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What Does "Sustainability" Mean in Business?

• 10 Oct 2018

A growing number of organizations are integrating sustainability into their business strategy —realizing they can do well by doing good. In a recent McKinsey survey , 70 percent of respondents said their companies have a formal governance of sustainability in place. But what exactly does it mean to be “sustainable” in business?

In business, sustainability refers to doing business without negatively impacting the environment, community, or society as a whole.

Sustainability in business generally addresses two main categories:

• The effect business has on the environment
• The effect business has on society

The goal of a sustainable business strategy is to make a positive impact on at least one of those areas. When companies fail to assume responsibility, the opposite can happen, leading to issues like environmental degradation, inequality, and social injustice.

Sustainable businesses consider a wide array of environmental, economic, and social factors when making business decisions. These organizations monitor the impact of their operations to ensure that short-term profits don’t turn into long-term liabilities.

Examples of Sustainability in Business

Many successful organizations participate in sustainable business practices, however, no two strategies are exactly the same.

Sustainable business strategies are unique to each organization as they tie into larger business goals and organizational values. For instance, sustainability in business can mean:

• Using sustainable materials in the manufacturing process
• Optimizing supply chains to reduce greenhouse gas emissions
• Relying on renewable energy sources to power facilities
• Sponsoring education funds for youth in the local community

Why Is Sustainability Important?

Beyond helping curb global challenges, sustainability can drive business success . Several investors today use environmental, social, and governance (ESG) metrics to analyze an organization’s ethical impact and sustainability practices. Investors examine factors such as a company’s carbon footprint, water usage, community development efforts, and board diversity.

Research shows that companies with high ESG ratings have a lower cost of debt and equity, and that sustainability initiatives can help improve financial performance while fostering public support. According to McKinsey , the strongest motivating factors to adopting a sustainable mindset in 2017 were to align with a company’s goals, missions, or values; build, maintain, or improve reputation; meet customer’s expectations; and develop new growth opportunities.

The overlap between social and environmental progress and financial gain is called the shared value opportunity . In other words, “doing good” can have a direct impact on your company’s ability to “do well.” Due to this opportunity, it’s clear why many businesses have adopted these practices. Find out how to make your business more sustainable by following these four steps to align your strategy and mission to create shared value.

How to Create a More Sustainable Business Strategy

There are several ways you can go about transforming your organization’s purpose into performance. Here are a few steps to follow to create a more sustainable business strategy .

1. Assess the Problem and Define Objectives

The first step to driving change is assessing what sustainability means to your team, company, industry, and client. Consider the big problems each of these groups thinks is a priority.

To guide this process, consider asking questions, such as:

• How much waste is the organization creating?
• Is our company culture struggling?
• Are our hiring practices attracting diverse job candidates?
• Is our product targeted to help a certain audience?
• What impact does our company have on the local community?

Answering these types of questions will help you establish your company’s sustainability objectives.

• Quick Tip: Need help defining your sustainability objectives? Take the SMART goals approach as you move through these steps. Making sure your goals are “SMART”—specific, measurable, achievable, relevant, and time-bound—in this early stage can save you time in the future.

2. Establish Your Mission

Once you’ve agreed on concrete objectives, you’re ready to define your company’s mission. A distinct mission statement is an important part of becoming a more sustainable business.

An effective mission statement outlines your company’s focus on “doing.” It should capture your organization’s values and purpose and serve as a guiding light of why you do what you do. In other words, your mission statement should define your company’s five Ws: who, what, when, where, and why.

Here are two examples of companies with effective mission statements:

• Eyewear brand Warby Parker’ s mission is “to offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses.”
• Build the best product
• Cause no unnecessary harm
• Use business to protect nature
• Do not be bound by convention

In each, it’s clear what the company’s values are and how they’re executing against them.

• Quick Tip: Consider how your mission statement will grow as your company scales. A mission statement should help a business evolve with the market , not hinder internal capabilities to innovate and disrupt. For this reason, make sure your objectives can be extrapolated from your mission statement.

3. Craft Your Strategy

Once you’ve created a strong mission statement, you’re ready to realign your organization with a sustainable business strategy .

In crafting a sustainable business strategy, it’s important to ensure your company remains profitable. You can’t help your cause if you can’t stay in business. As proven, your sustainability efforts may help you become more profitable.

Consider the triple bottom line , which refers to how a company’s actions impact profit , people , and the planet . With this framework in mind, you can develop a sustainable business strategy that's also profitable.

Small changes can be the starting point for large-scale impact. For instance, does your company typically leave the electricity and heat on overnight, even when there are no employees on site? Imagine how much savings could be realized, in both cost and energy resources, if the last person in the office shut them off, or if you used a timer or motion sensor to automatically turn them off after the last person left.

What about the consumers willing to pay more for a sustainably produced product? A Unilever study found that 33 percent of consumers want to buy from brands “doing social or environmental good,” creating an opportunity in the market for sustainable goods.

Explore industry-specific strategies that can increase your operational efficiency while driving social and internal value. Putting in the work to build a robust sustainability strategy can help both your company and the environment in the long term.

• Quick Tip: Need a starting point for crafting your strategy? Consider internal and external opportunities to create value around your mission. Ask your team questions like, “Will our customers pay more for our product if we produce it more sustainably?” or “Can an enhanced business process decrease our emissions?” If the answer to either of those questions is “yes,” you may have the beginnings of your strategy, while simultaneously increasing your productivity and profit.

4. Implement Strategy and Assess Results

It’s one thing to talk about a newfound motivation to do well and do good, but it’s another to take a public stance, pledge quantifiable results, and actually achieve them. With your mission and strategy solidified, you’re ready to make strides toward reaching your objectives.

As you’re implementing your strategy , remember to revisit your process periodically to assure your objectives, mission, and progress remain aligned.

• Quick Tip: Unsure of where to start? Ask yourself if there are any areas where your mission can quickly have a great impact. Consider partnering with an organization that has a similar mission to yours. Aligning your missions can help drive progress fast. Partnering with an established player can also enhance your credibility.

Sustainable Business for a Greater Impact

You’re now equipped with four simple steps—from purpose to performance—that can help you create a more sustainable business.

When objectives become a purpose, a powerful story is established. That story will drive your mission and allow you to create an actionable plan. Don’t worry if results don’t come immediately; the road to 100 percent sustainability is long and may require testing a few different approaches for you to make the greatest impact.

Are you interested in learning more about how to turn purpose into profit and create business models that drive change? Explore our online course Sustainable Business Strategy .

This post was updated on January 21, 2022 . It was originally published on October 10, 2018.

About the Author

Sustainability in business refers to a company's strategy and actions to reduce adverse environmental and social impacts resulting from business operations in a particular market. An organization’s sustainability practices are typically analyzed against environmental, social and governance (ESG) metrics.

As we face irreversible changes in the Earth’s system, the threat of climate change has become too risky to ignore. The exceedance of environmental thresholds is raising concerns about domino effects in global natural systems and societies. Businesses are seeing both pressure and opportunity to establish sustainability goals if they haven’t already.

Even during the COVID-19 pandemic, companies continued to align to the United Nations General Assembly sustainable development goals (SDGs) set in 2015 and intended to be achieved by the year 2030. The SDGs establish universal goals that provide a roadmap for sustainability in business in target areas such as poverty, inequality, environmental degradation and climate change. 

Examples of sustainability in business:

• Improving energy management efficiency by using alternative power sources and carbon accounting.
• Deploying infrastructure that reduces greenhouse gas (GHG) emissions, preserves water resources and eliminates waste.
• Operating dynamic and efficient supply chains to empower a circular economy, encourage reuse, design out waste, promote sustainable consumption and protect natural resources.
• Enabling sustainable development by assessing risks and improving resiliency while adhering to external regulations and development goals.

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We’re doing business in an unpredictable world. Climate change, dwindling natural resources, and ever-increasing demands on our energy and food supply are disrupting business operations and supply chains in unexpected ways. It’s more important than ever for private and public organizations to fundamentally rethink the way they function. Transforming into a successful sustainable business requires new levels of resilience and agility, rooted in responsible practices that preserve our planet.

Sustainability is a business imperative and should be core to the strategy and operations of every business. The reasons for this are both ethical and financial:

• Employees are increasingly looking for mission-driven, purpose-led employers who care about the planet when deciding where to work. 71% of employees and employment seekers say that environmentally sustainable companies are more attractive employers. 1
• Consumers are willing to pay a premium for goods from brands that are environmentally responsible. 80% of consumers indicate sustainability is important to them. 2
• Governments, investors, employees and customers are demanding new levels of enterprise accountability, including action to address climate change.
• Many of the world’s top economies have or are developing corporate disclosure requirements around environmental impact, driving businesses to curb GHG emissions. 3
• The rise of ESG investment criteria and sustainable investing means that a sustainable business is inherently more attractive to the rising numbers of responsible investors. Investment in ESG assets may reach USD 53 trillion by 2025, representing over a third of global assets. 4

To safeguard our planet and our future, companies need to drive decarbonization, meet environmental regulatory requirements and compliance deadlines, and improve resource consumption. Those paving the way in sustainable business practices are embracing new business models to win customers, increase brand loyalty and uncover new opportunities to lower costs.

Companies that conscientiously integrate sustainable practices into their operations are seeing valuable business benefits. These include:

55% of consumers say environmental responsibility is very or extremely important when choosing a brand. 5 Being known as a sustainable business can improve your brand awareness and help you attract consumers that are favorably predisposed to companies actively engaged in sustainable practices.

In 2021, four out of five personal investors planned to act on sustainability or social responsibility factors in the following 12 months. 6

Governments will continue to expand regulations and corporate SDGs. Stay ahead of the curve by implementing sustainable solutions early on to meet these new regulatory requirements and continually capture, measure, benchmark and report on ESG performance.

The COVID-19 pandemic has accelerated digital transformation in most companies. If that transformation is sustainable, you’re building a more resilient business that is ready for disruption and new opportunities.

Employees seeking purpose-driven employment want to work for sustainable and socially responsible companies. By building a reputation as a sustainable business, you can attract and retain the right employees for your company.

By implementing sustainable practices that reduce resource consumption and optimize operational efficiencies, today's change agents become tomorrow’s winners as they improve their bottom line. While efforts that have greater overall impact may be more costly to implement at the outset, the long-term gains will justify the investment.

Early leaders in enterprise sustainability are applying digital technologies such as artificial intelligence (AI), Internet of Things (IoT) data, blockchain and hybrid cloud to help operationalize sustainability at scale. In the process, many are uncovering opportunities to increase efficiencies while creating more motivated, inspired employees and more satisfied, loyal customers. The key to a successful sustainability strategy is to balance environmental drivers with key differentiators and market demands.

Step one to creating a sustainable strategy  is to ensure stakeholders have a clear and agreed-upon vision for the future state of the business. This might require outside help to get everyone on the same page. IBM Garage™ for sustainability experts can help your organization identify top challenges and opportunities, prioritize critical actions and measure outcomes against sustainability and business goals to realize results in weeks instead of months. 

Next, follow a timebound framework approach to implementing the sustainable vision across every aspect of your organization. Document everything in an environmental management system with defined roles, responsibilities and accountability.

Finally, start with concrete initiatives that can generate tangible, measurable results and show value. This will demonstrate the value of sustainability in business to obtain more buy-in, create momentum, and scale. 

There are five key focus areas to plan a resilient and profitable path forward:

The past decade has had the largest natural disaster impact on record. Organizations must factor the impact of climate change, which is causing extreme weather and climate events, into their business operations in a scalable and repeatable manner. Prepare for disruption with solutions that bring together multiple data sources, including proprietary, third-party, geospatial, weather and IoT data, with advanced analytics. Predict and plan for critical weather events to enable sustainable development and ensure business continuity. Reduce the operational costs and complexity of ESG compliance and reporting.

Global challenges of climate change and environmental degradation, security, privacy and resource management require businesses to ensure their infrastructure is designed and managed with resiliency in mind. By using intelligent asset management, monitoring and predictive maintenance, organizations can extend the life of assets, reduce downtime and maintenance costs, optimize maintenance, repair and operations inventories, reduce CO 2 emissions and eliminate waste. This will help them deliver against ESG goals with profitability.

Consumers are becoming more concerned about the traceability of the goods they purchase, and supply chain leaders are looking to invest in circular economies that encourage reuse. Blockchain solutions can provide greater supply chain visibility with up-to-the-minute inventory views and performance insights that help build trust and transparency, assuring authenticity from origin to consumption while reducing waste and lowering cost to serve. Tackle complex Scope 3 emissions challenges by establishing product provenance, and minimize logistics-related emissions by optimizing fulfillment and delivery with advanced AI.

Enabling clean electrification at scale will require leaders to come together in new ways to rethink how electrical systems operate and their role in a net-zero GHG emissions economy. Drive the transformation to decarbonization by enhancing grid efficiency, safety, reliability and resilience with intelligent asset management for energy and utilities. By implementing smart metering to better understand actual resource usage, you can keep critical assets and resources operating at maximum efficiency, improve equipment operations, lower costs and enhance services through automation.

Companies must embed sustainability into the fabric of their business to get the insights they need to operationalize at scale. This enables new business models and platforms to achieve sustainability goals, increase operational efficiencies, comply with regulatory requirements, expose innovation opportunities, and improve the customer experience while creating competitive advantage.

There are several challenges to overcome in the pursuit of becoming a truly sustainable business:

Customer readiness

While the mindset around sustainability is shifting, no business can afford to be left behind, and few can financially afford to be too far ahead of the appetite for sustainable offerings. Co-creating a sustainable future requires a deep understanding of your customers and having partners with the right relationships and ecosystems to bring them along on the journey.

Implementing sustainable business practices typically requires higher upfront investments. In the short term, it will often be cheaper to stick with the status quo. Some organizations will need help building an investment case to show how immediate investment will result in more durable profitability over the long run.

Systemic inertia

While sustainability is an important goal, it often isn’t seen as more important than other key priorities that may provide benefits sooner. Many businesses plan in ten-year increments, so while a 2050 commitment is good, it often isn’t enough to drive sufficient action in this decade, from a planning standpoint. It comes back to reframing risks as opportunities and building the case that acting on sustainability now is necessary to achieve future sustainability in business.

Lack of tools, insights and expertise

Being unprepared to develop a corporate sustainability vision, strategy and framework is a monumental risk. Companies may lack the ability to implement sustainable solutions or even know where to start. Sustainability in business is evolving and so are the answers. Every business needs an ecosystem of innovation partners to help them reinvent the world and create a sustainable future.

