What: McKinsey reflects on how to organise sustainability with business performance and profitability in mind.

Why it is important: Companies can make money or earn a few productivity points if sustainability is addressed properly, which is still seldom the case. It is still seen as a side area including a significant amount of reporting, and not enough addressed as an actionable component of the business per se.

Even though sustainability is an increasingly important topic, most of the companies remain ill-equipped in terms of organisation and how to treat it as a material business issues (away from investors relation, PR and CSR).

Instead of having reporting and relationship coordination capabilities, McKinsey argues that organisations should empower executives and hold them responsible on the impact created.

This implies making clear choices on the topics inserted in the sustainability umbrella: new low-carbon businesses, green products, environmental and social compliance…. McKinsey then suggests 4 approaches :

1) Design according to sustainability topics, not sustainability overall. Sustainability is a catchphrase that can include many elements. Topics that matter in sustainability should be the ones important for the business or where the company is positioned to make a difference. In order to assess this, the evergreen materiality assessment method can be helpful to design a short list of priority topics. Also, when it comes to reporting sustainability work at the topic level, McKinsey suggests that a modular organisational design is better than one holistic, central organisation. For instance, some business units might be better equipped to follow and report a specific topic than HQ.

2) Give your central sustainability team the decision rights to execute changes. Large teams are not a prerequisite to be successful. What is key is to make sure that the teams in charge have the mandate to incubate new ideas and integrate them within the company. This involves the possibility to engage the board of directors on topics, to hold others accountable, enlist the needed leaders and define the agenda.

3) Find the structure that best fits sustainability agenda and the organisation as a whole. There is no ideal structure when it comes to sustainability.

McKinsey identifies general patterns:

• Large central team with few business-unit resources,
• Lean central team with decisions rights and many business-unit resources,
• Central teams that deploy agile or SWAT teams to business units.

4) Prioritize the design of processes and governance rather than reporting lines, that account for sustainability’s complexity and dynamic nature. It is critical to think about redesigning sustainability -related processes and governance early on, according to some guiding principles:

• Central teams should be empowered to make decisions on topics that individual business units can’t resolve on their own. If they can’t neither, the topic should go up to the C-Level,
• Set aside a pool of capital allocations dedicated to sustainability initiatives, as they have different risk-return profiles and uncertainty than other investments,
• Develop specific metrics taking on the good business practices: setting measurable targets (both financial and non financial), establishing incentives, and set up performances review.

organizing for sustainability success where and how leaders can start