Sustainability transformation – déjà vu?

Insights from a panel debate on the similarities and dissimilarities between a digital and a sustainability transformation

Stijn Viaene

By Stijn Viaene

Professor of Digital Transformation

David Veredas

By David Veredas

Professor of Financial Markets

15 February 2023

Sustainability has become the new normal, but how do you go about it? Many companies have faced transformation before – digital transformation is the most recent one and is still ongoing. So, maybe we can learn from the past. At a recent event organised by our Centre for Sustainable Finance and our Centre for Enterprise Architecture and Digital Design, Professors David Veredas and Stijn Viaene debated the similarities and dissimilarities between a digital and a sustainability transformation.

web-insights-sustainability-transformation-deja-vu

To discuss this topic, we invited two high-level panellists: Solange Rouschop (Chief Sustainability Officer of ABN Amro and former CEO of ABN Amro Belgium) and Marloes van Kooten Holsinck (Vice-President of PVH, the parent company of iconic fashion brands such as Calvin Klein and Tommy Hilfiger). They kicked off the debate by explaining how the digital transformation (PVH) and the sustainability transformation (ABN Amro) came about in their respective companies. The debate was moderated by Professors David Veredas and Stijn Viaene, and after the debate, the panellists received questions from the audience.

Insights gathered from the debate indicate that the implementation of both transformations in corporations faces similar threats and opportunities. Moreover, the two professors believe that the success of each of these transformations depends on the other one. 

Here are the debate’s main takeaways:

The beginning - a visionary leader

In essence, the digital transformation in PVH followed a top-down approach, thanks to a visionary CEO in 2015, who introduced digital showrooms. This was the ignition for their digital journey. It changed the way they think about the value chain, accelerating a transformation that is now touching remote whole sale sell in and digital product creation.

The case of ABN Amro was different, as it started (as far as Solange Rouschop could remember) back in early 2000, when ABN Amro became one of the initiators of the Equator Principles for assessing and managing environmental and social risk in project finance.

These differences in how the transformations came about show that the beginning of the transformation can be either bottom-up or top-down – but in either case, everything starts with visionary leadership somewhere in the organisation. If bottom-up, the transformation typically starts with a small group of transformational leaders, who develop a successful initiative that shows everyone – top management in particular – its value. This is what happened at ABN Amro. A top-down transformation typically starts with the CEO or Chairperson, as was the case with PVH. However, either way, the strong will and conviction of a group, as powerful as it might be, will not be enough to transform the company. A guiding coalition is needed, which strives to make the whole organisation work together in the transformation.

Playing a long game

In both transformations, resistance arises in numerous corners of the corporation. One of the main reasons is that the transformation’s value is not well understood. For instance, budgets for the transformation are often seen as costs instead of investments, especially in the first stages. This is common to both transformations and introduces a short-term vs. long-term performance tension.

If the corporation sees the transformation strictly as a short-term initiative, then it will insist on monetizing value quickly, typically requiring similar returns on investment and timeframes as for other ‘regular’ projects. However, if the corporation views the transformation as a long-term effort, justifications will be made strategically rather than solely financially. In other words, only long-term thinking makes these transformations a strategic priority.

Seize the momentum

A third similarity is that there is no silver bullet. To engage the whole company in the transformation, it is essential to communicate to, and train, everyone. And to commit to learning together. There must be a plan that needs to constantly be held up against what works and what doesn’t. The above-mentioned group of visionaries are persistent and resilient to setbacks. One of their key strengths is in connecting with other believers to create the required transformational momentum.

To transform or not

A fourth similarity is that the digital and sustainability transformations are not so much revolutions as they are radical evolutions. There is no need to throw the baby out with the bathwater – which would be neither practical nor very intelligent in most organisations. Success rests on the ability to build upon and leverage what is future-proof in the current core, whilst learning to disregard what no longer works. The credibility of each of these transformations is built on the progress shown in key performance indicators, rather than in demonstrating their absolute value.

Governance

With digital and sustainability transformations recognised as strategic priorities, the next step is to build ownership for making change happen, enterprise-wide, which implies having the right governance. It is important to be able to associate concrete leadership faces with the transformation. And those faces must be high up in the corporate hierarchy, including the highest levels. Their signalling function cannot be underestimated. Moreover, the governance of both transformations will benefit greatly from being connected. In particular, digital capabilities and skills are critical success factors for sustainability transformation.

Do you want to get started with implementing a digital transformation or a sustainability transformation in your company? Discover our Digital Leadership,Director Climate Journey and Transforming to Sustainable Business programmes.

Vlerick-Gent-20150917---60-hero-desktop-w2880

Join us to dive deep into the world of sustainable finance

The Centre for Sustainable Finance is here to advance understanding and share knowledge and best practice on sustainability with our partners, members and the wider financial community. Together with our partners, we carry out systematic, scientific research – and produce up-to-the-minute, actionable insights. Our current research topics include scope 3 emissions, climate risk for SMEs and impact investments.

Get in touch!

David Veredas

David Veredas

Professor and Associate Dean