Insights from environmental data are changing business and societal behaviors, resulting in the emergence of the sustainable enterprise. Thus, sustainability in business is a megatrend that will continue to profoundly affect companies’ competitiveness and even survival in the market. Leaders are looking to harness the power of data, AI and blockchain to manage climate and environmental risk, optimize asset performance and resource utilization, drive decarbonization and build more sustainable supply chains.

IBM® continues its own sustainability journey, including conservation and renewable energy procurement, CO 2 emissions reduction, product and waste reuse and recycling, reduced water withdrawals and sustaining critical biodiversity. By driving continual improvements and setting new goals for environmental sustainability across its operations, IBM’s 30 years of environmental leadership can help you build sustainability solutions that are good for your business, your brand, and our planet.

Sund & Bælt is using AI and IoT to preserve and protect some of the world’s largest infrastructure, projecting lifespan extension for Great Belt bridge by 100 years, which would avoid 750,000 tons of CO2 emissions.

Farmer Connect is using IBM Food Trust® on blockchain to transparently connect coffee growers to the customers they serve, helping consumers support responsible and sustainable coffee production from farm to cup.

Yara International and IBM are using technology to advance sustainable food production and empower farmers with insights and unprecedented tools.

To help prepare Denmark for its transition to renewable energy, transmission system operator Energinet is using AI to better manage the grid and calculate the risk associated with taking equipment offline for maintenance.

The Climate Service (TCS) is on a mission to integrate climate data into financial decision making. TCS partnered with IBM Garage to rapidly scale their business to meet growing demand.

Accelerate your sustainability journey by planning a sustainable and profitable path forward with open, AI-powered solutions and platforms, and deep industry expertise from IBM.

Use ESG reporting to integrate data silos. Find new opportunities to embed sustainable practices across your operations and simplify GHG emissions reporting.

Optimize how you allocate resources to applications throughout your ecosystem with the IBM® Turbonomic® platform. Increase utilization, reduce energy costs and carbon emissions, and achieve continuously efficient operations by allowing applications to consume only what they need to perform.

Measure, monitor, predict and report on your organization’s environmental footprint while providing near real-time insights to accelerate sustainability initiatives and reduce impact to your business operations and supply chain.

Incorporate sustainability considerations into your operations and create more resilient, sustainable infrastructure by extending their life with intelligent asset management, monitoring and predictive maintenance.

Reduce waste, cost-to-serve and logistics-related emissions by optimizing fulfillment and delivery with trusted supply chain solutions that are powered by AI, backed by blockchain, and built on an open, hybrid-cloud platform.

Enhance grid efficiency, safety, reliability and resilience while streamlining maintenance and reducing outages with intelligent asset management and advanced climate and environmental intelligence for energy and utilities.

IBM Garage for sustainability experts can help you identify top sustainability challenges and opportunities, prioritize critical actions, and measure outcomes against business and sustainability goals to realize results quickly.

IBM is client zero in the battle for enterprise sustainability. Learn more about our history of environmental leadership and our commitment to net-zero greenhouse gas emissions by 2030.

Environmental risks are business risks. Learn how technology can help companies reduce their impact on the planet.

Sustainability has become central to business strategy and operations. Learn how organizations can set and achieve clear sustainability targets that deliver a competitive advantage.

IBM Turbonomic allows you to run applications seamlessly, continuously and cost-effectively to help achieve efficient app performance while lowering costs.

• “ Sustainability at a turning point ” IBM Institute for Business Value, May 2021
• “ Meet the 2020 consumers driving change ” Research Insights, June 2020
• “ The future of sustainability reporting standards ” (link resides outside ibm.com) EY, June 2021
• “ ESG assets may hit USD 53 trillion by 2025, a third of global AUM ” (link resides outside ibm.com) Bloomberg Intelligence, February 2021

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How to Develop a Small Business Sustainability Plan

If you’re a small business owner, you may be wondering what you’ll gain by adopting a small business sustainability plan. In a word, plenty! Regardless of your industry, adopting sustainable business practices can improve your bottom line—in both the traditional and the environmental sense.

Your cost savings, reduced risk, positive brand association, improvements to the environment and public health, and ability to meet demands for eco-conscientious products and services will more than offset the costs of up-front integration of sustainability initiatives. In other words, your small business sustainability plan’s initial costs are a wise investment!

What Is a Business Sustainability Plan?

A business sustainability plan is simply something an organization develops to achieve goals that create financial, societal and environmental sustainability. A business impacts communities and resources, so taking these steps to sustainability is in the best interests of the environment, the business owner and the consumer.

Reasons to Build a Sustainable Business

Making the case for a sustainable business is simple: an environmentally friendly business can be a profitable one. You can decrease your business’s negative impact on the environment and potentially save money. Just take it from the many  companies around the world that generate at least $1 billion a year in revenue from sustainable products or services. These companies manufacture everything from burritos to sports cars. Collectively, these businesses generate more than $100 billion in annual revenue from their green product lines alone, and they can outperform competitors by nearly 12 percent annually.

Small businesses can easily scale these practices and implement them in their own organizations through a small business sustainability plan. From saving money and promoting public health to improving public relations, the benefits of building a sustainable business might surprise you.

Benefits of a Small Business Sustainability Plan

• Reduce energy use. From installing ENERGY STAR products and appliances to using LED light bulbs and automatic taps, if you reduce waste, you will increase your business’s efficiency, potentially save money on energy and contribute to overall small business sustainability. You can even start small: encourage employees in energy-saving practices such as turning off lights, carpooling, or telecommuting whenever possible.
• Improve public health.  Be committed to going beyond mere compliance with baseline government standards. A sustainable business will implement changes that reduce emissions, improve air quality, and identify products that reduce concerns about health and safety liability. This promotes higher standards of public health and environmental protection.
• Be a trailblazer.  Not too long ago, no one thought a sustainable business could also be a profitable one, so many industries still lack sustainable companies. Become an inspiring voice of advocacy beyond the four walls of your organization, and blaze trails by creating value for employees, consumers and the public. The visionary thinking and passion behind your business sustainability plan will be remembered—and will yield dividends—for years to come.
• Attract green-conscious consumers—and publicity. Improve public relations with your sustainable business by becoming attractive to Earth-conscious consumers and raising your brand’s value. And remember to let the public know when you implement your environmentally friendly policies. Learn more about the  benefits of running an environmentally friendly business here !

5 Steps to Sustainability for a Small Business

If you’re ready to develop your small business sustainability plan, we’re here to help! With these five steps to sustainability based on going above and beyond mere regulatory compliance , you’ll be equipped to make your business more up to date and efficient. The result will be rewards for both the environment and your bottom line.

Step 1: Learn about Sustainability

The first step in creating a small business sustainability plan is learning what, exactly, sustainability is all about.

• Knowledge is power. Use your resources wisely! There are many guides out there that offer suggestions on sustainability as well as renewable and sustainable energy. Use them as a jumping-off point.
• Profits, people and planet. Internalize the idea that sustainability within your business means managing your triple bottom line: your financial, social and environmental impacts, obligations and opportunities.
• Going green vs. going sustainable. You may be wondering, what is a green business? Green products and services directly reduce the environmental impact when compared to other products and services— sustainability is a broader concept. It’s about the long-term, multifaceted impacts and implications of your products and services. But you can use green language in your small business sustainability plan and campaign using green goals to measure your total sustainability success.
• Out with the old (way of thinking). Forget the outdated “take-make-waste” worldview, and adopt the “borrow-use-return” model. It’s all about a perspective shift. The key is to see the business, the self, the economy and the household as connected with—instead of separate from—the environment.

Step 2: Assess Areas of Improvement

If the federal government and major corporations can find ways to improve sustainability, so can your small business! It just takes some research.

• Learn the laws. From local development laws to self-regulation in your industry to international treaties, many standards are already on the books in terms of sustainable practices. The Environmental Protection Agency ’s website is a great place to start in your research.
• Check your compliance. At a minimum, your business should be in total compliance with any laws or standards already in place. Research cost-effective ways to improve compliance, such as through pollution-prevention techniques and innovation.
• Assess global issues. Research issues such as global warming, energy and fuel crises, and ecosystem decline to see whether your practices are a contributing factor. This will guide what small business sustainability goals you set in terms of improvement.

Step 3: Find Opportunities

Start embracing the entrepreneurial spirit of innovation and asking yourself the hard questions: check out these opportunities for creating the best small business sustainability plan possible.

• Innovate. Success in implementing sustainable business practices is directly related to innovation. If you want to meaningfully reduce waste and energy consumption, you’ll need to innovate, whether you’re a start-up or a thriving business. From problem solving to finding cheaper and better ways of doing things, innovation ranges from simple changes to implementation of complex new technologies.
• Get employee input. Bring in employee ideas and support; employees will take responsibility for things like energy efficiency and come up with solutions that will help you implement and improve sustainability.
• Self-reflect. Ask yourself a few questions, and you’ll find numerous opportunities for improvement: What strengths does my business bring to the table that can play a unique role in sustainability? Does my company create an overabundance of waste? Do the companies I work with create mass amounts of waste?

Step 4: Create a Vision

Your vision for sustainability is all about what makes you and your business tick.

• Find your company’s passion. What is your company passionate about? Choose from a few environmental issues (e.g., global warming, air pollution, waste disposal, water pollution, urban sprawl), and focus on where you can have a meaningful impact.
• Be specific about your small business’s vision. Create a separate vision for each section of your small business, from those on the front lines to those working behind the scenes in different departments.
• Define your sustainability model’s terms. Be sure to define a few words that describe your business’s specific sustainability model. This will help you give your employees the ability to take ownership of your overall vision.

Step 5: Implement Changes

The final of the five steps to sustainability is an exciting one. Implementation!

• Communicate clearly. Adequately communicate your new sustainability plan across your entire company. Educate your employees to ensure successful implementation, and make sure all leaders are involved.
• Change policies. Ensure your current policies align with your sustainability plan. If not, create new ones that are specific to different departments and employees.
• Review performance. Create specific, measurable and attainable written goals, and develop metrics on how to track the success of your changes. This could be as simple as comparing a previous energy bill under the old policies with a new one that comes after you’ve implemented changes.
• Get feedback . Have your leaders in the company report back to you on any difficulties they encounter in implementing changes to policies, so that you can troubleshoot how to fix them while still staying true to the sustainability model. This will help you identify opportunities for more small business sustainability.

After you’ve taken the five steps to sustainability, make sure you can substantiate your sustainability claims before going public with the environmental advantages of your products or services. You can avoid making unqualified claims by following the Federal Trade Commission’s guidelines and general principles that apply to environmental marketing. You’ll learn how consumers will interpret your claims and how to support and qualify your claims without being misleading. Then you’ll be ready to let people know about your small business sustainability plan. The financial, societal, environmental and public relations rewards are sure to follow!

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Social Impact

/ article, four steps to sustainable business model innovation.

By  David Young and  Marine Gerard

This article is part of an ongoing series that describes the concept of “Sustainable Business Model Innovation” (SBM-I) and how companies are putting it to use.

You may have noticed that every day there’s another announcement about companies making new climate commitments, asset managers outlining their plans for ESG integration, or regulators proposing new disclosures or extending producers’ responsibilities. Corporate coalitions like the World Economic Forum International Business Council and the US Business Roundtable endorse a more stakeholder-inclusive corporate capitalism while industry coalitions work to solve their members’ shared sustainability challenges. And employees and consumers call on employers and brands to take environmental and social challenges seriously. All of this makes clear that we have entered a new era for business, one in which sustaining competitive advantage requires companies to transform their business models for sustainability.

Company leaders need a broader, more systemic understanding of these dynamic sustainability challenges and the ways that their companies can play a part in addressing them. Fortunately, as some farsighted businesses are discovering, the most powerful opportunities for profitable innovation are embedded in these same challenges. Let’s consider three examples.

The first is Telenor, the leading Norwegian mobile operator. In 2008, having entered Pakistan three years earlier, it joined forces with the microfinance bank Tameer. With support from the Bill and Melinda Gates Foundation, the International Finance Corporation (IFC), and the Consultative Group to Assist the Poor (CGAP), they launched a new service called Easypaisa, providing mobile-based financial services to the unbanked and underbanked. By the end of 2019, Telenor Microfinance Bank (the result of Telenor’s acquisition of Tameer) boasted the largest branchless banking service in Pakistan, growing its Easypaisa mobile wallet user base to 6.4 million, its depositor base to 17 million, and the transactions volume through its agent network to about PKR 1 trillion (approximately $6 billion). This service has significantly advanced financial inclusion in Pakistan and established Telenor as a major telecom enterprise there.

Or consider Ajinomoto, a global food and biotech company based in Japan. It produces seasonings, sweeteners, and pharmaceuticals. As part of its 2030 vision and growth strategy to “help one billion people worldwide lead a healthier life,” Ajinomoto is exploring a new "personalized nutrition for health" business. Combining its core nutrition expertise and new technology, the company aims to provide customers with digitally enabled diagnostics, analytics, and product recommendations. These would guide people toward the kind of well-balanced amino acid intake that boosts cognitive and physiological functions and helps prevent aging-related diseases like dementia—a prominent societal issue in Japan.

Another example is Indigo Ag, a US-based agricultural technology startup that was valued at $1.4 billion in 2017. In 2019, the company launched a service called Indigo Carbon to help incentivize farmers to remove carbon from the atmosphere and sequester it in their soil. The service provides technologies and recommendations for regenerative agriculture practices. The ultimate goal is to pay farmers for each ton of carbon captured and then sell certifications to companies looking to offset their carbon footprints. By supporting a transparent carbon credit marketplace, Indigo Carbon creates benefits for all participants: the farmers, the companies buying the offsets, the planet, and its own business.

What do these three companies have in common? Regardless of industry, geography, or size, they (and dozens of others like them) are innovating business models—building on and expanding beyond their core assets and capabilities—to address significant environmental and societal challenges in their local contexts. In this way, they create new sources of value and competitive advantage for their business.

The Four-Step Innovation Cycle

In our research, we have studied more than 100 cases of companies that are practicing what we call “Sustainable Business Model Innovation” (SBM-I). We have found that the most advanced of these companies, the “front-runners,” combine environmental, societal, and financial priorities to re-imagine their core business models and even shift the boundaries of competition.

