By Stephan Liozu
Published by IndustryWeek: https://www.industryweek.com/leadership/strategic-planning-execution/article/21263055/5-best-practices-for-monetizing-esg-and-sustainability
In 2016, BCG and MIT Sloan Management Review reported that 90% of managers felt that a sustainability strategy is essential to remaining competitive. Fast forward seven years, and it is pretty much guaranteed that this number is now close to 100%. So it is not a question of if, but a question of why, how and what for.
Today, a fair number of companies invest in sustainability because they follow the trends and decide to do the bare minimum to be compliant. We have seen many examples of greenwashing in the early days of sustainability. Today, firms that greenwash their reporting or marketing get caught, exposed and punished with significant fines.
The difference between 2016 and today is that genuine sustainability pioneers have been using sustainability and ESG reporting to their advantage and have turned them into strong competitive advantage. They produce robust reports of their performance, which allow them to boost brand equity, financial value and their ability to secure financing. It is great progress indeed.
Even for these pioneers, however, sustainability remains a cost of doing business or at best a compliance play. Very few companies have gone the extra mile in truly monetizing their sustainability efforts, meaning extracting specific sources of sales revenue and profit. Here is the sticky part: they invest millions of dollars in sustainability and are not able to generate some form of payback.
I propose that sustainability is a tremendous source of differentiation, customer value and eventually of pricing power. I posit that these investments in greener products, recyclability, circularity and socially responsible development efforts can be translated into financial value and eventually some form of revenue. For that, sustainability must be considered a strategic innovation that must be strongly tied to go-to-market strategies. It cannot be just a cost of doing business or a compliance play. Sustainability, like digital transformation, is an organizational innovation requiring the mobilization of all go-to-market experts, including pricing and monetization teams.
It is back to the how and for-what questions of investing in sustainability. It is about the “so what?” In the context of the 3Ps of sustainability (people, planet, profit), it is OK to have that discussion about protecting the planet while making a decent profit. Why not?
I believe that taking this 3P approach can accelerate the inclusion of sustainability into the corporate strategic agenda. Connecting sustainability and ESG to monetization and financial impact is the fastest way to make it mainstream and avoid greenwashing tendencies.
So how do you get started with the monetization process of sustainability? Here are some best practices:
1. Make sustainability a strategic priority in the innovation process and a strategic area of future competitive advantage: Strategic innovation teams connect all functional areas of the business. Developing an innovation portfolio for sustainability that includes process improvements, a recyclability and circularity strategy and new business models helps with the productization and “tangibilization” of sustainability. Productizing sustainability improves your chances of making it more tangible so that it can be incorporated into your go-to-market processes.
2. Operationalize sustainability in your go-to-market processes: If it is part of the process, people have no choice but to pay attention. Of course, the right steps, methods and KPIs must be defined and operationalized. Here, the priority is to make sure that innovation managers, products managers and sales managers embrace the process and run with it.
3. Mobilize the monetization and pricing teams:Sustainability cannot be managed by ESG teams working closely with accounting, IT and finance teams. The role of the chief sustainability officer is to connect all the functional areas, including marketing and pricing. ESG reporting and dashboarding are great. Linking this to differentiation, marketing and pricing is even better. Pricing teams can bring their advanced monetization toolbox to calculate the impact of sustainability on brand value, on margins, and on pricing power. They can help monetize new business models and generate solid customer value propositions. They do this day-in-day-out with traditional products and services.
4. Adopt best practices in value quantification by conducting advanced customer and pricing research: Eighty-one percent of consumers declare they are ready to buy more sustainable products but only 32% are willing to pay more. But what is the magic number for your products in your industry? Advanced research techniques can help price and position your business models and green products. Data is essential in ESG accounting and reporting. The same goes for monetizing sustainability!
5. Inject sustainability in your value selling and commercial playbook: A 2022 study by Implement Group reported that 33% of sales reps rarely or never engage in conversations related to sustainability with their customers. Most sales teams report that they are not trained enough on sustainability and do not have the right tools to sell. Productizing your sustainability efforts means creating the right value playbook to be used during customer interactions.
When it comes to monetization and sustainability, we are at the beginning of the journey. More and business leaders are asking the “so what?” question. This is why Fabien Cros and I have co-founded Pricing for the Planet in 2022. We want to help organizations reap the benefits of their sustainability innovations and investments. On April 4th, 2023, we will delivered a webinar with the Professional Pricing Society on the topic of monetization and pricing for sustainability. You can register here: Pricing for The Planet w/ Stephan Liozu & Fabien Cros - Crowdcast.