Five Ways Innovation Is Shaping the Executive Sustainability Agenda

Talk is cheap. True innovators in sustainability are going beyond promises to pioneer ways of building a better world and a stronger company at the same time.

This is the message we got when we recently set out to update our list of critical innovations on the C-suite agenda. As we did during earlier pulse checks in December 2020 and June 2021, we tapped two sources of insight: first, our regular meetings with hundreds of carefully selected technology companies and start-ups and, second, our experience working with large corporations, investors, and our innovation ecosystem partners. The result: five innovation trends that reflect how imperative sustainability has become and how leading companies are working to create a better world and better businesses.

Leaders are building perpetual learning organizations.

The pandemic accelerated adoption of many new technologies and ways of working, but their roots stretch back years to the broader digitalization of business, which has changed how we work, the skills we need, and how we develop them. The demand for new skills and training is evident across organizations, from making data-driven supply chain decisions, to automating work in tight labor markets, to managing entirely new systems, such as digital twins that predict maintenance and monitor equipment performance.

Most people expect automation to change their jobs in the next decade, surveys show, and most employees worry a skills shortage will render them less competitive. Nevertheless, overall retraining rates remain low. Companies in the forefront, however, are remaking themselves into learning organizations. Amazon is investing $1.2 billion to train 300,000 people, more than a third of its US workforce. Unilever aims to retrain or upskill all of its employees, with the goal of equipping them with a skill set fit for the future by 2025. The consumer products giant is also helping 10 million young people develop essential skills that will prepare them for the employment opportunities of 2030 and beyond.


Venture Ecosystem

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This is all part of building a “future back” talent strategy. Today it’s necessary to take a longer-term view, anticipate future requirements, segment roles, and focus talent and capability investments on your pivotal roles.

To maximize these types of investments, London-based Kubrick focuses on building skills of the future in a diverse workforce. The start-up helps companies recruit a diverse set of candidates who complete industry-leading 15-week programs in data, artificial intelligence (AI), and cloud technology before they’re deployed on client engagements.

Novel technologies support diverse teams and work to counter bias.

The pandemic, Black Lives Matter, #MeToo: How can companies address these and other defining events of recent years?

Forward thinkers start with their own workforces, first working to ensure the diverse talent they have wants to stay and then recommitting to recruiting diverse new hires in an unbiased fashion. This is the right thing to do and an important business strategy. Diverse teams create remarkable value. Studies have shown that boards with at least one woman see a 26% increase in their company’s financial performance, diverse teams make better business decisions up to 87% of the time and are 3.5 times more likely to contribute their full innovative potential, and companies with diverse teams are 45% more likely to report growth in market share.

While more still needs to be done, there are signs of real progress at many organizations. Catering and facilities management company Sodexo has increased its share of female employees from 17% in 2009 to 55% today, and 58% of its board members are now women. The company has found that organizations with an optimal gender balance measurably improve employee engagement, gross profit, and brand image. More than 65,000 L’Oréal employees have taken its diversity and inclusion training, and the company is focused on closing pay differentials between the sexes in all categories of work.

Technology and innovation can help. Beamery, a UK-headquartered firm that provides a talent management SaaS solution, has done extensive research on the state of diversity, equity, and inclusion (DEI) at large corporations, and on how AI talent technology can help identify DEI issues, overcome human biases, and improve inclusivity.

New systems monitor and help achieve ambitious corporate climate goals.

No longer satisfied with reaching carbon neutrality, many companies have zeroed in on improving their entire carbon footprint, as well as those of their second- and third-tier suppliers. Customers are watching: 70%-plus report being concerned by global warming, and half say they are willing to change behavior to mitigate their own impact on the climate.

Investors are, too. In the first six months of 2021, venture capital–backed climate tech companies raised more than $14 billion worldwide, 88% of the total for all of 2020, according to PitchBook. As of September 2021, there are 30 climate tech unicorns worth $1 billion or more spanning the globe from Europe, to Asia, to North America, participating in agriculture, energy, transportation, and other industries. The worsening climate and ecological crisis, government reactions, and technological innovation, among other factors, will continue to keep these issues top of mind for both customers and investors in the years to come.

One leader pushing forward climate tech is automotive giant Toyota. By 2050, Toyota aims to reach carbon neutrality and reduce global average carbon dioxide emissions from its new vehicles by 90%. Additional goals include moving toward zero emissions for all production sites, optimizing water consumption, and globally deploying its Japanese reprocessing and recycling technologies for end-of-life vehicles. All are tasks requiring a heavy dose of technological innovation. Toyota Ventures has allocated $150 million to its Climate Fund, which invests in start-ups that can help the company reach its 2050 carbon neutrality goal. Hydrogen innovation is one area of long-term interest, and Toyota recently formed a partnership with Japanese fuel company ENEOS to further explore hydrogen’s potential.

Arizona-based Persefoni, recently announced as a strategic partner of Bain’s, works with investors and companies to achieve these kinds of ambitious carbon goals. Persefoni’s software automates the calculation, management, and reporting of carbon usage data. Its cloud platform can ingest data from thousands of sources, complete the required carbon calculations instantaneously, and provide results suitable for disclosure and reporting purposes, creating a single, auditable, and transparent view into progress on sustainability goals.

Major companies invest in the pioneers of meat alternatives.

Population and environmental trends mandate that we change how we feed the planet. Food system activities produce significant greenhouse gases, and livestock production is an especially large contributor. Consumers are increasingly interested in alternatives to meat; since 2016, the compound annual growth rate of the alternative protein market has been 13%. At the same time, the standards are high. Customers want protein replacements with the same taste, nutrition, and price of the original. To meet these demands, large food and consumer products companies have been acquiring innovative start-ups with strong R&D.

Cargill, for example, has balanced ongoing investment in traditional animal protein with investments in alternatives such as pea protein and has also entered into an agreement with White Dog Labs to provide a sustainable alternative to wild fishmeal as a feed for the aquaculture industry.

Among start-ups, Swiss company Planted creates protein alternatives, including pulled pork and kebab products, in part by using an original technique for extruding plant proteins and water into fibrous structures similar to those of real meat.

Data tracking and analysis tools establish actual ESG performance.

ESG (environmental, social, and governance) is not a new term, but it is having a moment. Moving beyond the arena of good public relations and risk management, ESG efforts are now much more focused on creating strategic value for the organization, including by reducing risk and expenses, attracting talent, and supporting innovation and revenue growth. Environmental aspects—emissions, waste, and water management, among others—are increasingly critical given the pace of climate change. Covid-19 and rising awareness of racial disparities have put a spotlight on social elements like health and wellness, DEI, and employee safety.

Sustainable investments reached $35 trillion globally in 2020 according to the Global Sustainable Investment Alliance, up 54% from 2016. The stocks of ESG-focused companies have outperformed broader indices by 1.5 to 2 times since 2003. And private equity exits from ESG-focused portfolio companies earn measurably higher internal rates of return. Combine all this with rising regulatory attention on disclosure and efforts to create a common taxonomy for corporate sustainability performance, and sustainability is fully on the minds of CEOs. A recent Bain study of over 50 companies in consumer products, retail, and agribusiness found that more than 90% have quantified sustainability ambitions.

EcoVadis, a Bain partner on ESG strategy and implementation, creates an ESG score for companies based on environment, labor and human rights, ethics, and sustainable procurement metrics and assesses corporate actions, policies, and results. Johnson & Johnson, which has more than 70,000 suppliers around the world, has relied on the platform for thousands of supplier assessments, critical to meeting its goal of allocating 80% of spending to suppliers in its sustainable procurement program.

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