One might expect the front-runners to consist mainly of smaller enterprises, branded through their visible social or environmental missions. But most of them are actually global corporations that have gradually developed new business models that create both sustainability and long-term competitive advantage.

The core practice for SBM-I is an iterative innovation cycle, shown in Exhibit 1. With each round, the company gains scale, experience, and market presence for its initiative; these reinforce both the business advantage and the environmental and societal benefits generated.

1. Expand the Business Canvas

So how can you bring this cycle to life in your company? The first step is to develop a rich understanding of the broader stakeholder ecosystem in which the company operates and of the environmental and societal issues and trends that might affect this ecosystem. As part of this diagnosis, you explore the potential impacts of ecosystem dynamics and issues on your business model. This will allow you to identify a range of business vulnerabilities and opportunities tied to environmental and societal issues. Some of these are good starting points for focused SBM-I.

More specifically, we recommend the following:

• Expand the business canvas by mapping the wider ecosystem of stakeholders and societal issues in which the business operates. Ask yourself: Who are the key stakeholders in the system? What are the material environmental and societal issues and trends? How do stakeholders and environmental and societal issues directly or indirectly impact all the different parts of the business model?
• Stress-test the business model (current or potential) within this broader map. How do stakeholder dynamics and environmental and societal issues constrain or hold back your business model? Where do limitations in the system create vulnerabilities for the business model? 
• Extrapolate trends and build materiality scenarios. Look at today’s environmental and societal trends and think about how they might evolve over time. In addition, build scenarios to envision completely different, more extreme versions of the future (as opposed to linearly projecting trends) to stretch your thinking. And then, under these scenarios, ask yourself: How might environmental and societal issues change over time? How might stakeholders’ perceptions of and attitudes toward those issues shift? What would be the effects on the system map and the business model?
• Explore scaling up the business. Imagine the business model at different scales of activity. Suppose your business grew three- or five-fold over the next few years. Where might breaking points or opportunities arise? What happens to the externalities the business creates? How do risks and opportunities change?
• Identify innovation opportunity spaces or “strategic intervention points” (SIPs). These are points at which targeted action or innovation could alter stakeholder dynamics, positively impact the environmental or societal issues, reduce the vulnerabilities of the business model, or even create new business value opportunities.

Look for difficulties, gaps, and risks to arise from the analysis. For example, your company’s own lines of business might contribute to the environmental or societal issue and impact the growth of the business today. Also, don’t just rely on your own thinking. Cultivate outsiders who can provide complementary and thought-provoking perspectives.

In a recent interview , Christine Rodwell, former vice president of business development cities at Veolia, explained that “to walk the talk on sustainability, companies need to listen to their external stakeholders. They should create a committee of critical friends (across public, social, and academic sectors) who will challenge them and advise them to develop business solutions that create meaningful environmental and societal benefits.”

To understand what expanding a business canvas looks like in practice, consider the hypothetical example of a consumer packaged goods (CPG) manufacturing company engaged in a real-world dilemma: the toxic effect of plastic packaging on natural habitats, particularly in the world’s oceans. About 18 billion pounds of plastic waste enter the world’s oceans each year. This is equivalent to five grocery bags of trash on every foot of coastline. Plastic pollution causes extensive damage to life on land and at sea, including toxic contamination, strangulation, blockage of digestive passages, and endocrine-related reproductive problems for people as well as animals. Concerns about this problem reached a tipping point in the mid-2010s, as studies confirmed the damage.

As industrial leaders in this field know all too well, the complexities of gathering, cleaning, sorting, recycling, and reusing plastics have made it costly and difficult to address this issue. Companies that step forward with effective and financially viable solutions will not only gain enormous goodwill but are also likely to build high-growth businesses.

But where do you start? And where do you focus innovation efforts and investments to tackle such a complex, multifaceted environmental issue? Reflecting the SBM-I cycle approach, Exhibit 2 shows what a stakeholder-centric systems map for the plastics issue could look like from the point of view of a CPG company. This map uses basic systems dynamics principles to capture the most significant interrelationships among the CPG company, the environmental issue at stake, and key stakeholders (consumers, policymakers, civil society, waste collectors and recyclers, and plastics manufacturers). The arrows show patterns of cause and effect. For example, when urbanization increases, so does the cost of landfilling.

The power of this diagram (versus more traditional, linear depictions) comes in part from its ability to reveal where delays, rebound effects, or tipping points might be active in the system. For instance, the node labeled “environmental and recycling awareness” will influence changes in several consumer habits—but only after a delay. Such awareness cannot be seen as a quick-fix solution, but over time it will help change the dynamics of the entire system.

The boxes in the exhibit represent the opportunity spaces or strategic intervention points (SIPs) that become evident during this step. In this example, a few of the SIPs for our CPG company are as follows: shifting to new packaging formats; setting up plastic collection initiatives; lobbying for government programs like deposit return systems; joining precompetitive coalitions that invest in recycling infrastructure and new recycling technology; and educating and nudging consumers to consume and dispose of packaging in more sustainable ways.

2. Innovate for a Resilient Business Model

The first step in the cycle will have led you to identify the opportunity spaces that hold potential for both financial returns and societal value. You must then transform your business model, or imagine an entirely new one, so that you can seize these opportunities. In this second step, you innovate and develop new aspects of that new business model. You are seeking to bypass current constraints, break tradeoffs, deploy technological advances, and perhaps integrate activities that were previously kept separate. You should ideate a new business model to integrate and reinforce both business advantage and environmental and societal benefits.

In related research , we introduced and defined seven archetypal business models that optimize for both societal and business value. Here we illustrate how they might apply to the plastics waste challenge.

• Own the origins. Change production inputs to generate societal and environmental benefits. For instance, HP is working with waste collectors in a partnership with the First Mile Coalition in Haiti. HP has invested $2 million in a local facility to produce clean, high-quality recycled plastics that can then be used as input in an array of HP personal computer products and ink cartridges, reducing the environmental footprint of those products. Four years after its launch in 2016, the program had already diverted approximately 1.7 million pounds (771 metric tons) of plastic materials (equivalent to more than 60 million plastic bottles) from waterways and oceans and created income opportunities for 1,100 Haitians (with 1,000 more expected in coming years). Thanks to this and other efforts, HP boasted the world’s most sustainable PC portfolio in May 2020. This included, for example, the HP Elite Dragonfly, the first PC manufactured with ocean-bound plastic.
• Own the whole cycle. Create environmental and societal impact by influencing the product usage cycle from cradle to grave. Since the 1990s, Grupo AlEn, a leader in home cleaning products based in Monterrey, has invested and scaled up its in-house plastic recycling operations to become one of the largest plastic recyclers in Mexico. AlEn now operates 30 routes and 6,200 collection points in the Monterrey area, recycling more than 50,000 tons of PET and HDPE per year. This business expansion has given AlEn an exclusive supply of recycled plastics, enabling it to create distinctive, greener packaging at a relatively stable cost.
• Expand societal value. Expand the environmental and societal value of products and services, and capture value in pricing, market share, and loyalty. In 2018, PepsiCo acquired Sodastream, the world’s leading at-home sparkling water maker. Building on this technology, PepsiCo has begun to bring packaging-free, customizable beverages to workplaces, college campuses, and airports. This new business positions PepsiCo to win in the increasingly personalized beverage market and to save an estimated 67 billion single-use plastic bottles by 2025.
• Expand the value chains. Innovate by layering onto the business ecosystems of customers or of partners in other industries. In Chile, Algramo’s innovative bulk distribution system replaces single-use plastic with RFID-equipped reusable containers. Since 2013, the startup has scaled up its business by partnering with more than 2,000 family-owned stores across Santiago. They dispense affordable food and staple products “al gramo” (Spanish for “by the gram”) and reward customers for reusing containers. Algramo’s model not only helps the environment but also benefits the urban poor, who previously had to pay high prices for small quantities of products, in wasteful, individually wrapped packets.
• Re-localize and regionalize. Shorten and reconfigure global value chains to bring societal benefits closer to home. In Brazil, BASF has developed a solution to a local issue: waste certificate fraud. Some collectors and recyclers claim credits for recycled materials that they didn’t actually process or that aren’t actually recycled. Partnering with Kryha, a digital blockchain studio, and Recicleiros, an NGO that supports waste collectors and their cooperatives, BASF developed an online platform called ReciChain. This platform enables accurate and secured data tracking throughout the recycling value chain, to improve the quality of operations and guarantee the validity of manufacturers’ certificates and claims.
• Energize the brand. Encode, promote, and monetize the full environmental and societal value of products and services, and use that leverage to engage customers in novel ways. The innovative manufacturing company 3M released the latest version of its Thinsulate insulation product in 2019. This is “100% recycled featherless insulation” made from recycled plastic bottles. Building on this accomplishment, 3M worked with the high-end apparel brand Askov Finlayson to create “the world’s first climate-positive parka,” producing 3,000 parkas in 2019 as an inspiring demonstration project.
• Build across sectors. Create new business models in collaboration with government and nonprofit organizations, particularly in rapidly developing economies, to improve the business ecosystem and societal proposition. Together, SC Johnson and the social enterprise Plastic Bank have opened nine recycling centers in Indonesia to collect and recycle plastic before it reaches the ocean. This partnership also plays an important societal role, helping families in impoverished areas who collect plastic waste by buying it at a premium from them. In 2019, the partnership announced a ground-breaking, three-year deal to create 509 plastic collection points, including locations in Thailand, the Philippines, Vietnam, and Brazil. In aggregate, these points are expected to collect 30,000 metric tons of plastic over three years—the equivalent of stopping 1.5 billion plastic bottles from entering waterways and the ocean. On the business side, among other benefits, this collaboration will secure a steady supply of high-quality recycled plastics and help SC Johnson meet its 2025 packaging goals.

These seven archetypes can be starting points for developing your own business model innovation. Adapt them, and combine several together to develop a more comprehensive solution to environmental and societal issues relevant to your enterprise. Interestingly, among the 102 in-depth SBM-I cases that we explored in our research, 75% of the SBM-I leaders (the “front-runners”) combine three or more archetypes. This contrasts with less than 30% in the two other groups: the “ecosystem leaders” and the “initiative leaders,” whose efforts tend to be more narrowly focused.

In addition to exploring the possibilities inherent in these seven archetypes, take inspiration in the lessons learned from SBM-I front-runners. Front-runners see sustainability as a source of competitive advantage. In line with their long-term strategies, they continuously iterate and fine-tune their business models, always seeking to deepen their beneficial impact. They explicitly seek to understand and fix the root causes of environmental and societal challenges—as some of our plastics recyclers did, addressing not just the environmental concerns but also the social aspects of the issue. These companies also use digital technologies wherever possible, to break economic constraints and unlock new solutions. They practice an intensive form of stakeholder engagement: partnering with nonprofits and governments, operating across organizational boundaries, and pooling resources with other enterprises, even competitors. Last but not least, they experiment with new forms of value capture, such as blended financing sources, to de-risk and amplify their own investments. After all, notwithstanding their environmental and social track records, the front-runners are still in business to show a profit and return investment to shareholders.

3. Link to Drivers of Value and Competitive Advantage

In the third stage of the cycle, test, iterate, and refine your business model ideas or concepts (from the second step) to ensure that they will yield the environmental and societal benefits intended, and that the benefits will translate into value and advantage for the company. A business with weak profit margins cannot invest in innovation to amplify and scale environmental and societal benefits.

The objective of this step is to keep assessing and reengineering the business model, so that it continually improves the resilience of the business and the benefits to society. The following questions, based on our research into the characteristics of robust, resilient business models , can help you navigate this part of the process:

• Can the business model scale effectively? Can it be replicated across all your business units or the markets you serve, without diminishing returns?
• Will the business model differentiate your brand or product and make it more competitive in the marketplace?
• Will it reduce the risk of commoditization, by being hard for others to imitate? Will its distinctiveness help you retain some control over pricing?
• Can it leverage network effects? For example, can it attract the kinds of customers and suppliers that make other customers feel compelled to join?
• Does the business model harness business ecosystems—including the larger industry, the value chain, and everyone who interacts with your products, services, and practices—for advantage and sustainability?
• Does the business model naturally create meaningful environmental and societal benefits?
• Will the environmental and societal benefits remain durable against changing trends over time, even as the business model scales up?
• Does the business model increase returns to shareholders as well? Are the financial benefits linked to the environmental and societal benefits in some significant way?
• Finally, does the model animate your company’s purpose? Does it boost engagement and loyalty between the company and its employees, customers, investors, and other stakeholders?

Exhibit 3 shows how a company might assess its business model against these nine questions. The resulting footprint reveals how robust and resilient the business model is and identifies where it could be improved to unlock further advantage and value for the company.

The fuller the footprint, the better. Among the front-runners in our sample, 90% score “high” on at least five of the nine attributes, as opposed to only 30% in the other groups. The front-runners also show superior average scores on every single dimension.

4. Scale the Initiative

The full potential value of sustainable business model innovation is achieved only when the new business model is brought to scale: engaging people in the company, across the supply chain, in the company’s networks, and in its ecosystems to expand impact and advantage.

To accomplish this, companies can leverage three enablers. First, partnerships with other organizations, within or across industries or sectors, can help a company pool resources, fill capability gaps, and unlock new markets. Almost 90% of the front-runners have broadened their efforts this way. Second, digital technology (leveraged by 80% of the front-runners) can help create new distribution channels that reach previously unserved or underserved populations at a fraction of the cost of their predecessors. Third, companies that adopt SBM-I tend to develop cultures and leadership values that attract and engage people inside and outside their boundaries. Indeed, all of the front-runners explicitly mention the environmental and societal impact they seek to deliver in their vision, purpose, or mission statements.

Consider the example of BIMA, a mission-driven provider of mobile-delivered health and insurance services that started operations in Ghana in 2010. Its innovative digital technology platform and its partnership model (which comprises telecom providers, mobile money providers, and insurance underwriters) have enabled it to rapidly scale its innovative business model. BIMA now provides affordable, easy-to-manage life and health insurance to more than 35 million low-income customers across ten emerging economies. BIMA’s customers have access to its services through their mobile phones. Many of them are lower income families who earn less than $10 a day. About 75% of them are obtaining insurance for the first time in their lives. These societal benefits are at the core of BIMA’s strategy and mission; the company’s website says explicitly that its “purpose is to protect the future of every family.”

The four-step innovation cycle we propose in this article offers companies a way to systematically integrate and solve for social and business value in one business model. Most of the companies that begin this journey are already skilled at optimizing for business advantage. They may already recognize the importance of taking into account their environmental and societal impacts. With this approach, they are now ready to take on innovation for a business that optimizes for both business and social value.

