliance and social responsibility have always been pillars of long-term business sustainability. Now, they have become more urgent as climate change advances, financial markets pay more attention, and governments adopt specific dates to achieve goals such as net zero carbon. Our survey of 183 companies now finds that ESG is a more urgent part of a comprehensive business sustainability strategy that includes digital transformation, product/service innovation, developing/retaining the future, and capturing knowledge/IP.
What are companies doing to ensure long-term business success in these turbulent times? How can they leverage the pillars of long-term business sustainability to succeed?
Focus on Long-term Business Sustainability
Focus on the Pillars of Business Sustainability
Our executive survey series tracks a collection of areas companies must address to survive and thrive despite persistent risk and disruption. These pillars have evolved with our research and include:
- Digital Transformation / Adopting New Technology
- Product / Service Innovation and Agility
- Workforce Development
- Environmental and Social Sustainability
- Adopting New Business Models
Our research shows that managing the impact of global disruption frequently takes focus and energy away from these critical factors. However, as our Business Sustainability (and Survival) Strategies 2020 report states, “Despite global disruption, companies must continue to focus on the pillars of business sustainability to ensure long-term success and viability.” Data from this study indicates that the importance and urgency of the pillars are well aligned.
Focus on the Digital Transformation and Innovation Remain Strong
The current survey shows that the focus on digital transformation remained the highest of the pillars and continued to accelerate. Product and service innovation also remained a high focus. This represents an optimistic view to stay relevant well into the future and aligns with findings that new market opportunity and long-term growth goals are the leading factors dictating corporate strategy. This is important because, as the 2021 report concluded, “Companies that don’t accelerate digital transformation are at significant risk for both future disruptions and being left behind during the recovery.”
Companies Report Ambitious ESG Plans
Companies Recognize Business Impact of ESG Initiatives
Drilling down into sustainability plans, researchers investigated which goals companies believe will significantly impact their company’s long-term success. More than three-quarters of companies viewed all of the ESG initiatives investigated as either critical or important to their success. This perspective confirms that all of these initiatives; shifting to renewable energies, adopting circular economy principles, pursuing sustainable production, and reducing carbon, are business necessities. Fortunately, these initiatives are interrelated, and pursuing any of them may help reach the objectives of others. For example, renewable energies can help reduce carbon emissions.
Going Beyond the Minimum
ESG needs are essential to business success and becoming higher priorities due to customer and market demands. So how are companies reacting to requirements? In prior studies and experience, we’ve encountered many companies doing the least they could do, typically to avoid regulatory action. In this study, we asked respondents to share both the timing and the scope of their company’s plans to meet environmental and social responsibility requirements.
The majority of responding companies focus on meeting all customer / government requirements for scope and timing. Conversely, very few companies only plan to meet either “some or very few” or only address requirements that are most actively enforced or expected to be enforced. In fact, about one-third of companies plan to exceed expectations. Of course, stating these as objectives is not as easy as attaining these goals, but it’s a positive sign that companies are taking a more proactive stance on ESG.
Conclusions and Recommendations
Take a Balanced Approach to Business Sustainability
Companies will have to continue to deal with business risk and disruption. It is the status quo. Although companies are moving away from the crisis response to COVID, they are still dealing with supply chain, energy, workforce, and financial market issues that are getting worse due to factors like the conflict in Europe.
Companies must focus on business fundamentals and be agile to adapt to changing circumstances so they can drive long-term business success. They need to take a balanced approach to address all of the pillars of business sustainability, including:
- Digital Transformation / Adopting New Technology
- Product / Service Innovation and Agility
- Workforce Development
- Environmental and Social Sustainability
- Adopting New Business Models
Place Greater Emphasis on ESG
The most surprising finding in this year’s study is a significant rise in focus on ESG. Survey results show an increased recognition of ESG’s role in maintaining success and profitably over the long term. Customers and markets are now demanding social and environmental sustainability.
Although prior surveys showed an awareness of these needs, there was a significant disconnect between awareness and action. The most dramatic change in the data is that companies report that they are taking action. Respondents report that they are actively pursuing ESG goals, including:
- Renewable energies
- Circular economy
- Sustainable production
- Decarbonization / reducing carbon
*This summary is an abbreviated version of the research and does not contain the full content. For the full research, please visit our sponsor Dassault Systèmes (registration required).
If you have difficulty obtaining a copy of the report, please contact us.