Citi Perspectives Spring 2020

24 | Treasury and Trade Solutions Integrating sustainability into business strategy Once companies have come to grips with the risk and cost implications of sustainability, they can start quantifying anticipated savings and incremental returns from financial investment into a sustainable future business model. Rather than seeing ESG as a corporate social responsibility activity, corporates can look at the opportunities they offer, both to enhance their reputation among consumers and take advantage of new markets and growth opportunities. As outlined in the C.O.R.E. framework in Figure 2, corporates need to evaluate their operating model end-to-end, including organizational culture, operations, RD&I activity and emissions footprint, to identify areas for transformational changes required to switch to a sustainable business model in the future. One of the greatest challenges relating to ESG is to evolve corporate strategy so that waste is treated as a resource that offers potential savings throughout the supply chain. Operating processes need to be remodeled and redefined in order to close the loop from linear to circular models. At the procurement stage, reusable raw materials need to be regenerated from recovered waste, potentially creating cost savings by lowering procurement volume. Next, at the production stage, operational processes need to be redesigned to optimize usage of materials. Throughout the supply chain and distribution stages, corporates need to reconsider their relationships with partners, and find smart ways to optimize capacity and transportation networks. Determining future business success Transitioning to a more sustainable — or even circular — model can seem daunting given the scale of the change required. However, by developing a business strategy framework that aligns corporate strategy with ESG requirements, companies can transform their culture (setting out a vision to mobilize the workforce), operations (to shift from linear to circular models), research (to apply eco-design principles) and emissions (to reduce waste).