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Accelerating toward net zero: The green business building opportunity

Getting to net zero will require tremendous, rapid change and large-scale technology deployment across industries. The transition will create massive opportunities to build entirely new businesses.

A recent McKinsey report found that reaching net zero by 2050 could entail a 60 percent increase in capital spending on physical assets, compared with current levels. The required investments amount to $9.2 trillion per year until 2050, of which $6.5 trillion annually would go into low-emissions assets and enabling infrastructure. Our analysis  also shows that growing demand for net-zero offerings could generate more than $12 trillion of annual sales by 2030 across 11 value pools, including transport ($2.3 trillion to $2.7 trillion per year), power ($1.0 trillion to $1.5 trillion), and hydrogen ($650 billion to $850 billion) (Exhibit 1). Such a transformation of the global economy could create significant growth potential for climate technologies and solutions.

Some technologies will be key in propelling the transition to net zero. In Europe, for example, our research  suggests that just 15 technologies could drive 70 percent of the emissions abatement required to reach net zero in the region. Technologies that are mature and already available at a commercial scale, including onshore wind and solar photovoltaic, account for about 25 percent of the abatement potential in Europe, while an additional 45 percent could come from technologies that have an opportunity to be commercialized in the near future. This means that, in addition to renewable-energy technologies and electric mobility, technologies for zero-carbon residential heating (such as heat pumps), carbon capture and storage, green-hydrogen-based fuels, and industrial electrification could support decarbonization at scale.

In many markets, start-ups have been the first to scale up climate-tech businesses (renewable energy and electric vehicles, for example), while incumbents have been slower to adapt. But it’s not too late for established companies to break into still-maturing climate-technology domains, where the playing field remains wide open—provided that they move quickly. In addition, there will be room for thousands of surrounding players as these businesses develop and mature.

A recent McKinsey report found that reaching net zero by 2050 could entail a 60 percent increase in capital spending on physical assets, compared with current levels.

Building green businesses is top of mind for many leaders. In Leap by McKinsey’s state of new-business building report , 92 percent of executives say that new businesses built in the next five years will address sustainability to some extent—and 42 percent expect to put sustainability at the center of their new businesses’ value proposition. In our work with organizations that have built green businesses, we have identified ways companies could set themselves up not only for entry into a market but also for significant growth. Green business builders will likely need to plan and scale at the speed of digital companies to accelerate the transition to net zero. They’re ambitious with their growth goals and have cost advantages, often because they move quickly. Here, we share key lessons from successful green business builders.

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Moving at the speed of digital

While it took many years and significant governmental support to scale up renewable-electricity generation, broadening support for the net-zero agenda could enable the next wave of green businesses to grow more quickly.

By now, more than 3,000 companies across the world have set or are in the process of committing to an emissions reduction through the Science Based Targets initiative, 1 “Companies taking action” dashboard, Science Based Targets, accessed June 3, 2022. an institution that has created a framework around reduction commitments for businesses. Additionally, regulation (the EU taxonomy, 2 “EU taxonomy for sustainable activities,” European Commission, accessed June 3, 2022. for instance, which helps to define what economic activities in the region can be considered environmentally sustainable), investor activism, and rising consumer interest, among other factors, are pushing companies to benchmark and improve the sustainability performance of their offerings. For example, suppliers in B2B value chains are facing increasingly stringent emissions-reductions requirements as more of their customers pursue net-zero strategies. All of this is likely to accelerate the adoption of cleaner materials—such as low-emissions steel in the automotive industry, as one example—and solutions (for instance, the electrification of thermal-energy processes in manufacturing). Some sustainable products, such as low-emissions steel and recycled polyethylene terephthalate (PET), the plastic most commonly used for beverage bottles, are already seeing a price premium due to a shortage of supply versus demand.

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The development of green businesses could be much faster for an additional reason: some climate technologies can only compete on price when they are being manufactured at a large enough scale (more on this idea in a later section). The need to scale up quickly to compete could propel new green businesses to achieve execution speeds that are more familiar to the digital economy. Commercializing many green technologies will likely require significant investments in physical assets, which aren’t required for software development or digital engineering; these investments could reach billions of dollars or euros per plant. Nevertheless, green business builders can learn lessons from digital-business builders, including aggressive growth plans, working with agility, and being a first mover. Historically, scaling sustainable technologies has been done carefully, step-by-step over years, to manage both the technological and commercial risks involved.

A few companies in the alternative-proteins and alternative-dairy categories illustrate how embracing the speed of digital could create a market advantage. For one, some of these players did not allow their lack of manufacturing capacity to get in the way of growth. They were early to get their products distributed through leading fast-food and coffee chains, which helped to elevate brand awareness. Some relied on co-manufacturing, even though this typically hurts margins in the short term. And now, as their revenues have grown, some of these players are building up their own manufacturing capacity to help meet demand, often with larger plants that produce goods at lower unit costs.

In some cases these players could experience scaling pains—when demand outpaces expanded production capacity, for example. However, being early to market and growing quickly has resulted in strong market share, with the distribution and cost advantages that come along with such a position. Gross margins tend to be strong for these players, too, since many consumers have been willing to pay a premium for their products. These companies have typically reinvested profits back into the business.

The alternative-proteins and alternative-dairy examples are, of course, B2C cases. However, scaling early and quickly is an approach that, based on our experience, may help to separate strong green businesses, whether B2B or B2C, from competitors or followers in the same space.

Seven keys to scaling green businesses

For green business building, incumbents may have advantages, including access to capital and deep institutional knowledge. Some corporate leaders have identified success factors for building a new business in general , such as providing ring-fenced investment in the new business and setting realistic expectations with both internal and external stakeholders on investment needs. However, building a green business can also come with new challenges for incumbents. For example, when scaling a new climate technology, it may be difficult to balance the time it takes to validate the technology on a demonstration scale while also planning industrial-scale installations across different conditions and geographies. Start-ups  typically have been the first movers on some green ventures, as they are often equipped with a higher tolerance for risk-taking and the ability to operate at faster speeds.

Through our work with organizations that have built and scaled green businesses successfully, we have identified seven key principles.

• Lead with game-changing ambition. Effective green business builders tend to set their sights on creating something significant from the start. Game-changing ambition may mean aspiring to produce a zero-carbon product at a competitive cost (which enables a competitive price), compared with a less sustainable alternative, and scaling new capacity fast. Leaders tend to think about what it will take for the product to achieve significant market share within the next, say, five years—instead of 15—and engineer backward from there, much like in the world of digital business building. Our experience shows that operating with such ambition could result in companies reaching their targeted costs faster. By setting firm production-capacity goals, a new business might better position itself to reach lower unit costs faster and potentially be competitive on price from the start (more on cost advantages shortly). Leading with game-changing ambition could also encourage certain markets to make the shift to net zero faster. For example, H2 Green Steel, a Swedish company founded in 2020, is building a fossil-fuel-free steel mill that relies on a hydrogen-based production process. Last year, H2 Green Steel announced that total financing for the first phase of the project is approximately €2.5 billion ($2.7 billion), and the company plans to begin production in 2024. 3 “H2 Green Steel to build large-scale fossil-free steel plant in northern Sweden,” H2 Green Steel press release, February 23, 2021. Industry incumbents in Europe may have already been planning green-steel investments, but H2 Green Steel’s launch has coincided with incumbents now pursuing at least 20 other green-steel projects in the region. 4 Fastmarkets; company websites; press search.
• Secure a cost advantage by identifying a scaling break point for any new technology. Building a business around a clean technology may require analyzing different technological pathways, including some technology options that are not yet commercialized. When analyzing a new technology, leaders must understand the scale break point for cost competitiveness, so business viability can be reached as quickly as possible. Take recycled textiles, for example. Based on our experience, many fashion and apparel players are looking to introduce materials that require the scaling of textile-recycling technologies. Our analysis of one of the technologies identified the scale break point at which producing recycled man-made cellulosic fibers, an alternative to virgin viscose, would likely be cost competitive. In this case, only when average plant size and the number of plants reaches a critical scale could costs be expected to become competitive (Exhibit 2). Before committing to investments at scale, leaders may benefit from knowing the relative maturity of the technologies, assessing their performance under different scaling speeds, and understanding the environmental footprint.
• Sign up captive demand before scaling. Green business builders often tackle the commercial side of investment risk by signing up captive demand for their output before they start to physically scale—as Swedish battery manufacturer Northvolt AB did with Volkswagen and BMW. 5 “Northvolt receives $14 billion battery cell order for Swedish gigafactory from Volkswagen,” Northvolt press release, March 15, 2021; “BMW Group signs long-term supply agreement for battery cells with Northvolt,” Northvolt press release, July 13, 2020. Many green business builders—including Northvolt—also invite their customers to invest in the business up front, as a way to align interests even further. Alternatively, when larger corporations start a green business, they might themselves be the ideal first captive customer. For example, shipping company Maersk and ferry operator DFDS are major investors in a new e-ammonia project (e-ammonia is a green shipping fuel). 6 “Maersk backs plan to build Europe’s largest green ammonia facility,” Maersk press release, February 23, 2021.
• Build capacity with parallel scaling. To reach scale-up goals, the ability to drive several investments or market introductions in a limited time frame is key. Often we’ve seen leaders “parallelize the scaling” from the start—that is, initiate additional growth waves before they have completed the first one. They create a modular, replicable standard for production based on the first business deployment rather than a tailor-made, one-off pilot. They also incorporate key lessons from each growth wave into the next, as a way to help manage costs and keep ambitious deployment timelines on schedule. One example of the parallel-scaling approach is a zero-carbon metals player that is planning to start building a second plant halfway into the construction of the first—and aims to complete it in approximately half the time as the first. The parallelization of scaling is also something to consider when growing adjacent businesses.

Proactively create business ecosystems. Many green business building efforts are also value-chain-building efforts. Consider circular materials, like the recycled textiles example mentioned earlier. There is a need to secure effective collection, appropriate sorting and processing, and market-based demand for the recycled textile fibers. No one player is the natural investor in all steps of the value chain. But investments in a single step may be less feasible without all the other steps already in place. Similarly, many new green businesses require new infrastructure around them. In the case of the e-ammonia project, substantial investments in upstream hydrogen and renewable electricity capacity are needed, as well as new transportation and fueling infrastructure downstream. Green business builders look to collaborate with players in their value chains and make sure that the infrastructure and investments come together in a coordinated manner. This could be done through joint feasibility studies or demonstration pilots where relevant players team up. When done successfully, these collaborations could also lead to the captive-demand arrangements described earlier. Once the framework of a new value chain starts to operate and has a financial underpinning, more ecosystem players may start gravitating toward it.

One example of new ecosystem players getting together is the Long Duration Energy Storage (LDES) Council. 7 McKinsey has collaborated with the LDES Council as a knowledge partner, including on the reports Net-zero power: Long duration energy storage for a renewable grid , November 2021, and A path towards full grid decarbonization with 24/7 clean Power Purchase Agreements , May 2022. The CEO-led group has brought together key actors—from technology providers to end customers—with the aim of understanding the technology landscape and pathways to economic breakthrough and scaling. Council participants are in a position to help shape their industries and drive collaborations.

• Lead on sustainable operations, through ambitious targets, innovation, and partnerships. Successful green business builders are leaders in how their operations minimize carbon emissions and other environmental impacts. For example, Northvolt, the Swedish battery manufacturer, has set a target to produce batteries that have a lower carbon footprint than most current EV batteries—by 80 to 90 percent—by leveraging green electricity and recycled input materials. Sustainable-textile company Spinnova has designed a manufacturing process with a water and chemicals footprint that is lower than that of similar products. Many green business builders also partner with organizations that share the same mentality. This 360-degree dedication to sustainability could help to drive credibility and encourage partnerships and innovation that may keep these companies ahead of their peers.
• Dedicate recruiting resources early in the process. Many green business builders, whether they’re start-ups or corporates, are seeking the talent they need to scale quickly—and the range of skills required to pull off successful green businesses can be wide. Green business builders identify individuals who could help shape and (as needed) pivot strong business models and explore potential partnerships and financing structures. Many new green businesses benefit from those who understand customers’ technical, investment, and decision-making processes. Consider the specific skill sets the organization may need to meet business goals. For B2B technologies, for example, there could be a need to build awareness and acceptance. In B2C, strong brand-building skills could be beneficial to create messaging that speaks to green credibility and tangible, real-world impact. Finally, physical technology ramp-up, factory construction, and supply chain scaling at an ambitious speed typically require bringing along the best of the best in operations skills. Dedicating resources for recruiting early in the endeavor could be a critical enabler of scaling quickly, especially in areas where there may be a scarcity of talent.

Green business builders often tackle the commercial side of investment risk by signing up captive demand for their output before they start to physically scale.

Building a green business is no small feat. It often requires moving at unprecedented speed, setting ambitious growth targets, and planning multiple steps ahead. The mindset green business builders have demonstrated is very close to that of the digital leaders of our time: they have been adept at creating and shaping markets rather than spectating and waiting for the markets to appear, and they have embraced the notion of accelerated scaling. This mindset combined with a few key principles could help propel green business building on the global journey to net zero.

The authors wish to thank Jonatan Janmark and Sean Kane for their contributions to this article.

This article was edited by Andrew Simon, a senior editor in the Seattle office.

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Developing a Corporate Sustainability Plan: Small Businesses

March 15, 2021 

Corporate sustainability consists of three pillars: environmental, social, and economic. Each business is responsible for creating a sustainability plan that acknowledges all three. In addition to protecting the environment, sustainability measures can help small businesses gain favor with consumers by demonstrating social responsibility and business ethics. Sustainable practices also positively impact a company’s bottom line by reducing resource waste and improving productivity.

To learn more, check out the infographic below, created by Maryville University’s online Bachelor of Science in Sustainability .

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The three pillars of corporate sustainability.

Corporate sustainability incorporates intentional business practices in three societal areas, with the goal of providing stakeholder value without compromising the environment, people, or the economy.

The Environmental Pillar

Businesses should work to limit their impact on the environment by reducing their carbon footprint, minimizing waste from packaging, and efficiently using water. By tracking the use of resources by benchmarking — or measuring resource consumption against a set standard — businesses can see and understand their spending and plan for the future.

