It’s time to transform strategic plans to achieve net zero emissions

Dr Axel Kravatzky

“How often should we change our strategic plan?” That is a frequently asked question by board and CEOs – particularly of state-related bodies, who often ask for help after three-five years, when their strategic plan has "expired."

The answer is, of course, that all organisations need to respond to changes in context. If these are sufficiently large or different from what the organisation previously thought, the strategy and the plan need to be updated or changed. Global organisations review and update their strategic plans at least annually.

The covid19 pandemic has challenged all organisations. Many had to overcome tragic human losses, all had to find new ways of operating, and many continue to struggle with short-term solutions to critical cash flow problems.

Some sectors have experienced a dramatic increase in demand. In contrast, organisations in others are being pushed closer and closer to complete ruin because of the policy response to the public health situation.

What is true for all sectors is that betting on a return to a business-as-usual scenario harbours the most significant risk. Force-fitting old solutions to a world that has changed will not produce the results it did in the past. Today different challenges require new, innovative, and profitable solutions.

The pandemic has both masked and accelerated an even more fundamental shift – a global shift in how people perceive the state of the natural environment. On the one hand, the pandemic is forcing so many emergency measures in public and organisational life that there is not much space to discuss other topics. On the other hand, the pandemic also uncovered underlying social ills, and a large part of the population has been able to personally experience the long-predicted extreme weather events, and so global warming has become "real" for most.

What many do not yet realise is that the changes in both nature and major institutions around the world have been so profound that they will require most organisations to fundamentally rethink not only their strategies but their very purpose!

Take, for instance, the Race to Zero & Race to Resilience Campaign – which is part of the United Nations Framework Convention on Climate Change. Today, 3,067 businesses, 133 cities and 173 investors have joined and thereby committed to achieving net zero by 2050 (greenhouse-gas emissions caused by people are balanced by removals of greenhouse gases over a defined period of time).

In order to be able to achieve net zero in 28 years, they will need to reduce their emissions by half in the coming eight years. Many of the largest institutional investors have committed to these targets. Throughout the world, institution investors own large proportions of shares traded on stock exchanges. Investors will need to ensure that the companies in their portfolios are doing their part. The portfolio companies, in turn don’t only need to ensure their inhouse production of goods and services is net-zero, but their entire value chain is net zero.

That, in turn means that many of the SMEs with which the portfolio companies do their business will also need to demonstrate a credible, science-based path and evidence of action towards net zero. And this is just one of the paths of change that are currently in operation and massively picking up speed.

The implication is that organisations will not only need to their update their strategy very soon, but they will also need to pivot in quite dramatic ways or face extinction themselves. To pivot the strategy, an organisation needs to be clear on the organisational purpose, because the strategy is in service of the purpose.

When the ground is shifting, and products or services of an organisation are no longer creating sustainable benefits and no longer generating well-being, or they are producing unacceptable consequences, organisations are forced to ask themselves, "What are actually trying to achieve? Why? What is our true purpose? What aspect of wellbeing or ecological health are we trying to promote? For whom? What constitutes value in these changed circumstances?"

Organisations that ask and answer these questions will innovate new solutions to people’s actual problems, and they will be richly rewarded when they find efficient and effective solutions that people pay for.

Once the answers are as current as the problems they are seeking to solve, organisations will become strategic and transform.

Dr Axel Kravatzky is managing partner of Syntegra-ESG LLC, vice-chair of ISO/TC309 Governance of organisations, and the co-convenor and editor of ISO 37000 Governance of organisations – Guidance.

Disclaimer: the views presented are those of the author and do not necessarily represent those of any of the organisations he is associated with.

Comments and feedback that further the regional dialogue are welcome at axel.kravatzky@syntegra-esg.com