When devising a sustainability strategy, business model innovation is important, but succeeding in sustainability doesn’t stop there. Increasingly, sustainability progress depends on transforming the way entire industries function. This requires going beyond business model innovation to business system innovation. Take the Roundtable Sustainable Palm Oil (RSPO), which is working to set global sustainability standards for palm oil production. The RSPO counts over 3,000 worldwide members encompassing the entire palm oil business system, from oil producers to consumer brands to retailers to bankers to regulators to community groups to NGOs and activists. Navigating successfully in venues like these requires a whole set of managerial skills not taught in business schools.
A business system perspective takes into account the larger social and environmental context within which industry operates. Altering a business system is a team effort, relying on cooperative engagement with non-business stakeholders. Executives recognize this, with 90% of companies saying collaborations are necessary to succeed with sustainability. But it is hard. Fewer than half of companies we surveyed are collaborating and of those less than two-thirds say they are successful. It’s not hard to understand why. Business-to-business work is already challenging before you bring in politicians, union leaders, community groups, and activists.
And the challenge is not going away. Our survey respondents say the diversity and number of collaborations will continue to grow in the years ahead. Before 2000, 40% of companies we surveyed had no collaborations on sustainability efforts, and 19% had just one to three collaborations. In 2014, we found that most companies were engaged in some form of sustainability collaboration and fully 16% of respondents said they expected to have more than 50 collaborations in the future.
Success in collaboration is learned on the job in the school of hard knocks. It first takes commitment, with companies maintaining sustainability as a top management agenda item more than twice as likely to collaborate strategically than others. And the more companies engage in collaborations the more likely they are to report success and value creation. Collaboration skill is built through sustained commitment and engagement. Strategic collaborators with sustainability as a top management item are up to five times more likely to do the preparation required to ensure successful outcomes, including groundwork like establishing roles, reporting frameworks, and clear governance structures.
This post is the seventh in a series of eight, representing key findings from a collaborative research report between MIT Sloan Management Review and the Boston Consulting Group.