The Social Pillar

Businesses need to maintain their social license — their ongoing acceptance by employees, stakeholders, and the public. A business can ensure it has a good reputation through several means, including treating employees well and engaging the community. It can also promote sustainable practices and make responsible supply chain decisions, publicly displaying its commitment to sustainability.

The Economic Pillar

Businesses should consider the benefits of displaying a commitment to sustainability, including improved profitability through sustainable practices. They can benefit from aligning resource spending practices with the company’s values, listening to employees’ insight about possible process improvements, and involving customers in planning sustainable practices.

Businesses also need to be transparent with investors to gain their trust. This can include maintaining compliance with regulatory requirements; avoiding hiring board members who may have a conflict of interest; avoiding the exchange of political contributions for favors; and avoiding using inaccurate, or opaque, accounting methods.

Actionable Practices in Corporate Sustainability

Companies can easily put into action a number of sustainability practices.

The Triple Bottom Line

The triple bottom line expands a company’s bottom line to consider not just profits but also people and the planet. A business that models its operating plans on the triple bottom line examines risks and opportunities to create a profitable sustainability plan. Risks include inefficiently wasting resources on packaging and hurting the environment, as well as inefficiently managing energy and creating a larger carbon footprint. Opportunities include looking for more sustainable materials in wider supply markets to reduce waste and installing energy-efficient appliances to lower long-term utility costs.

Employee Incentive Programs

These programs help involve employees in a business’s sustainability efforts. Incentives can include rewards for carpooling, biking, and taking public transit, as well as telecommuting options. In-office incentives could involve reusable supplies, such as washable cups to minimize plastic water bottle usage and rewards for lessening an office’s waste.

Corporate Sustainability Plan

More small businesses are realizing the benefit of creating an official sustainability plan. Creating a sustainability plan entails five key steps. The first step involves learning about sustainability. Next, companies should assess business areas that can be improved. Then, they should find opportunities for change. Finally, businesses should enact the changes that will make their operations more sustainable.

The Global Reporting Initiative’s Guidelines    

The Global Reporting Initiative provides businesses with the tools to create a standardized sustainability report. Tools such as downloadable, editable forms and training make reporting simple. Reporting shows a business’s dedication to transparency and sustainability.

Short and Long-Term Benefits of Corporate Sustainability

Consumers and employees want to support responsible businesses. Businesses with better environmental and social responsibility can reduce employee turnover by 25% to 30%. Some 47% of consumers want to buy from environmentally conscious businesses. Additionally, 58% of Generation Z consumers want eco-friendly packaging, and 57% want environmentally sustainable products.

Benefits      

Sustainability leads to lower costs, better operational efficiency, and better stock price performance. The assets under management that use sustainable investing strategies amounted to $12 trillion at the start of 2018 and grew to $17 trillion by the start of 2020, a 42% increase. Being energy efficient and using responsible packaging saves money and makes resources last longer, lowering costs. For example, a hotel can reduce its energy costs by 25% by asking guests to forgo daily sheet changes. This also reduces the replacement rate of the sheets, lowering both expenses and waste.

Business leaders might worry about a lack of resources and the cost, but sustainability can be implemented in small steps, removing a large overhead. The Global Reporting Initiative and other resources can help them understand the process of implementing sustainable practices. Business leaders might worry about long-term benefits, but stockholders, investors, and consumers support sustainable efforts.

Corporate sustainability should be a priority for all businesses. Small businesses that focus on implementing sustainable practices will gain and maintain a loyal customer base. Stockholders and investors prefer to support businesses that practice sustainability. Small businesses should consider a sustainability plan’s long-term benefits when creating a business strategy.

Accenture, 2019 Annual Holiday Local Shopping Survey

Business News Daily, “Your Small Business Needs a Corporate Social Responsibility Report”

Cape Farewell Foundation, “How to Bring Sustainability to Your Small Business While Maintaining Profits”

Constellation, “How to Develop a Small Business Sustainability Plan”

Cultivating Capital, “The Small Business Guide to Sustainable Business Practices”

Cultivating Capital, “10 Surprising Areas Missed in Small Business Sustainability Programs”

Cultivating Capital, “Three Excellent Employee Engagement Strategies for Sustainability”

Eco-Business, “The SME’s Guide to Benefitting from Sustainability”

Emarketer, “Sustainability Is Factoring into 2019 Holiday Shopping”

Global Reporting, The Global Standards for Sustainability Reporting

GreenBiz, Sustainability

Harvard Business Review , “The Comprehensive Business Case for Sustainability”

Investopedia, “The Three Pillars of Corporate Sustainability”

Investopedia, “Triple Bottom Line”

Kearney, “How Gen Z’s Concern with Emotional Health Fuels Retail Growth and Failure”

L.A. Times , “How Nestle, Google and Other Businesses Make Money by Going Green”

Sumas, “Unpacking the Business Case for Sustainability”

Sustainability Knowledge Group, “The Importance of SMEs Role in Achieving Sustainable Development”

US|SIF, “The US SIF Foundation’s Biennial ‘Trends Report’ Finds That Sustainable Investing Assets Reach $17.1 Trillion”

Unboxed Technology, “Corporate Sustainability vs. CSR: What’s the Difference?”

You Matter, “Should SMBs Have a CSR or Sustainability Strategy? How Can They Create It?”

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How to Create a Sustainable Business Model

Table of contents.

Creating a sustainable business model is a top priority for many companies. A sustainable business helps the planet and may prove more successful in the long run; customers want to work with companies that care about making a positive contribution to the world. 

Sustainability isn’t just for large corporations. Businesses of any size can work toward a sustainable business model by following specific practices and adopting a sustainable strategy.  

What is sustainability?

Sustainable means the ability to be maintained at a certain rate or level, and sustainable development meets current needs without compromising future generations’ ability to meet their own needs.

However, we must dig a little deeper to understand how the concept of sustainability is relevant to business development.

What is a sustainable business model?

To Rex Freiberger, president of Superlativ Media, a sustainable business model helps generate value for everyone involved, without draining the resources that help to create it.

“A business model meant to capitalize on a trend isn’t sustainable, for example, because the social resources that get it started won’t exist in years or even months,” Freiberger said.

Lia Colabello, managing principal of Plastic Pollution Solutions, noted that there’s a difference between a sustainable business model — a business that will likely achieve profitable growth —  and a business model that prioritizes sustainability.

“A sustainable business model is what every business leader hopes to achieve — a business that will turn a profit quickly and stay afloat for the long term,” Colabello explained. “A business model that prioritizes sustainability is one that, at a minimum, considers all stakeholders, assesses and addresses environmental impacts, and is transparent and thorough in its reporting.”

What makes a sustainable business model work?

There are four key elements of a sustainable business model.

1. A sustainable business model is commercially profitable.

You can make a profit and be socially responsible . No business can succeed or scale unless it attracts customers. What is your value proposition? Who are your target customers ? Why is your business valuable, and what niche do you fill?

2. A sustainable business model can succeed far into the future.

A trendy business or one that relies on limited resources may be profitable for a few months, but how will it fare in a year or two? Resource availability and pricing are never guaranteed or fixed; you don’t want to build your castle on a sinking rock. 

3. A sustainable business model uses resources it can utilize for the long term.

You can’t have a sustainable business model without sustainable resources. Many business activities are limited by finite resources or exceptionally high prices. On the other hand, some resources may be readily available yet environmentally harmful. 

Palm oil is a famous example of a cheap and plentiful resource. However, farmers are razing acres of land and causing severe environmental destruction by cultivating the crop. Cheap resources may be tantalizing for business, but consider the big picture instead of taking a shortcut now.

4. A sustainable business model gives back.

One theory is that a truly sustainable business model is one that gives as much as it takes. This concept is called the cyclical borrow-use-return model. 

Bob Willard, expert and author on quantifiable sustainability strategies, contrasts this model with the current “linear take-make-waste model” that so many modern businesses are built upon, which he said is “culpable for contributing to [this world’s] unsustainability.”

Instead of taking from the Earth, a sustainable business “borrows” resources with the intent to replenish them. This concept of responsible consumption is one that both businesses and consumers can promote and practice.

What is a sustainable strategy?

A sustainable strategy takes the big picture into account. “A sustainable strategy is one that understands the flow of ‘in’ and ‘out’ — not just cash flow, but again, the resources, both tangible and intangible, that are required to create the product or service,” Freiberger explained.

Colabello noted that the most effective sustainability strategies start with an organization’s purpose. She encouraged businesses to ask these questions, similar to what you’d ask when crafting a vision or mission statement :

• Why does the organization exist?
• What problem is it solving?
• How is it going to improve the world, environment and society?

“From there, a strategy can emerge that engages the entire brand ecosystem — internally, the supply chain, its communities and its industry,” Colabello said. “The approach is prioritized and diagrammed out, complete with goals, KPIs [key performance indicators] and a timeline. These are communicated both internally and externally, in keeping with transparency.”

Why do we need sustainable business models?

There are many ways to approach the issue of sustainability, but the simplest one, which can unite all stakeholders, is this: Kind businesses attract more customers. According to the 2022 Global Buying Green report , 86 percent of consumers under 45 were willing to pay more for sustainable packaging, and 68 percent purchased items in the past six months based on companies’ sustainability credentials.

It’s OK to be open about your sustainability goals and use your sustainability as a selling point. Customers will ask, and the friendlier you are about it, the more likely they will be to share that news with their friends.

But maybe you’re not motivated entirely by money. Perhaps you’re driven by the desire to be the change you’d like to see in the world. 

After all, the larger a business grows, the greater its impact is on the world and the people around it. And it’s better to start sustainably than to make the switch 10 years down the line — or when stakeholders begin pushing back on unreasonable business practices.

How can you start and maintain a sustainable business model?

Getting started with a sustainable business model can be straightforward. Consider the following guidelines. 

1. Plan your resource usage. 

Consider the resources your business requires to operate, and then do the following:

• Make a list of the raw materials you’ll need. This list will vary dramatically by business type. Software-as-a-service companies, for example, don’t require the raw resources that clothing brands do.
• Consider where your materials might be sourced. Who is making or harvesting your product materials? How are they being sold?
• Consider where the resources are coming from and how they are being transported. How far do they have to travel to arrive at your home or warehouse? How can you cut down on fuel miles? What are the riskiest resources on your list, and how can you increase their productivity while lessening your dependence on them?

After you address your resource usage, outline your manufacturing and business processes. Ask yourself these questions:

• Which manufacturing processes are the most wasteful? How can you mitigate the adverse effects of these processes?
• For physical materials, is it possible to source locally?
• How are you packaging your products? (Sustainable, biodegradable packaging can reduce the amount of trash stuck in landfills.)
• Which materials on your list are the riskiest or least sustainable? How might you replace them? Could you replace them now?
• What are the end products of these processes? How can you reuse waste material? Does it have to be thrown away?
• Can the produced waste be used as a resource or be fed into a different process to be used again? How can you reduce unusable waste?
• Where can you reduce waste? How can you stretch your raw materials? Can you lower the number of resources used to create a specific product while maintaining its quality?
• What are the labor conditions like? Are your laborers being paid fairly? Is their quality of life improving or worsening because of your business processes? Is their time being respected?

2. Consider alternative forms of company ownership.

The traditional top-down business model can create unreasonable wage gaps between those at the highest rungs of the ladder (CEO, other C-level executives, founders, managers) and those at the lowest (laborers tasked with creating raw materials or carrying out the manufacturing processes). Including everyone in your sustainability goals can help you keep your business on track and give those who are typically disadvantaged a larger say.

3. Engage your customers.

Going green can improve your brand reputation among consumers, but your dedication to sustainability may result in higher prices. But that’s OK; in a compelling blog post, series of posts or dedicated brand story page , tell your customers why they’re paying more for your products.

You might choose to engage customers by pledging a percentage of revenue to support a charity or by offering different shipping or packaging options. Customers who love your product can be converted into brand ambassadors when you create messaging that resonates with them. 

If you involve your customers in your discussions about sustainability, they will become more invested in your company’s success and your products. You could also consider crowdsourcing sustainability ideas from consumers through a forum or online group.

What roadblocks are there to a sustainable business model?

Building a sustainable business can be daunting. If your business is stuck, you may struggle with one or more of these issues:

1. You hold innovation meetings, but ideas don’t go anywhere.

Many good ideas arise when founders or leaders get together at a workshop or meeting. However, you must nurture these ideas and draft a plan of action.  

2. Ideas are not implemented.

Another issue founders face is that the plans for change are never implemented. This could be because it seems too challenging to change the status quo or because the members of the company aren’t yet convinced of the need for a greener, kinder business model.

3. The implemented business models fail in the market.

Two of the most common reasons businesses fail to move toward sustainability include the wrong mindset and a reluctance to dedicate resources to change.

To address these issues, find your allies — those who believe sustainability is essential for the company’s bottom line and the larger world — and connect with them. Together, you can remove or alter harmful, outdated systems and encourage innovation.

Practicing and following through with your sustainability goals helps consumers feel closer to you and instills more trust in your brand. This is crucial at a time when customers expect more warmth and honesty from companies.

Why is sustainability important in business?

Shel Horowitz, an expert on green and transformative business profitability, raised three points about why sustainability is crucial in business:

• Sustainability allows you to be here decades from now because you’ve created something of lasting value.
• Sustainability makes you much more attractive in the eyes of customers, employees and other stakeholders who actively want to do business with companies that think beyond the single bottom line.
• Sustainability helps the planet and its creatures heal from the abuse humans have piled on it, especially in the past 250 years or so.

Aside from businesses’ immense environmental impact, Colabello noted these forces putting pressure on companies to build robust sustainability strategies:

How is a business sustainable?

Freiberger believes a business can make itself sustainable by focusing on the bare essentials it needs to survive and then growing from there. Make long-term projections, and keep an eye on the distant future instead of focusing on more immediate profits, he advised.

As part of making your business sustainable, consider these statistics from the SUMAS Sustainability Management School , and determine where you can cut back to reduce your business’s carbon footprint :

• An estimated 5 trillion plastic bags are used worldwide each year.
• 400 million tons of plastics are produced globally every year.
• Globally, only 9 percent of plastic ever produced has been recycled; 79 percent can now be found in landfills, dumps or the environment; and 12 percent has been incinerated.
• With rapid population growth and urbanization, annual waste generation is expected to increase by 70 percent from 2016 levels to 3.4 billion tons in 2050.
• If it continues at the same rate, the plastic industry will account for 20 percent of the world’s total oil consumption by 2050.
• The construction and later demolition of buildings produce 40 percent of all waste.

