In Part 1 of this series exploring contextual strategy-making and goal-setting, we shared how our work with the corporate members of the Embedding Project, and their interest in understanding how to make sense of the methodologies, frameworks, tools and ideas around sustainability context, led us to develop our free “Road to Context” guide.
The guide lays out four key steps to contextualising your strategy and goals, and helps your company better articulate a public position that clarifies what role you will play with respect to global socio-ecological issues (such as climate change, water scarcity and human rights). The core of this approach is to better allocate your resources by transparently prioritising where it makes the most strategic sense to direct your efforts, anchored in an understanding of your own impacts and your ability to influence the impacts derived from your supply chain, the use of your products and services, or the companies that you finance.
Our supplemental interactive casebook illustrates how these steps are being applied in practice by comparing and celebrating the efforts being made by early adopters of a contextual approach. Clearly, momentum is growing when it comes to setting contextual goals and overwhelmingly, the most commonly addressed threshold is that of GHG emissions, no doubt heavily influenced by the Science-Based Targets Initiative. But only a handful of companies are currently stepping back and taking a broader contextual view with respect to their overarching strategy. We break out some of the key insights that we gleaned from comparing early experiments with context below:
Step 1: Acknowledging the need to operate within global, regional and/or local socio-ecological thresholds
While an increasing number of companies acknowledge the need to contribute to solving socio-ecological issues by “minimising” the impacts of their business activities, only a few leaders articulate their understanding of the socio-ecological thresholds that are applicable to their business and even fewer publicly acknowledge the need to operate within them. Even among those early adopters that are beginning to commit to operating within the limits of socio-ecological thresholds, it’s a rare few that formally extend these commitments to helping support their value chain in doing the same. That said, we anticipate that the number will grow. Even within the eight-month period we have been developing these cases, we have seen new companies on board at an increasing rate.
Step 2: Transparently prioritising a set of focus areas in relation to key socio-ecological trends at the global, regional and/or local level
Any company has limited resources and it makes sense to prioritise where it should allocate them. A contextualised strategy considers where a company has the greatest impacts and the most potential to contribute to system value. Many of the early adaptors we studied continue to use what we would describe as a “classic” materiality approach that identifies and prioritises environmental and social issues by assessing the influence these have on their stakeholders and the influence they have on their own operations. In contrast, we see leading companies moving away from their reliance on materiality matrices, instead restructuring their stakeholder engagement processes to seek input on how they are conceptualising thresholds and where the company might be best positioned to have the most impact. We also observed that when companies invest in gathering better baseline data, they gain a better understanding of their potential impacts, putting them in a stronger position to prioritise where to direct their efforts, and they are in better positions to set more realistic goals. They are also better positioned to articulate a clear, more defensible strategy that outlines why they are focusing their efforts on particular socio-ecological issues over others or why they might put more attention on influencing their value chain instead of focusing only on their immediate operations.
Step 3: Setting strategy and goals by transparently articulating the current performance gap and what portion of this gap the business will address
While likely well intentioned, we saw that many early adopters are making commitments to be “net positive,” “neutral” or context-based without clearly articulating their understanding of these commitments or what they see as the gap between their current performance and the performance needed to achieve their commitment. In contrast, leading companies are working to help others understand how they approached the development of their strategy and goals by transparently describing the methodologies or tools that they used and the assumptions behind how they determined the limits of socio-ecological thresholds as well as how they calculated their own impacts. We also observed that companies are starting to more transparently discuss how they might assess their ability to influence others.
Step 4: Transparently tracking performance against realistic trajectory targets
A contextual strategy moves you from “what can we do” to “what do we need to do,” which means that contextual goals are often framed with respect to longer timeframes (for instance, most GHG emissions goals reference the year 2050). This means that companies also need to set realistic interim trajectory targets that can be used to assess progress towards these long-term ambitious contextual goals. Yet, few companies are transparently articulating these targets and those that are often default to a linear extrapolation instead of clarifying what they see as potential turning points stemming from technological or regulatory shifts.
Finally, as companies experiment with context, we encourage them to be as transparent as possible in their assumptions and their approaches. In trying to surface and compare what companies are doing, we found that this work continues to be buried within and scattered across corporate sustainability reports and websites, often relegated to footnotes. We hope the development of these cases helps to bring more visibility to this work and helps others to progress on their own contextual journeys.
Our “Road to Context” resources were launched this week at SB’17 Detroit and are free to access through our website. We will continue to develop case studies that illustrate how these steps are being applied in practice and we will be announcing these releases on Twitter.