Sustainability is becoming a ubiquitous subject in most boardroom discussions. The commitments from companies to science-based targets aligned with Paris more than doubled in 2021. There is no shortage of ambition right now; to win, however, business leaders must connect their sustainability ambitions to drivers of business value and competitive advantage — a feat that fewer than 20% of sustainability initiatives have been designed to achieve, as our research with the BCG Henderson Institute into Sustainable Business Model Innovation (SBM-I) suggests.

We’ve interviewed a diverse set of sustainability leaders to understand how to operationalize sustainability for resilient competitive advantage. These leaders span sectors, industries, and geographies. And while their contexts may be very different, a consistent set of insights emerged through our conversations. These insights make it clear that sustainability must be anchored in purpose and galvanized through ambitious targets; led from the top; woven into the core of business strategy, operations, and culture; and extend across the value chain and broader ecosystem.

Together these sustainability leaders articulated seven key success factors for a company to harness the power of sustainability and turn it into a source of competitive advantage.

1. Anchor sustainability in purpose.

Companies must connect sustainability to their core purpose — and they must live that purpose if they are to turn sustainability into a source of competitive advantage. Only through deeply connecting the creation of environmental and societal benefits to the purpose of the corporation can companies rally their employees, partners, and broader stakeholders for collective action. “Purpose is the idea that brings sustainability and sustainable business together,” said Ashley Grice, CEO of BrightHouse. “They are not two separate functions; they are one and the same.”

That certainly holds true for Schneider Electric, ranked the most sustainable company in the world by Corporate Knights in 2021. 1. “Schneider Electric’s purpose is to ‘empower all to make the most of our energy resources, bridging progress and sustainability for all.’” said Olivier Blum, the company’s chief strategy and sustainability officer. “And we have built a rich portfolio of activity around energy management and industrial automation.” Blum added, “[W]e’ve spent the last 15 years refocusing that portfolio to make sure we can contribute to the decarbonization journey of our customers.”

Amanda Sourry, former president of Unilever North America, made a similar point about Unilever’s sustainability transformation. “Purpose was there from the beginning — and there were many moments, if you look at that company over time, where you can see an understanding that business was not there only to make corporate profit.” She cited the importance of purposeful leaders in driving a company’s sustainability transformation. “I would say to anybody who is thinking about what their transformation insofar as sustainability or ESG is going to be [purposeful leadership] is at least as important as the hardwiring of exactly how you’re going to get to this set of targets that you’ve laid out.”

2. Establish bold leadership with the right set of accountabilities.

Boards, CEOs, and senior leaders must set the tone from the top of their organizations by articulating a bold vision for sustainability rooted in purpose, underpinned by ambitious targets. As our interviews made clear, this requires a certain amount of courage from leaders, because often the path to achieve these ambitions is not clear.

For Sourry, committing to an ambitious sustainability plan for Unilever without already knowing exactly how to attain it was both “catalyzing and scary.” She acknowledged that “it felt uncomfortable to commit to something you didn’t know how you would achieve.”

Isabelle Grosmaitre, founder CEO of Goodness & Co, former co-chair of Collaboration of Healthier Lives at the Consumer Goods Forum and former Catalyst at Danone, emphasized that sustainability transformations will require transformed leaders. “We are reimagining business, but we need to reimagine leadership. We need leaders with empathy. We need hands and heart to build sustainable futures…we need leaders with courage, courage to do what’s right, to set new business standards and to dare to ensure the full operationality of the vision.”

Beyond courage, sustainability also will require senior leaders to make nuanced tradeoffs between near- and long-term goals. Pedro Zinner, CEO of Eneva, discussed the tough choices he has encountered in pushing for improved ESG performance. “You have to make sure you’re doing the right thing. And there will be some embedded costs in terms of making those decisions. And they may jeopardize the short term, but over the long term you’re making sure you’re heading in the right direction.”

What helps align and guide senior leaders are a clear set of new KPIs and metrics for both business and individual performance. Blum spoke about creating these accountabilities. “In the field of sustainability, if you really want to progress, you need to make bold bets and set ambitious targets,” he said. However, he went on to note the importance of ambition with accountability and ownership saying, “We are trying to have this mix between making ourselves accountable for the bold commitments we have made and at the same time, challenging ourselves to make sure we keep raising the bar cycle after cycle.”

3. Activate culture and empower talent.

Leaders must cascade sustainability throughout an organization and activate it within a company’s culture. “Executive sponsorship is not enough,” according to Grosmaitre. “You need to empower people to make this happen.” Purpose is a key part of driving this activation, as is empowering your talent to own sustainability in their parts of the business. In discussing Unilever’s sustainability transformation, Sourry noted that “a very important part of this transformation was the personal element of purpose that everyone brought to the table…we said, ‘not only did the business need purpose, we needed to have purposeful leaders who understood why they were here in the world.’”

Zinner amplified the importance of culture and talent, “My single and biggest advice to CEOs embarking on the sustainability journey: ensure that you have the right culture, the right state of mind, and the right people in place.”