If you are thinking about implementing a sustainable business model, consider the short-term expenses you will incur. However, these costs are a small price to pay for a better future and a compelling brand value for increasingly eco-conscious consumers. In other words, sustainability sells.

Jamie Johnson contributed to this article. 

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THE SDGS IN ACTION.

What are the sustainable development goals.

The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.

The 17 SDGs are integrated—they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability.

Countries have committed to prioritize progress for those who're furthest behind. The SDGs are designed to end poverty, hunger, AIDS, and discrimination against women and girls.

The creativity, knowhow, technology and financial resources from all of society is necessary to achieve the SDGs in every context.

Eradicating poverty in all its forms remains one of the greatest challenges facing humanity. While the number of people living in extreme poverty dropped by more than half between 1990 and 2015, too many are still struggling for the most basic human needs.

As of 2015, about 736 million people still lived on less than US$1.90 a day; many lack food, clean drinking water and sanitation. Rapid growth in countries such as China and India has lifted millions out of poverty, but progress has been uneven. Women are more likely to be poor than men because they have less paid work, education, and own less property.

Progress has also been limited in other regions, such as South Asia and sub-Saharan Africa, which account for 80 percent of those living in extreme poverty. New threats brought on by climate change, conflict and food insecurity, mean even more work is needed to bring people out of poverty.

The SDGs are a bold commitment to finish what we started, and end poverty in all forms and dimensions by 2030. This involves targeting the most vulnerable, increasing basic resources and services, and supporting communities affected by conflict and climate-related disasters.

736 million people still live in extreme poverty.

10 percent of the world’s population live in extreme poverty, down from 36 percent in 1990.

Some 1.3 billion people live in multidimensional poverty.

Half of all people living in poverty are under 18.

One person in every 10 is extremely poor.

Goal targets

• By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions
• Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable
• By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance
• By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters
• Ensure significant mobilization of resources from a variety of sources, including through enhanced development cooperation, in order to provide adequate and predictable means for developing countries, in particular least developed countries, to implement programmes and policies to end poverty in all its dimensions
• Create sound policy frameworks at the national, regional and international levels, based on pro-poor and gender-sensitive development strategies, to support accelerated investment in poverty eradication actions

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Zero hunger.

Zero Hunger

The number of undernourished people has dropped by almost half in the past two decades because of rapid economic growth and increased agricultural productivity. Many developing countries that used to suffer from famine and hunger can now meet their nutritional needs. Central and East Asia, Latin America and the Caribbean have all made huge progress in eradicating extreme hunger.

Unfortunately, extreme hunger and malnutrition remain a huge barrier to development in many countries. There are 821 million people estimated to be chronically undernourished as of 2017, often as a direct consequence of environmental degradation, drought and biodiversity loss. Over 90 million children under five are dangerously underweight. Undernourishment and severe food insecurity appear to be increasing in almost all regions of Africa, as well as in South America.

The SDGs aim to end all forms of hunger and malnutrition by 2030, making sure all people–especially children–have sufficient and nutritious food all year. This involves promoting sustainable agricultural, supporting small-scale farmers and equal access to land, technology and markets. It also requires international cooperation to ensure investment in infrastructure and technology to improve agricultural productivity.

The number of undernourished people reached 821 million in 2017.

In 2017 Asia accounted for nearly two thirds, 63 percent, of the world’s hungry.

Nearly 151 million children under five, 22 percent, were still stunted in 2017.

More than 1 in 8 adults is obese.

1 in 3 women of reproductive age is anemic.

26 percent of workers are employed in agriculture.

• By 2030, end all forms of malnutrition, including achieving, by 2025, the internationally agreed targets on stunting and wasting in children under 5 years of age, and address the nutritional needs of adolescent girls, pregnant and lactating women and older persons
• By 2030, double the agricultural productivity and incomes of small-scale food producers, in particular women, indigenous peoples, family farmers, pastoralists and fishers, including through secure and equal access to land, other productive resources and inputs, knowledge, financial services, markets and opportunities for value addition and non-farm employment
• By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems, that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding and other disasters and that progressively improve land and soil quality
• By 2020, maintain the genetic diversity of seeds, cultivated plants and farmed and domesticated animals and their related wild species, including through soundly managed and diversified seed and plant banks at the national, regional and international levels, and promote access to and fair and equitable sharing of benefits arising from the utilization of genetic resources and associated traditional knowledge, as internationally agreed
• Increase investment, including through enhanced international cooperation, in rural infrastructure, agricultural research and extension services, technology development and plant and livestock gene banks in order to enhance agricultural productive capacity in developing countries, in particular least developed countries
• Correct and prevent trade restrictions and distortions in world agricultural markets, including through the parallel elimination of all forms of agricultural export subsidies and all export measures with equivalent effect, in accordance with the mandate of the Doha Development Round
• Adopt measures to ensure the proper functioning of food commodity markets and their derivatives and facilitate timely access to market information, including on food reserves, in order to help limit extreme food price volatility.

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Good health and well-being.

We have made great progress against several leading causes of death and disease. Life expectancy has increased dramatically; infant and maternal mortality rates have declined, we’ve turned the tide on HIV and malaria deaths have halved.

Good health is essential to sustainable development and the 2030 Agenda reflects the complexity and interconnectedness of the two. It takes into account widening economic and social inequalities, rapid urbanization, threats to the climate and the environment, the continuing burden of HIV and other infectious diseases, and emerging challenges such as noncommunicable diseases. Universal health coverage will be integral to achieving SDG 3, ending poverty and reducing inequalities. Emerging global health priorities not explicitly included in the SDGs, including antimicrobial resistance, also demand action.

But the world is off-track to achieve the health-related SDGs. Progress has been uneven, both between and within countries. There’s a 31-year gap between the countries with the shortest and longest life expectancies. And while some countries have made impressive gains, national averages hide that many are being left behind. Multisectoral, rights-based and gender-sensitive approaches are essential to address inequalities and to build good health for all.

At least 400 million people have no basic healthcare, and 40 percent lack social protection.

More than 1.6 billion people live in fragile settings where protracted crises, combined with weak national capacity to deliver basic health services, present a significant challenge to global health.

By the end of 2017, 21.7 million people living with HIV were receiving antiretroviral therapy. Yet more than 15 million people are still waiting for treatment.

Every 2 seconds someone aged 30 to 70 years dies prematurely from noncommunicable diseases - cardiovascular disease, chronic respiratory disease, diabetes or cancer.

7 million people die every year from exposure to fine particles in polluted air.

More than one of every three women have experienced either physical or sexual violence at some point in their life resulting in both short- and long-term consequences for their physical, mental, and sexual and reproductive health.

• By 2030, reduce the global maternal mortality ratio to less than 70 per 100,000 live births
• By 2030, end preventable deaths of newborns and children under 5 years of age, with all countries aiming to reduce neonatal mortality to at least as low as 12 per 1,000 live births and under-5 mortality to at least as low as 25 per 1,000 live births
• By 2030, end the epidemics of AIDS, tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other communicable diseases
• By 2030, reduce by one third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being
• Strengthen the prevention and treatment of substance abuse, including narcotic drug abuse and harmful use of alcohol
• By 2020, halve the number of global deaths and injuries from road traffic accidents
• By 2030, ensure universal access to sexual and reproductive health-care services, including for family planning, information and education, and the integration of reproductive health into national strategies and programmes
• Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all
• By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination
• Strengthen the implementation of the World Health Organization Framework Convention on Tobacco Control in all countries, as appropriate
• Support the research and development of vaccines and medicines for the communicable and noncommunicable diseases that primarily affect developing countries, provide access to affordable essential medicines and vaccines, in accordance with the Doha Declaration on the TRIPS Agreement and Public Health, which affirms the right of developing countries to use to the full the provisions in the Agreement on Trade Related Aspects of Intellectual Property Rights regarding flexibilities to protect public health, and, in particular, provide access to medicines for all
• Substantially increase health financing and the recruitment, development, training and retention of the health workforce in developing countries, especially in least developed countries and small island developing States
• Strengthen the capacity of all countries, in particular developing countries, for early warning, risk reduction and management of national and global health risks

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Quality education.

Since 2000, there has been enormous progress in achieving the target of universal primary education. The total enrollment rate in developing regions reached 91 percent in 2015, and the worldwide number of children out of school has dropped by almost half. There has also been a dramatic increase in literacy rates, and many more girls are in school than ever before. These are all remarkable successes.

Progress has also been tough in some developing regions due to high levels of poverty, armed conflicts and other emergencies. In Western Asia and North Africa, ongoing armed conflict has seen an increase in the number of children out of school. This is a worrying trend. While Sub-Saharan Africa made the greatest progress in primary school enrollment among all developing regions – from 52 percent in 1990, up to 78 percent in 2012 – large disparities still remain. Children from the poorest households are up to four times more likely to be out of school than those of the richest households. Disparities between rural and urban areas also remain high.

Achieving inclusive and quality education for all reaffirms the belief that education is one of the most powerful and proven vehicles for sustainable development. This goal ensures that all girls and boys complete free primary and secondary schooling by 2030. It also aims to provide equal access to affordable vocational training, to eliminate gender and wealth disparities, and achieve universal access to a quality higher education.

Enrollment in primary education in developing countries has reached 91 percent.

Still, 57 million primary-aged children remain out of school, more than half of them in sub-Saharan Africa.

In developing countries, one in four girls is not in school.

About half of all out-of-school children of primary school age live in conflict-affected areas.

103 million youth worldwide lack basic literacy skills, and more than 60 percent of them are women.

6 out of 10 children and adolescents are not achieving a minimum level of proficiency in reading and math.

• By 2030, ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and Goal-4 effective learning outcomes
• By 2030, ensure that all girls and boys have access to quality early childhood development, care and preprimary education so that they are ready for primary education
• By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university
• By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship
• By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples and children in vulnerable situations
• By 2030, ensure that all youth and a substantial proportion of adults, both men and women, achieve literacy and numeracy
• By 2030, ensure that all learners acquire the knowledge and skills needed to promote sustainable development, including, among others, through education for sustainable development and sustainable lifestyles, human rights, gender equality, promotion of a culture of peace and non-violence, global citizenship and appreciation of cultural diversity and of culture’s contribution to sustainable development
• Build and upgrade education facilities that are child, disability and gender sensitive and provide safe, nonviolent, inclusive and effective learning environments for all
• By 2020, substantially expand globally the number of scholarships available to developing countries, in particular least developed countries, small island developing States and African countries, for enrolment in higher education, including vocational training and information and communications technology, technical, engineering and scientific programmes, in developed countries and other developing countries
• By 2030, substantially increase the supply of qualified teachers, including through international cooperation for teacher training in developing countries, especially least developed countries and small island developing states

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The future of education

Gender equality.

Gender Equality

Ending all discrimination against women and girls is not only a basic human right, it’s crucial for sustainable future; it’s proven that empowering women and girls helps economic growth and development.

UNDP has made gender equality central to its work and we’ve seen remarkable progress in the past 20 years. There are more girls in school now compared to 15 years ago, and most regions have reached gender parity in primary education.

But although there are more women than ever in the labour market, there are still large inequalities in some regions, with women systematically denied the same work rights as men. Sexual violence and exploitation, the unequal division of unpaid care and domestic work, and discrimination in public office all remain huge barriers. Climate change and disasters continue to have a disproportionate effect on women and children, as do conflict and migration.

It is vital to give women equal rights land and property, sexual and reproductive health, and to technology and the internet. Today there are more women in public office than ever before, but encouraging more women leaders will help achieve greater gender equality.

Women earn only 77 cents for every dollar that men get for the same work.

35 percent of women have experienced physical and/or sexual violence.

Women represent just 13 percent of agricultural landholders.

Almost 750 million women and girls alive today were married before their 18th birthday.

Two thirds of developing countries have achieved gender parity in primary education.

Only 24 percent of national parliamentarians were women as of November 2018, a small increase from 11.3 percent in 1995.

• End all forms of discrimination against all women and girls everywhere
• Eliminate all forms of violence against all women and girls in the public and private spheres, including trafficking and sexual and other types of exploitation
• Eliminate all harmful practices, such as child, early and forced marriage and female genital mutilation
• Recognize and value unpaid care and domestic work through the provision of public services, infrastructure and social protection policies and the promotion of shared responsibility within the household and the family as nationally appropriate
• Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decisionmaking in political, economic and public life
• Ensure universal access to sexual and reproductive health and reproductive rights as agreed in accordance with the Programme of Action of the International Conference on Population and Development and the Beijing Platform for Action and the outcome documents of their review conferences
• Undertake reforms to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources, in accordance with national laws
• Enhance the use of enabling technology, in particular information and communications technology, to promote the empowerment of women
• Adopt and strengthen sound policies and enforceable legislation for the promotion of gender equality and the empowerment of all women and girls at all levels

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Clean water and sanitation.

Water scarcity affects more than 40 percent of people, an alarming figure that is projected to rise as temperatures do. Although 2.1 billion people have improved water sanitation since 1990, dwindling drinking water supplies are affecting every continent.

More and more countries are experiencing water stress, and increasing drought and desertification is already worsening these trends. By 2050, it is projected that at least one in four people will suffer recurring water shortages.

Safe and affordable drinking water for all by 2030 requires we invest in adequate infrastructure, provide sanitation facilities, and encourage hygiene. Protecting and restoring water-related ecosystems is essential.

Ensuring universal safe and affordable drinking water involves reaching over 800 million people who lack basic services and improving accessibility and safety of services for over two billion.

In 2015, 4.5 billion people lacked safely managed sanitation services (with adequately disposed or treated excreta) and 2.3 billion lacked even basic sanitation.

71 percent of the global population, 5.2 billion people, had safely-managed drinking water in 2015, but 844 million people still lacked even basic drinking water.

39 percent of the global population, 2.9 billion people, had safe sanitation in 2015, but 2.3 billion people still lacked basic sanitation. 892 million people practiced open defecation.

80 percent of wastewater goes into waterways without adequate treatment.

Water stress affects more than 2 billion people, with this figure projected to increase.

80 percent of countries have laid the foundations for integrated water resources management.

The world has lost 70 percent of its natural wetlands over the last century.

