Global C-suite Series 25th Edition The CEO Study Own your impact Practical pathways to transformational sustainability IBM Institute for Business Value The IBM Institute for Business Value, in cooperation with Oxford Economics, interviewed 3,000 CEOs from 40+ countries and 28 industries as part of the 25th edition of the IBM C-suite Study series. These conversations focused on executives’ perspectives on leadership and business; their changing roles and responsibilities; and sustainability, including how they are addressing challenges, what they see as opportunities, and their visions for the future. Contents 1 Introduction 5 Chapter 1 Sustainability: A business priority – and challenge 21 Chapter 2 The path to sustainability: From assessing to transforming 29 Chapter 3 The transformational edge: Leadership, open innovation, and technology 43 Action guide: Steps toward progress for each pathway 50 Research and analysis methodology 53 Notes and sources 3,000 CEOs surveyed 40+ countries 28 industries 25th edition i “Sustainability promotes business, supports the needs of our customers, generates profitability, and contributes to a better world. This is how we see our transformative role.” Fausto Ribeiro CEO of Banco do Brasil ii Introduction We’ve reached an inflection point. For some time, the role of business in sustainability has received steadily increasing attention from companies and their stakeholders. But over the past year, something changed for CEOs worldwide, and sustainability talk turned into action. Continued disruption – including upheaval from the pandemic – has society calling for a new approach to economic activities and business priorities. Our latest CEO study, drawn from interviews with 3,000 CEOs worldwide, reveals sustainability’s dramatic emergence onto the mainstream corporate agenda. For a few, this ascent is validation of long-held beliefs and years of planning. For most CEOs, however, an urgency to act is encountering the reality that turning sustainability aspirations and commitments into measurable results is easier said than done. Many CEOs accept responsibility for the impact their organizations have on the environment and society. They also feel increasing pressure to act from all manner of stakeholders, many of whom are losing patience, frustrated by what they view as too much talk and too little action. After witnessing a proliferation of corporate sustainability pledges – from water positive and carbon negative to net zero and zero waste – some of these stakeholders are questioning what progress companies are actually making toward these goals. 1 Our research suggests that most organizations’ sustainability commitments reflect a genuine sense of accountability, often combined with the recognition of new opportunities. However, many CEOs tell us they are uncertain how to move forward and achieve meaningful change. Their organizations face roadblocks ranging from difficulty measuring ROI to data and technology challenges. Finding ways to punch through those barriers is crucial. Sustainability is no longer a “nice to have.” Companies that ignore the call risk significant impact – financial and otherwise.1 The good news is some CEOs have found a path to effective action. They are managing to turn the ideals of sustainability into a reality. Not only are they making real progress toward their sustainability goals, but they are also positioning themselves for strong business performance and growth. What do these CEOs know that their colleagues don’t? What are their organizations doing differently? The answers stem from their approach: These CEOs come at the sustainability challenge with a different mindset. They see opportunity where others see cost. From the strategies they embrace, to the stakeholders they engage, to the digital capabilities they leverage, leading CEOs approach sustainability as an opportunity that can drive growth and positively impact their business. Some of these successful CEOs are leveraging their sustainability investments to optimize operations by driving efficiencies and improvements. Others view sustainability as an avenue for enterprise transformation, embracing what we call transformational sustainability (see sidebar “Perspective: What is transformational sustainability?”). They embrace digital capabilities and open innovation to combine sustainability performance with better financial outcome