This activation of sustainability in culture also helps attract and retain talent. Blum, reflecting on his own career, said “I spent 28 years at Schneider. And if you ask me why I’m still working for the company, it’s because of sustainability. Because sustainability is deeply included in everything we do in the company, it’s a part of our strategy, part of the culture, part of the DNA.”

4. Integrate sustainability into core strategy and business operations — with a clear link to value.

Sustainability must go beyond corporate social responsibility initiatives; it has to be connected to core strategy and operations. This will mean internalizing material externalities and measuring success of your strategies and business operations in new ways.

Mark Wiseman, former chair of BlackRock’s Global Investment Committee and former CEO of CPPIB, summarized it well. “Companies have to be thinking about [sustainability] not as an afterthought, but how it’s integral to the longer-term business strategy,” he said. “It’s having a clear objective, measuring [the] objective and then communicating both the strategy and outcomes against it. This all sounds new, but it’s what business leaders have been doing for decades — just not on these metrics.”

Sourry echoed this sentiment. “It is not about sustainability or business results,” she said. “It’s both. Always. At the same time. It’s the only way, I think, that you can move sustainability into the heart of the business.” She added, “These things have got to come together. It has to be part of the business model.”

A strategic approach to sustainability enables companies to drive positive environmental and societal impact at scale. “Companies who have decided to embed social and environmental issues into their core business strategy are able to deliver much more impact,” said Christine Rodwell, former vice president of social and sustainable impact at Groupe Renault. “By leveraging their sustainability strategy in order to boost their innovation, they contribute to Common Good and, at the same time, they build very strong competitive advantage.”

When the positive environmental and societal benefits are scaled in a way that purpose and sustainability are truly embedded, we find a “convergence of values and value,” according to Wiseman. “Companies that have good values are companies that will have more value in the long run… They are simply better managed, better run, take a holistic approach to business and therefore are to not just valuable to the society in which they operate but also to shareholders.”

5. Leverage innovation to deliver on sustainability ambitions.

Embedding sustainability into your company’s purpose, as well as your business strategy and operations, will demand leveraging your innovation agenda. For many companies, operating sustainably requires an entirely new way to think about the business — and it requires reinventing existing practices and products.

“When you set high ambition and bold bets in sustainability it creates a lot of momentum inside of the company and a lot of excitement,” said Blum. “Now at the same time, that forces people to think differently. And we love that, because you start not only to be an innovator for your customer and for your business…but it also leads to innovation in the way you run the company, your supply chain and even social innovation for the communities that you impact.”

Driving sustainable innovation requires a willingness to challenge conventional wisdom or existing mental models and decision-making frameworks. According to Sourry, some of the changes required to meet sustainability targets at Unilever were initially projected to cost significantly more than they ultimately did. “It’s one of those classic Clayton Christensen things where the model that you’re in is so optimized that the model that you’re trying to get to will never compare on an apples-to-apples basis. It’s when you get into the deep due diligence of these innovations that you find new ways to bring these costs down.”

6. Leverage partnerships to create more sustainable ecosystems.

Maximizing a company’s sustainability often requires breaking through the constraints imposed by its ecosystem — which in turn may require seeking novel partnerships, joining sustainability alliances, or building business ecosystems to foster collaborations across value chains, industry, and across public, private and social sectors to drive systems change.

“[It’s] highly unlikely that you will be able to get there on your own,” said Sourry, “[or] with the set of partners that you’ve worked with historically. You will need to build new partnerships and ecosystems to get there.”

Doing so will increasingly require substantive and meaningful engagement with your investors. “Shareholders are getting more and more involved,” said Vicki Escarra, former global CEO, Opportunity International; former president and CEO, Feeding America; and former CMO, Delta Airlines. “It isn’t just the CEOs and NGOs,” she said, speaking about cross-sector partnerships. “It’s now becoming the shareholders that are concerned citizens.”

7. Create a learning loop.

Your competitors, suppliers, customers, and broader stakeholders are also responding to the rapidly evolving challenges of sustainability. Maintaining competitive advantage will require continuous learning and iteration. Speaking of her experience leading Danone’s Growth Acceleration Platform, Grosmaitre noted, “this is a learning journey, and it’s about growth and innovation, to invest new ways of doing business…we innovate, we fail, we innovate again, we pilot, and we scale… so the key element here is to ensure you set the learning mechanism to succeed.” Regarding Schneider Electric, Blum went on to say, “ Sustainability is like a marathon without a finish line, you are never done; You always need to raise the bar to the next level.”

These are seven critical ingredients for business leaders that are looking to successfully harness sustainability as a source of competitive advantage. In our research at the BCG Henderson Institute on Sustainable Business Model Innovation (SBM-I) we have outlined a four-step innovation approach that can start you on your journey towards creating competitive advantage in a sustainable world. Not only how to understand how to set your ambition and strategy to innovate your business model — but also how to begin your sustainability transformation.