Transition to sustainability requires an innovative mindset

To support organizations in the transition to sustainability, Nyenrode Business Universiteit and KPMG jointly founded the ESG Innovation Institute. Dr Jeroen van der Velden and Prof dr Jeff Gaspersz are both connected to this institute and explain how innovation contributes to business transformation.

As of 2024, listed companies, credit institutions and insurance companies will be obligated by the European Commission to include sustainability information in their reports. The same applies to companies that meet two of the following three criteria: more than 250 employees, more than 40 million euros in turnover, and more than 20 million euros on the balance sheet. Van der Velden explains that these regulations have a huge impact on organizations. “It is no longer just about financial results, they are now also expected to act according to ESG (Environment, Social, Governance) values and develop measurement tools for this in the form of KPIs. This transformation requires a different way of thinking because companies will now also be judged on their impact on society.”

Cultural change

“Sustainability used to be part of the marketing strategy for many organizations. Greenwashing was often lurking: companies pretending to be more sustainable or more socially responsible than they actually are,” Van der Velden continued. “Thanks to the new European regulations, companies must actually be able to demonstrate how they deal with certain sustainability standards. These are the sustainable development goals (SDGs) drawn up by the United Nations. So organizations are expected to make a transition in the short term. This is not just about following the rules; the intrinsic motivation seems to be a major success factor. But the latter also requires a cultural change.”

Mindset

Gaspersz is a Professor of Innovation at Nyenrode and helps directors of organizations realize an innovation strategy. “We can only see opportunities and seize them if we continue to think and act innovatively. Focusing on new, sustainable technologies and services requires a certain mindset. You could say: It's not a way of doing, but a way of being. By this I mean that ESG must become part of the DNA, which requires a holistic way of thinking. An innovation strategy always starts with the internal organization. As a director, you can exert influence by encouraging executives to come up with new ESG-related ideas or by encouraging cooperation between departments on this topic. It is also important that you facilitate the development of knowledge and competencies around ESG and evaluate performance and progress.” Pursuing ESG goals also contributes to being an attractive employer, according to Gaspersz. “I notice that young people in particular are increasingly becoming critical. It’s important to them that companies pay attention to themes such as sustainability and inclusion, which they factor into their decision whether or not to work for an organization.”

Community

In addition to educational course availability and an academic ESG chair, the ESG Innovation Institute also supports the formation of a community. “I think exchanging ideas and undertaking activities together helps raise awareness and has a great stimulating effect,” Gaspersz explains. “A great example of this is the Johan Cruijff ArenA acting as an ecosystem together with partners to come up with innovative ideas. For example, they collaborated with students from the University of Applied Sciences Amsterdam who researched mobility in the ArenA Poort area. They used the results to create a number of concepts that allow visitors to travel more sustainably.”

Paradigm shift

According to Van der Velden, the advent of ESG marks a paradigm shift. This requires organizations to develop an integrated vision of how they deal with the various SDGs. It is a wickedly complex issue where a one-dimensional solution-oriented approach will lead to more rather than fewer problems. “In doing so, we need to start looking at our business models differently. It is no longer just about an organization's economic contribution, but also about its impact on society and the environment. New business models could include a company like Homie that provides energy-efficient household appliances where the user pays for use rather than ownership.” Gaspersz adds that new business models can also involve the reuse of services and materials. “A company like Greenwheels for example, or a Product as a Service like the MUD Jeans, which you don't buy but lease.” Still, Van der Velden and Gaspersz stress that we should not think too easily about new business models. “It is good that things are developing, but we should not forget that at the same time we are still just in a transitional phase,” Gaspersz says. “We should not underestimate this transition. I think there is still a lot to discover.”

Intrinsic motivation

What can companies do to get started on ESG values themselves? “Brainstorm on how your organization can contribute to the transition to sustainability. Look at the impact the organization has on society and the environment and think of ways you can improve it. It is important not only to comply with the new European regulations, but also to be intrinsically motivated to integrate sustainability into the business strategy. Collaborating and exchanging ideas with other organizations can help achieve innovative solutions and accelerate the transition to sustainability,” Gaspersz concludes.