• By 2030, achieve universal and equitable access to safe and affordable drinking water for all
• By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations
• By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally
• By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity
• By 2030, implement integrated water resources management at all levels, including through transboundary cooperation as appropriate
• By 2020, protect and restore water-related ecosystems, including mountains, forests, wetlands, rivers, aquifers and lakes
• By 2030, expand international cooperation and capacity-building support to developing countries in water- and sanitation-related activities and programmes, including water harvesting, desalination, water efficiency, wastewater treatment, recycling and reuse technologies
• Support and strengthen the participation of local communities in improving water and sanitation management

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Affordable and clean energy.

Between 2000 and 2018, the number of people with electricity increased from 78 to 90 percent, and the numbers without electricity dipped to 789 million.

Yet as the population continues to grow, so will the demand for cheap energy, and an economy reliant on fossil fuels is creating drastic changes to our climate.

Investing in solar, wind and thermal power, improving energy productivity, and ensuring energy for all is vital if we are to achieve SDG 7 by 2030.

Expanding infrastructure and upgrading technology to provide clean and more efficient energy in all countries will encourage growth and help the environment.  

One out of 10 people still lacks electricity, and most live in rural areas of the developing world. More than half are in sub-Saharan Africa.

Energy is by far the main contributor to climate change. It accounts for 73 percent of human-caused greenhouse gases.

Energy efficiency is key; the right efficiency policies could enable the world to achieve more than 40 percent of the emissions cuts needed to reach its climate goals without new technology.

Almost a third of the world’s population—2.8 billion—rely on polluting and unhealthy fuels for cooking.

As of 2017, 17.5 percent of power was generated through renewable sources.

The renewable energy sector employed a record 11.5 million people in 2019. The changes needed in energy production and uses to achieve the Paris Agreement target of limiting the rise in temperature to below 2C can create 18 million jobs.

• By 2030, ensure universal access to affordable, reliable and modern energy services
• By 2030, increase substantially the share of renewable energy in the global energy mix
• By 2030, double the global rate of improvement in energy efficiency
• By 2030, enhance international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency and advanced and cleaner fossil-fuel technology, and promote investment in energy infrastructure and clean energy technology
• By 2030, expand infrastructure and upgrade technology for supplying modern and sustainable energy services for all in developing countries, in particular least developed countries, small island developing States, and land-locked developing coun

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Decent work and economic growth.

Over the past 25 years the number of workers living in extreme poverty has declined dramatically, despite the lasting impact of the 2008 economic crisis and global recession. In developing countries, the middle class now makes up more than 34 percent of total employment – a number that has almost tripled between 1991 and 2015.

However, as the global economy continues to recover we are seeing slower growth, widening inequalities, and not enough jobs to keep up with a growing labour force. According to the International Labour Organization, more than 204 million people were unemployed in 2015.

The SDGs promote sustained economic growth, higher levels of productivity and technological innovation. Encouraging entrepreneurship and job creation are key to this, as are effective measures to eradicate forced labour, slavery and human trafficking. With these targets in mind, the goal is to achieve full and productive employment, and decent work, for all women and men by 2030.

An estimated 172 million people worldwide were without work in 2018 - an unemployment rate of 5 percent.

As a result of an expanding labour force, the number of unemployed is projected to increase by 1 million every year and reach 174 million by 2020.

Some 700 million workers lived in extreme or moderate poverty in 2018, with less than US$3.20 per day.

Women’s participation in the labour force stood at 48 per cent in 2018, compared with 75 percent for men. Around 3 in 5 of the 3.5 billion people in the labour force in 2018 were men.

Overall, 2 billion workers were in informal employment in 2016, accounting for 61 per cent of the world’s workforce.

Many more women than men are underutilized in the labour force—85 million compared to 55 million.

• Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries
• Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors
• Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services
• Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programmes on sustainable consumption and production, with developed countries taking the lead
• By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value
• By 2020, substantially reduce the proportion of youth not in employment, education or training
• Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms
• Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment
• By 2030, devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products
• Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all
• Increase Aid for Trade support for developing countries, in particular least developed countries, including through the Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries
• By 2020, develop and operationalize a global strategy for youth employment and implement the Global Jobs Pact of the International Labour Organization

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Industry, innovation and infrastructure.

Investment in infrastructure and innovation are crucial drivers of economic growth and development. With over half the world population now living in cities, mass transport and renewable energy are becoming ever more important, as are the growth of new industries and information and communication technologies.

Technological progress is also key to finding lasting solutions to both economic and environmental challenges, such as providing new jobs and promoting energy efficiency. Promoting sustainable industries, and investing in scientific research and innovation, are all important ways to facilitate sustainable development.

More than 4 billion people still do not have access to the Internet, and 90 percent are from the developing world. Bridging this digital divide is crucial to ensure equal access to information and knowledge, as well as foster innovation and entrepreneurship.   

Worldwide, 2.3 billion people lack access to basic sanitation.

In some low-income African countries, infrastructure constraints cut businesses’ productivity by around 40 percent.

2.6 billion people in developing countries do not have access to constant electricity.

More than 4 billion people still do not have access to the Internet; 90 percent of them are in the developing world.

The renewable energy sectors currently employ more than 2.3 million people; the number could reach 20 million by 2030.

In developing countries, barely 30 percent of agricultural products undergo industrial processing, compared to 98 percent high-income countries.

• Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all
• Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries
• Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets
• By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities
• Enhance scientific research, upgrade the technological capabilities of industrial sectors in all countries, in particular developing countries, including, by 2030, encouraging innovation and substantially increasing the number of research and development workers per 1 million people and public and private research and development spending
• Facilitate sustainable and resilient infrastructure development in developing countries through enhanced financial, technological and technical support to African countries, least developed countries, landlocked developing countries and small island developing States 18
• Support domestic technology development, research and innovation in developing countries, including by ensuring a conducive policy environment for, inter alia, industrial diversification and value addition to commodities
• Significantly increase access to information and communications technology and strive to provide universal and affordable access to the Internet in least developed countries by 2020

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Reduced inequalities.

Income inequality is on the rise—the richest 10 percent have up to 40 percent of global income whereas the poorest 10 percent earn only between 2 to 7 percent. If we take into account population growth inequality in developing countries, inequality has increased by 11 percent.

Income inequality has increased in nearly everywhere in recent decades, but at different speeds. It’s lowest in Europe and highest in the Middle East.

These widening disparities require sound policies to empower lower income earners, and promote economic inclusion of all regardless of sex, race or ethnicity.

Income inequality requires global solutions. This involves improving the regulation and monitoring of financial markets and institutions, encouraging development assistance and foreign direct investment to regions where the need is greatest. Facilitating the safe migration and mobility of people is also key to bridging the widening divide.

In 2016, 22 percent of global income was received by the top 1 percent compared with 10 percent of income for the bottom 50 percent.

In 1980, the top one percent had 16 percent of global income. The bottom 50 percent had 8 percent of income.

Economic inequality is largely driven by the unequal ownership of capital. Since 1980, very large transfers of public to private wealth occurred in nearly all countries. The global wealth share of the top 1 percent was 33 percent in 2016.

Under "business as usual", the top 1 percent global wealth will reach 39 percent by 2050.

Women spend, on average, twice as much time on unpaid housework as men.

Women have as much access to financial services as men in just 60 percent of the countries assessed and to land ownership in just 42 percent of the countries assessed.

• By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average
• By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status
• Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard
• Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality
• Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations
• Ensure enhanced representation and voice for developing countries in decision-making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions
• Facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies
• Implement the principle of special and differential treatment for developing countries, in particular least developed countries, in accordance with World Trade Organization agreements
• Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest, in particular least developed countries, African countries, small island developing States and landlocked developing countries, in accordance with their national plans and programmes
• By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent

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Sustainable cities and communities.

More than half of us  live in cities. By 2050, two-thirds of all humanity—6.5 billion people—will be urban. Sustainable development cannot be achieved without significantly transforming the way we build and manage our urban spaces.

The rapid growth of cities—a result of rising populations and increasing migration—has led to a boom in mega-cities, especially in the developing world, and slums are becoming a more significant feature of urban life.

Making cities sustainable means creating career and business opportunities, safe and affordable housing, and building resilient societies and economies. It involves investment in public transport, creating green public spaces, and improving urban planning and management in participatory and inclusive ways.

In 2018, 4.2 billion people, 55 percent of the world’s population, lived in cities. By 2050, the urban population is expected to reach 6.5 billion.

Cities occupy just 3 percent of the Earth’s land but account for 60 to 80 percent of energy consumption and at least 70 percent of carbon emissions.

828 million people are estimated to live in slums, and the number is rising.

In 1990, there were 10 cities with 10 million people or more; by 2014, the number of mega-cities rose to 28, and was expected to reach 33 by 2018. In the future, 9 out of 10 mega-cities will be in the developing world.

In the coming decades, 90 percent of urban expansion will be in the developing world.

The economic role of cities is significant. They generate about 80 percent of the global GDP.

• By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums
• By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons
• By 2030, enhance inclusive and sustainable urbanization and capacity for participatory, integrated and sustainable human settlement planning and management in all countries
• Strengthen efforts to protect and safeguard the world’s cultural and natural heritage
• By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters, including water-related disasters, with a focus on protecting the poor and people in vulnerable situations
• By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management
• By 2030, provide universal access to safe, inclusive and accessible, green and public spaces, in particular for women and children, older persons and persons with disabilities
• Support positive economic, social and environmental links between urban, peri-urban and rural areas by strengthening national and regional development planning
• By 2020, substantially increase the number of cities and human settlements adopting and implementing integrated policies and plans towards inclusion, resource efficiency, mitigation and adaptation to climate change, resilience to disasters, and develop and implement, in line with the Sendai Framework for Disaster Risk Reduction 2015-2030, holistic disaster risk management at all levels
• Support least developed countries, including through financial and technical assistance, in building sustainable and resilient buildings utilizing local materials

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Responsible consumption and production.

Achieving economic growth and sustainable development requires that we urgently reduce our ecological footprint by changing the way we produce and consume goods and resources. Agriculture is the biggest user of water worldwide, and irrigation now claims close to 70 percent of all freshwater for human use.

The efficient management of our shared natural resources, and the way we dispose of toxic waste and pollutants, are important targets to achieve this goal. Encouraging industries, businesses and consumers to recycle and reduce waste is equally important, as is supporting developing countries to move towards more sustainable patterns of consumption by 2030.

A large share of the world population is still consuming far too little to meet even their basic needs.  Halving the per capita of global food waste at the retailer and consumer levels is also important for creating more efficient production and supply chains. This can help with food security, and shift us towards a more resource efficient economy.

1.3 billion tonnes of food is wasted every year, while almost 2 billion people go hungry or undernourished.

The food sector accounts for around 22 percent of total greenhouse gas emissions, largely from the conversion of forests into farmland.

Globally, 2 billion people are overweight or obese.

Only 3 percent of the world’s water is fresh (drinkable), and humans are using it faster than nature can replenish it.

If people everywhere switched to energy efficient lightbulbs, the world would save US$120 billion annually.

One-fifth of the world’s final energy consumption in 2013 was from renewable sources.

• Implement the 10-year framework of programmes on sustainable consumption and production, all countries taking action, with developed countries taking the lead, taking into account the development and capabilities of developing countries
• By 2030, achieve the sustainable management and efficient use of natural resources
• By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses
• By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water and soil in order to minimize their adverse impacts on human health and the environment
• By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse
• Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle
• Promote public procurement practices that are sustainable, in accordance with national policies and priorities
• By 2030, ensure that people everywhere have the relevant information and awareness for sustainable development and lifestyles in harmony with nature
• Support developing countries to strengthen their scientific and technological capacity to move towards more sustainable patterns of consumption and production
• Develop and implement tools to monitor sustainable development impacts for sustainable tourism that creates jobs and promotes local culture and products
• Rationalize inefficient fossil-fuel subsidies that encourage wasteful consumption by removing market distortions, in accordance with national circumstances, including by restructuring taxation and phasing out those harmful subsidies, where they exist, to reflect their environmental impacts, taking fully into account the specific needs and conditions of developing countries and minimizing the possible adverse impacts on their development in a manner that protects the poor and the affected communities

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Climate action.

There is no country that is not experiencing the drastic effects of climate change. Greenhouse gas emissions are more than 50 percent higher than in 1990. Global warming is causing long-lasting changes to our climate system, which threatens irreversible consequences if we do not act.

The annual average economic losses from climate-related disasters are in the hundreds of billions of dollars. This is not to mention the human impact of geo-physical disasters, which are 91 percent climate-related, and which between 1998 and 2017 killed 1.3 million people, and left 4.4 billion injured. The goal aims to mobilize US$100 billion annually by 2020 to address the needs of developing countries to both adapt to climate change and invest in low-carbon development.

Supporting vulnerable regions will directly contribute not only to Goal 13 but also to the other SDGs. These actions must also go hand in hand with efforts to integrate disaster risk measures, sustainable natural resource management, and human security into national development strategies. It is still possible, with strong political will, increased investment, and using existing technology, to limit the increase in global mean temperature to two degrees Celsius above pre-industrial levels, aiming at 1.5 ° C, but this requires urgent and ambitious collective action.

As of 2017 humans are estimated to have caused approximately 1.0°C of global warming above pre-industrial levels.

Sea levels have risen by about 20 cm (8 inches) since 1880 and are projected to rise another 30–122 cm (1 to 4 feet) by 2100.

To limit warming to 1.5C, global net CO2 emissions must drop by 45% between 2010 and 2030, and reach net zero around 2050.

Climate pledges under The Paris Agreement cover only one third of the emissions reductions needed to keep the world below 2°C.

Bold climate action could trigger at least US$26 trillion in economic benefits by 2030.

The energy sector alone will create around 18 million more jobs by 2030, focused specifically on sustainable energy.

• Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries
• Integrate climate change measures into national policies, strategies and planning
• Improve education, awareness-raising and human and institutional capacity on climate change mitigation, adaptation, impact reduction and early warning
• Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible
• Promote mechanisms for raising capacity for effective climate change-related planning and management in least developed countries and small island developing States, including focusing on women, youth and local and marginalized communities

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Life below water.

The world’s oceans – their temperature, chemistry, currents and life – drive global systems that make the Earth habitable for humankind. How we manage this vital resource is essential for humanity as a whole, and to counterbalance the effects of climate change.

Over three billion people depend on marine and coastal biodiversity for their livelihoods. However, today we are seeing 30 percent of the world’s fish stocks overexploited, reaching below the level at which they can produce sustainable yields.

