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Climate change is a global crisis that requires a global solution. But at the same time, this is a local problem – one that transcends political and business boundaries in Australia.
Australia already faces water stress, rising sea levels, less predictable rainfall and more frequent and intense heat waves and bushfires as a result of climate change. These ground effects – along with government initiatives and investor pressure – will continue to push Australian companies to higher levels of sustainability.
The pressure from all sides is already having a strong effect. According to the Climateworks Centre, at least half of Australia’s largest companies have net zero liabilities. This figure is even higher (78%) in high-emitting sectors such as utilities, oil, gas, mining and metals.
As companies enter uncertain economic times, stakeholders are expected to increase pressure on businesses to balance current and future needs. Businesses must meet today’s financial obligations while maintaining a focus on innovation, sustainability and digital experiences.
Technology does not guarantee success
Businesses will need evolving business models and leadership to meet their competitive demands. They must maintain short-term financial performance while preparing their companies for sudden market changes and opportunities several years from now.
Global IT consultancy Infosys surveyed approximately 2,700 business leaders (from organizations with revenues over $1 billion) to better understand how they are addressing these demands through changing technology and organizational practices.
In general, the global survey found that companies are most successful when they create a culture that embraces responsible risk, follows values rather than processes, and uses “live data” (which is transparent, easily accessible and widely shared). Advanced technology is critical, but alone is not sufficient to enable companies to outperform the competition.
We need flexible, risk-taking and agile leadership
Infosys’ research titled ‘Digital Radar 2023’ found that ESG leadership is most effective when it comes from the top. The same goes for net zero – the critical part of the ESG equation.
Leadership and culture are among the most important practices that help Australian companies improve their net zero results. One-third or more of business leaders surveyed say their companies perform better when:
- Encourage risk-taking.
- Demonstrate a flexible leadership style.
- Create a culture of rapid testing and learning.
Leadership and employee diversity trailed slightly behind these other factors, but was still cited by 30% of respondents in Australian companies. The percentage was similar for companies around the world.
In addition to these agile and aggressive leadership traits, companies generally found that their data practices were often effective in achieving net zero goals. The need for comprehensive, secure and ‘fresh’ data was the most frequently cited (43%) of Australians in the top five practices. Around one-third of respondents see transparent data reporting – often through ESG dashboards – as a key success factor.
However, the survey results point to a gap in data and leadership. Despite the effectiveness of their data practices, executives were significantly less likely to say that data-driven decision-making helps them achieve their net zero goals.
These conflicting results highlight the challenges facing executives in this rapidly changing business environment. Sixty-one percent of Australian respondents say that when faced with ambiguity, they “make decisions quickly despite incomplete information.”
In these cases, managers either do not have time to collect all the necessary data, or the data is simply not available. One possible factor is the lack of transparent reporting, which slows down the speed of decision-making.
Getting the data right is critical – especially for the bottom line. Analysis of digital radar data found that improved data practices lead to better innovation outcomes. And better innovation outcomes correlate with increased profitability.
Net Zero Business Model Change
For people, businesses and nations to achieve a net zero future – especially by the 2050 deadline of the Paris Agreement – they cannot continue to do what has worked in the past. For companies, this will often apply to their business models.
An analysis of data from Digital Radar found that companies are more effective when they operate with a product-centric mindset rather than a traditional process focus. Nearly one-third of the leaders surveyed said that results-based business models are an organizational best practice that helps them achieve their net zero goals. These types of pay-as-you-go and as-a-service models give companies greater understanding and control over their carbon footprint.
The report found a number of benefits for companies adopting a subscription-based business model. These companies were 30 to 40% more likely to report “excellent” product creation speed. Companies are 80% more likely to improve customer engagement and loyalty with this model. Although subscription-based models are still an emerging approach, 28% of respondents said it was helping them on their net zero journey.
The Australian Fashion Council is now working with its industry to try to achieve a circular fashion economy by 2030 and net zero by 2050. The organization has found that 1.5 billion items of clothing enter the Australian market each year and about 200,000 tonnes end up in landfill. Through its National Apparel Care Scheme, the organization funds pilot programs to help its members discover and explore new, more sustainable business models.
While companies are eager to repair their reputation for sustainability, they cannot afford to let those ambitions undermine the rest of the business. Businesses are now reaching a point where they must decide how to be both environmentally responsible and profitable.
The Infosys report suggests that the two can co-exist and even support each other. Many of the practices studied—from live data to a risk-taking culture—simultaneously support company innovation, digital experiences, and net zero goals.
Andrew Groth, director of Australia and New Zealand at Infosys, said: “With the right understanding of what processes work and the technology to support them, businesses can create a new foundation that is future-proof.”
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