How to design a sustainability operating model

Last year we developed a blog that explored a series of considerations to think about when integrating sustainability within your operating model. This article goes a step further, focusing on how to build a robust sustainability operating model, emphasising how to align your organisation with sustainable practices while maximising its impact.

Defining a sustainability operating model

For us, a sustainability-focused operating model has three main criteria:

1. It enables a purpose-led business model focused on creating impact for people and the planet. Unless the organisation has a business model that is focused on commercial viability whilst creating impact, it can never really be deemed to be sustainable. 
2. Alongside being focused on creating positive impact, any negative impacts are minimised and mitigated as the organisation seeks to create as few negative externalities as possible. 
3. It is continuously evolving, exploring better ways to deliver impact and mitigate negative impacts. 

The four phases of design and implementation

To create this sustainability operating model we are going to detail four key design and implementation phases that we have been working with clients on. These are:

• Materiality analysis using spheres of influence
• Co-creating impact pathways 
• Aligning operating models around impact
• Developing experimental roadmaps

Principles for effective change

Before we move into these phases we have five engagement principles that we apply to this sort of work that we believe enable more successful design and the ability to create impact:

1. Leadership sponsorship: In the early stages of sustainable operating model transformation, leadership sponsorship is critical. People need to know that they have the agency to make decisions that are different from the norm, and that break traditional business thinking. For example, to make decisions such as being able to select more expensive suppliers who are more ethically aligned they will need leadership to set out the constructs of the organisation and what they need.
2. Create spaces for exploration: A lot of this work will be brand new to people – they need to have time to explore and rewire the way that they think. In Otto Scharmer’s Theory U he talks about the need for space to open people’s minds before being able to commit to action. Giving the space and the agency to think radically about how things might be different is therefore necessary.
3. Co-create: To design the most effective sustainability operating model, utilising the brains of those who are already in the organisation not only leverages their collective experience but enables far better adoption of designs.
4. Build capability: In Mariana Mazzucato and Rosie Collington’s book “The big con” they outlined the case against big consultancy. A lot of it is a fair reflection that consultancy can create dependence and not provide value for money. An experienced consultant contributes value when he or she enables an organisation to acquire sufficient capability to operate independently. When we approach the design of a sustainability-focused operating model, we look to coach, mentor and provide methodology that helps client teams develop their own capability.
5. Enable sharing of radical thought: For most organisations, a truly sustainable operating model is very far away from how they operate today. Therefore, there needs to be a space for radical thinking. How could we deliver value to customers in a completely different way? How could we run our company in a completely different way? While the path to a radical model might be through small-step evolution we need to create the space for revolutionary visioning. 

Pathway to your sustainability operating model

We apply these principles through the following pathway to develop sustainable operating models:

1. Materiality to determine spheres of influence

   Materiality assessments are of course common practice in the development of sustainability strategy. Commonly they consider the relative importance to stakeholders and the comparative impact of different environmental and social factors onto your organisation. Often using the UN SDG’s, the GRI’s or ESG frameworks to inform which of the areas to consider.  We do materiality a bit differently considering an organisation’s actual and potential for impact in different areas. Asking the question of which areas are we best placed to create impact. Here we look to understand what organisations optimum role in ‘Growing the Pie’ (A. Edmans) is. From it we look to break factors into three categories:

    

   This materiality enables us to then break down how we create positive and negative impact against these areas to inform operating model redesign.

2. Co-create impact pathways

   We use Theory of Change to map out how an organisation creates positive and negative impact against the defined impact areas. This technique can be used to develop a view of what you will do or change to create impact. It can consider business model, operating model or initiative level activities. Starting from what is the change that you want to see in the world or guard against happening and working back to what are the resources, the activities, the outputs you need to provide or change to make it happen. 

   The impact pathways in totality will provide a view of how your business will need to change in order to better deliver impact.
   

3. Design operating model

   Once there is clarity on the impact pathways you can integrate them into your operating model by changing your organisational focus. These are the changes you need to make to how you work to ensure you are prioritising impact.  From this you can then consider how your operations need to change to support that impact focus whilst also ensuring that your operating model meets your core responsibility.

4. Developing experimental roadmaps

Once some upfront design has been done you can then start to change your organisation to make it happen. Here you should adopt the principles we outlined before in terms of change but structure your roadmap into four key sections:

1. Radical moves – fundamental changes to your organisation’s governance, organisational structure or strategy that need to happen as big signal shifts because of their significance. 
2. Experiments – changes that should be broken down and tested
3. Empowerment – the areas of change that you are going to give people the freedom to innovate in. 
4. Engagement – the opportunities you will give for people to get involved in the change. 

Conclusion: Paving the way for a better world

If we want to create a better world we need organisations to consider radical, purpose-driven change in the way that organisations such as NatWest, Anglian Water and Jaguar LandRover are. I.e. moving from broad ambition statements to a fundamental redesign of how the organisation operates. While this is a highly complex endeavour, the change must be made and a collaborative and co-created process should be followed for the best results. 

If you need help on where to get started, get in touch to find out how we can support you.