Strategic Planning and Execution

Strategic Planning and Scenario Analysis

Integrate material and salient sustainability risks and opportunities into strategic planning, enterprise risk management, capital expenditure and investment calculations, and conduct sustainability-related scenario analysis to better analyze environmental and social impacts throughout the value chain and across multiple time horizons.

Actions

Companies integrate material and salient sustainability risks and opportunities into strategic planning, enterprise risk management and capital expenditure appraisal processes. Planning processes include assessment criteria that consider impacts of sustainability factors on decision-making, resource allocation and investment across the full product and service life cycle and value chain. As a critical input to strategic planning, companies will conduct sustainability-related scenario analyses across the value chain to identify potential impacts to current operations, sourcing regions, target markets and planned growth strategies. In doing so, companies will: 
 

  • Assign value and appropriately price natural and human capital from the perspective of impacts to the business, the planet and societies
  • Adjust time horizons to consider 3, 5 and 10-year variables and conditions related to sustainability impacts
  • Assess returns on capital over a 10-year time horizon or longer in order to fully consider the potential environmental and social risks and value the long-term benefits of investments 
  • Apply lower hurdle rates to sustainability-related investments, understanding that lowering systemic risk and increasing resiliency have tangible long-run value that should be calculated into decision-making
  • Ensure that enterprise risk management systems identify sustainability risks or impacts that run counter to corporate sustainable business priorities so that annual action plans for specific business functions do not introduce new unsustainable trade-offs 

Getting Started

Unlike the Critical Impact Actions, the actions within Strategic Planning and Execution do not have milestones leading to 2030. Each company already has the ability to begin taking or continue integrating these actions today.  Rather than taking iterative steps over the next 10 years, companies should prioritize strengthening their corporate systems and equipping themselves with the tools to address risk and capitalize on opportunity as soon as possible.

This section of the Ceres Roadmap 2030 identifies a list of resources to help companies further integrate sustainability into strategic planning and execution.

Corporate Purpose - A collection of resources from McKinsey & Company to help companies define their corporate purpose.

UN Guiding Principles: Salient Human Rights Issues - Part of the UN Guiding Principles Reporting Framework that shows companies how to focus their human rights reporting on their salient human rights issues.

The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities - A guide to assist organizations in using climate-related scenario analysis to support the development of disclosures consistent with the recommendations of the Task Force on Climate-related Financial Disclosures.

A4S Essential Guide to CapEx - A guide that shows how businesses can adapt their existing capital investment appraisal processes in a pragmatic and systematic manner to integrate social and environmental issues.

A4S Essential Guide to Finance Culture - This guide provides practical tools that will help finance teams develop a culture that embraces sustainable decision-making and supports the business in creating sustainable value.

Applying Enterprise Risk Management to Environmental, Social, and Governance-related Risks - This guidance is designed to help risk management and sustainability practitioners apply enterprise risk management (ERM) concepts and processes to ESG-related risks.
 

Companies in Action

3M integrates sustainability into every future new product. Increasingly, companies are embedding sustainability into investments and business decisions—including product development and R&D. As a result of internal stakeholder engagement, 3M in 2018 launched a new sustainability framework to guide the company’s long-term vision. The strategy focuses on three main pillars to drive impact: science for circular, science for climate and science for community. As part of this broader framework, 3M announced that starting in 2019 every new product launched by the company must have a Sustainability Value Commitment embedded in it demonstrating how it drives impact for the greater good. With an average of 1,000 new products released each year, representing around one-third of the company’s sales, the initiative has the potential to generate a significant ripple effect both within the company and beyond. 

Ingredion integrates sustainability criteria into merger and acquisition due diligence process and within accountability mechanisms. Ingredion integrates sustainability into its strategic decision-making processes by assessing climate impacts and water availability as part of its due diligence process for mergers and acquisitions. In its CDP response, the company notes that the evaluation of these risks influenced decisions on whether or not to continue with potential acquisitions—primarily related to the availability of reliable power grid and water availability, both of which are impacted by climate change. The board of directors' Governance and Nominating Committee has direct oversight for sustainability issues, including climate, and receives updates from the management team on progress. Ingredion's Sustainability Council is made up of senior leaders within the organization and is tasked with establishing the sustainability strategy, metrics and action plans for the company's global operations.The company also provides incentives to eligible employees through bonuses that are based on company and employee performance, which are assessed in accordance with strategy and goals, including sustainability commitments.

PepsiCo integrates sustainability criteria into its Capital Expenditure Filter. Proactive companies are taking steps to address sustainability risks and are incorporating sustainability criteria into capital allocation decisions. According to the company’s 2019 CDP response, PepsiCo incorporates environmental sustainability criteria into its Capital Expenditure Filter, which is applied to all capital expenditure requests over $5 million. Each request is reviewed not only against business financial metrics and value in advancing the business strategy, but also the positive or negative impact that it will have on the company’s environmental performance, including energy use, GHG emissions and contribution to PepsiCo’s efforts to achieve its climate goals.

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