Oceans also absorb about 30 percent of the carbon dioxide produced by humans, and we are seeing a 26 percent rise in ocean acidification since the beginning of the industrial revolution. Marine pollution, an overwhelming majority of which comes from land-based sources, is reaching alarming levels, with an average of 13,000 pieces of plastic litter to be found on every square kilometre of ocean.

The SDGs aim to sustainably manage and protect marine and coastal ecosystems from pollution, as well as address the impacts of ocean acidification. Enhancing conservation and the sustainable use of ocean-based resources through international law will also help mitigate some of the challenges facing our oceans.

The ocean covers three quarters of the Earth’s surface and represents 99 percent of the living space on the planet by volume.

The ocean contains nearly 200,000 identified species, but actual numbers may lie in the millions.

As much as 40 percent of the ocean is heavily affected by pollution, depleted fisheries, loss of coastal habitats and other human activities.

The ocean absorbs about 30 percent of carbon dioxide produced by humans, buffering the impacts of global warming.

More than 3 billion people depend on marine and coastal biodiversity for their livelihoods.

The market value of marine and coastal resources and industries is estimated at US$3 trillion per year, about 5 percent of global GDP.

• By 2025, prevent and significantly reduce marine pollution of all kinds, in particular from land-based activities, including marine debris and nutrient pollution
• By 2020, sustainably manage and protect marine and coastal ecosystems to avoid significant adverse impacts, including by strengthening their resilience, and take action for their restoration in order to achieve healthy and productive oceans
• Minimize and address the impacts of ocean acidification, including through enhanced scientific cooperation at all levels
• By 2020, effectively regulate harvesting and end overfishing, illegal, unreported and unregulated fishing and destructive fishing practices and implement science-based management plans, in order to restore fish stocks in the shortest time feasible, at least to levels that can produce maximum sustainable yield as determined by their biological characteristics
• By 2020, conserve at least 10 per cent of coastal and marine areas, consistent with national and international law and based on the best available scientific information
• By 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminate subsidies that contribute to illegal, unreported and unregulated fishing and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the World Trade Organization fisheries subsidies negotiation
• By 2030, increase the economic benefits to Small Island developing States and least developed countries from the sustainable use of marine resources, including through sustainable management of fisheries, aquaculture and tourism
• Increase scientific knowledge, develop research capacity and transfer marine technology, taking into account the Intergovernmental Oceanographic Commission Criteria and Guidelines on the Transfer of Marine Technology, in order to improve ocean health and to enhance the contribution of marine biodiversity to the development of developing countries, in particular small island developing States and least developed countries
• Provide access for small-scale artisanal fishers to marine resources and markets
• Enhance the conservation and sustainable use of oceans and their resources by implementing international law as reflected in UNCLOS, which provides the legal framework for the conservation and sustainable use of oceans and their resources, as recalled in paragraph 158 of The Future We Want

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Life on land.

Human life depends on the earth as much as the ocean for our sustenance and livelihoods. Plant life provides 80 percent of the human diet, and we rely on agriculture as an important economic resources. Forests cover 30 percent of the Earth’s surface, provide vital habitats for millions of species, and important sources for clean air and water, as well as being crucial for combating climate change.

Every year, 13 million hectares of forests are lost, while the persistent degradation of drylands has led to the desertification of 3.6 billion hectares, disproportionately affecting poor communities.

While 15 percent of land is protected, biodiversity is still at risk. Nearly 7,000 species of animals and plants have been illegally traded. Wildlife trafficking not only erodes biodiversity, but creates insecurity, fuels conflict, and feeds corruption.

Urgent action must be taken to reduce the loss of natural habitats and biodiversity which are part of our common heritage and support global food and water security, climate change mitigation and adaptation, and peace and security.

Around 1.6 billion people depend on forests for their livelihoods.

Forests are home to more than 80 percent of all terrestrial species of animals, plants and insects.

2.6 billion people depend directly on agriculture for a living.

Nature-based climate solutions can contribute about a third of CO2 reductions by 2030.

The value of ecosystems to human livelihoods and well-being is $US125 trillion per year.v

Mountain regions provide 60-80 percent of the Earth's fresh water.

• By 2020, ensure the conservation, restoration and sustainable use of terrestrial and inland freshwater ecosystems and their services, in particular forests, wetlands, mountains and drylands, in line with obligations under international agreements
• By 2020, promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests and substantially increase afforestation and reforestation globally
• By 2030, combat desertification, restore degraded land and soil, including land affected by desertification, drought and floods, and strive to achieve a land degradation-neutral world
• By 2030, ensure the conservation of mountain ecosystems, including their biodiversity, in order to enhance their capacity to provide benefits that are essential for sustainable development
• Take urgent and significant action to reduce the degradation of natural habitats, halt the loss of biodiversity and, by 2020, protect and prevent the extinction of threatened species
• Promote fair and equitable sharing of the benefits arising from the utilization of genetic resources and promote appropriate access to such resources, as internationally agreed
• Take urgent action to end poaching and trafficking of protected species of flora and fauna and address both demand and supply of illegal wildlife products
• By 2020, introduce measures to prevent the introduction and significantly reduce the impact of invasive alien species on land and water ecosystems and control or eradicate the priority species
• By 2020, integrate ecosystem and biodiversity values into national and local planning, development processes, poverty reduction strategies and accounts
• Mobilize and significantly increase financial resources from all sources to conserve and sustainably use biodiversity and ecosystems
• Mobilize significant resources from all sources and at all levels to finance sustainable forest management and provide adequate incentives to developing countries to advance such management, including for conservation and reforestation
• Enhance global support for efforts to combat poaching and trafficking of protected species, including by increasing the capacity of local communities to pursue sustainable livelihood opportunities

In the line of fire

Peace, justice and strong institutions.

We cannot hope for sustainable development without peace, stability, human rights and effective governance, based on the rule of law. Yet our world is increasingly divided. Some regions enjoy peace, security and prosperity, while others fall into seemingly endless cycles of conflict and violence. This is not inevitable and must be addressed.

Armed violence and insecurity have a destructive impact on a country’s development, affecting economic growth, and often resulting in grievances that last for generations. Sexual violence, crime, exploitation and torture are also prevalent where there is conflict, or no rule of law, and countries must take measures to protect those who are most at risk

The SDGs aim to significantly reduce all forms of violence, and work with governments and communities to end conflict and insecurity. Promoting the rule of law and human rights are key to this process, as is reducing the flow of illicit arms and strengthening the participation of developing countries in the institutions of global governance.

By the end of 2017, 68.5 million people had been forcibly displaced as a result of persecution, conflict, violence or human rights violations.

There are at least 10 million stateless people who have been denied nationality and its related rights.

Corruption, bribery, theft and tax evasion cost developing countries US$1.26 trillion per year.

49 countries lack laws protecting women from domestic violence.

In 46 countries, women now hold more than 30 percent of seats in at least one chamber of national parliament.

1 billion people are legally ‘invisible’ because they cannot prove who they are. This includes an estimated 625 million children under 14 whose births were never registered.

• Significantly reduce all forms of violence and related death rates everywhere
• End abuse, exploitation, trafficking and all forms of violence against and torture of children
• Promote the rule of law at the national and international levels and ensure equal access to justice for all
• By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime
• Substantially reduce corruption and bribery in all their forms
• Develop effective, accountable and transparent institutions at all levels
• Ensure responsive, inclusive, participatory and representative decision-making at all levels
• Broaden and strengthen the participation of developing countries in the institutions of global governance
• By 2030, provide legal identity for all, including birth registration
• Ensure public access to information and protect fundamental freedoms, in accordance with national legislation and international agreements
• Strengthen relevant national institutions, including through international cooperation, for building capacity at all levels, in particular in developing countries, to prevent violence and combat terrorism and crime
• Promote and enforce non-discriminatory laws and policies for sustainable development

Building on the strengths of t...

Leveraging public finance and ...

Partnerships for the goals.

The SDGs can only be realized with strong global partnerships and cooperation. Official Development Assistance remained steady but below target, at US$147 billion in 2017. While humanitarian crises brought on by conflict or natural disasters continue to demand more financial resources and aid. Many countries also require Official Development Assistance to encourage growth and trade.

The world is more interconnected than ever. Improving access to technology and knowledge is an important way to share ideas and foster innovation. Coordinating policies to help developing countries manage their debt, as well as promoting investment for the least developed, is vital for sustainable growth and development.

The goals aim to enhance North-South and South-South cooperation by supporting national plans to achieve all the targets. Promoting international trade, and helping developing countries increase their exports is all part of achieving a universal rules-based and equitable trading system that is fair and open and benefits all.

The UN Conference on Trade and Development (UNCTAD) says achieving SDGs will require US$5 trillion to $7 trillion in annual investment.

Total official development assistance reached US$147.2 billion in 2017.

In 2017, international remittances totaled US$613 billion; 76 percent of it went to developing countries.

In 2016, 6 countries met the international target to keep official development assistance at or above 0.7 percent of gross national income.

Sustainable and responsible investments represent high-potential sources of capital for SDGs. As of 2016, US$18.2 trillion was invested in this asset class.

The bond market for sustainable business is growing. In 2018 global green bonds reached US$155.5billion, up 78 percent from previous year.

• Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection
• Developed countries to implement fully their official development assistance commitments, including the commitment by many developed countries to achieve the target of 0.7 per cent of ODA/GNI to developing countries and 0.15 to 0.20 per cent of ODA/GNI to least developed countries ODA providers are encouraged to consider setting a target to provide at least 0.20 per cent of ODA/GNI to least developed countries
• Mobilize additional financial resources for developing countries from multiple sources
• Assist developing countries in attaining long-term debt sustainability through coordinated policies aimed at fostering debt financing, debt relief and debt restructuring, as appropriate, and address the external debt of highly indebted poor countries to reduce debt distress
• Adopt and implement investment promotion regimes for least developed countries  
• Enhance North-South, South-South and triangular regional and international cooperation on and access to science, technology and innovation and enhance knowledge sharing on mutually agreed terms, including through improved coordination among existing mechanisms, in particular at the United Nations level, and through a global technology facilitation mechanism
• Promote the development, transfer, dissemination and diffusion of environmentally sound technologies to developing countries on favourable terms, including on concessional and preferential terms, as mutually agreed
• Fully operationalize the technology bank and science, technology and innovation capacity-building mechanism for least developed countries by 2017 and enhance the use of enabling technology, in particular information and communications technology  

Capacity building

• Enhance international support for implementing effective and targeted capacity-building in developing countries to support national plans to implement all the sustainable development goals, including through North-South, South-South and triangular cooperation  
• Promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system under the World Trade Organization, including through the conclusion of negotiations under its Doha Development Agenda
• Significantly increase the exports of developing countries, in particular with a view to doubling the least developed countries’ share of global exports by 2020
• Realize timely implementation of duty-free and quota-free market access on a lasting basis for all least developed countries, consistent with World Trade Organization decisions, including by ensuring that preferential rules of origin applicable to imports from least developed countries are transparent and simple, and contribute to facilitating market access  

Systemic issues

Policy and institutional coherence

• Enhance global macroeconomic stability, including through policy coordination and policy coherence
• Enhance policy coherence for sustainable development
• Respect each country’s policy space and leadership to establish and implement policies for poverty eradication and sustainable development  

Multi-stakeholder partnerships

• Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology and financial resources, to support the achievement of the sustainable development goals in all countries, in particular developing countries
• Encourage and promote effective public, public-private and civil society partnerships, building on the experience and resourcing strategies of partnerships  

Data, monitoring and accountability

• By 2020, enhance capacity-building support to developing countries, including for least developed countries and small island developing States, to increase significantly the availability of high-quality, timely and reliable data disaggregated by income, gender, age, race, ethnicity, migratory status, disability, geographic location and other characteristics relevant in national contexts
• By 2030, build on existing initiatives to develop measurements of progress on sustainable development that complement gross domestic product, and support statistical capacity-building in developing countries

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Sustainable Development Goals Integration

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How to Market Sustainable Products

• Frédéric Dalsace
• Goutam Challagalla

Many companies overestimate customers’ appetite for sustainable products, flooding the market with offerings that don’t sell. The reality is, social and environmental benefits have less impact on purchasing decisions than basic product attributes do. Consumers buy products to get specific jobs done, and only after they find something that will do that will they look for a product that provides some social or environmental advantage.

Of course, that’s only if they value sustainability. Not everyone does, and marketers need to recognize that. Some customers (greens) place a premium on it, some (blues) value it only moderately, and some (grays) don’t care about it and view it skeptically. The three segments cannot all be approached in the same way. How sustainable product benefits interact with traditional benefits is also critical: They can have no impact on a product’s performance (independence), diminish it (dissonance), or enhance it (resonance). Marketers need to follow different playbooks for independent, dissonant, and resonant products, tailoring their approaches to green, blue, and gray customers with each.

Three paths to success

Idea in Brief

The problem.

Many companies overestimate consumers’ appetite for sustainable products, flooding the market with offerings that don’t sell well.

The Opportunity

By understanding how sustainability features interact with a product’s core benefits, companies can devise effective marketing strategies for different consumer segments.

The Solution

Assess whether your sustainable offering’s performance is equivalent, inferior, or superior to that of conventional alternatives. Tailor marketing messages to customers according to how they value sustainability versus traditional attributes.

When companies market the sustainability features of their offerings, they often overlook a fundamental truth: Social and environmental benefits have less impact on customers’ decisions than basic product attributes do. With any purchase, consumers are first trying to get a specific job done. Only after they find something that will help them do that job—and only if sustainability is important to them—will they look for a product that in addition confers a social or environmental advantage. No one decides to buy a chocolate bar to, say, improve the working conditions of farmers on the Ivory Coast. People buy chocolate, first and foremost, because they want to indulge in a small pleasure. No one decides to buy an electric car to prevent climate change. People buy cars because they need transportation; reducing their carbon footprint is an ancillary benefit.

• Frédéric Dalsace is a professor of marketing and strategy at IMD.
• GC Goutam Challagalla is a professor of strategy and marketing at IMD.

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Reporting by Valerie Volcovici; additional reporting by Nichola Groom; editing by Jonathan Oatis, Chris Reese, Susan Fenton and Marguerita Choy

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Thomson Reuters

Valerie Volcovici covers U.S. climate and energy policy from Washington, DC. She is focused on climate and environmental regulations at federal agencies and in Congress and how the energy transition is transforming the United States. Other areas of coverage include her award-winning reporting plastic pollution and the ins and outs of global climate diplomacy and United Nations climate negotiations.

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