The New Business Model For Sustainable Competitive Advantage. A Top C-Suite Advisor Speaks

“We are at a tipping point when business needs to reinvent themselves for better futures. In fact, I believe that they need to reinvent the model and even demonstrate the contribution to society.” Why? “Because they will be chosen by people, by employees, as you said, by investors, by partners, by clients. This is what is happening right now. And the question is not anymore about the why, the question has become about the how.”

That is how Isabelle Grosmaitre explained the moment the private sector is in today in an exclusive interview on Electric Ladies Podcast. She’s CEO and Founder of Goodness & Co. consulting firm, the former Sustainability Catalyst at Danone, a member of 100 Davos Women, top advisor to C-suites and corporate boards, and author of the book, “Purpose-Led Companies, and How The Next Generation of Leaders Can Really Change The World.” She was also on a panel about these issues that the author moderated at the big ChangeNow 2023 Summit in Paris, France earlier this year (pictured). (Author’s note: English is not Grosmaitre’s first language, so some wording in quotes may reflect that.)

“Sustainability has become a competitive edge,” she said.

What is that new business model?

Grosmaitre says that businesses need to reinvent their business model because, “At the core of the business model, it means that sustainability is not anymore, (just) sustainability experts’ business. It has become everyone's business. And in fact, those companies that are at the forefront,” such as Unilever, Mars, Patagonia, Nestle, and Ikea, according to Grosmaitre, companies that “are showing the way that sustainability has become a competitive edge, really.”

How can companies get there?

Here are six keys she says to reinventing a company’s business model for the new economic reality centered on sustainability because of what employees, regulators, customers, investors and other stakeholders are demanding in response to climate change:

1. Define “Why does a company exist”: It’s about “reinventing the model,” she said, which includes “defining your purpose as a company, meaning your contribution to the world, just going beyond profit. Why does a company exist?” Patagonia, for example, which recently converted its ownership to planet Earth, she explained as, “they exist to save our home planet.”

2. Reinvent the performance model: “Another way is about reinventing performance model. The reality is that if you always look at performance the way we used to look at it, it doesn't fly. It doesn't work,” Grosmaitre insisted. It means, “really shifting the role of finance towards Chief Value Patient Officer,” which she says L’Oreal did, for example.

That means, focusing “their investment planning into the contribution of the brands, not just on profit or regular financial performance, but also performance that are key for the people, the planet and people around them.” She cited Unilever as an example here, which developed the strategy of integrating sustainability so thoroughly into their business strategy that, “they don't have a sustainability plan and then a business plan. No, they have one in all. Their transformation strategy is about making the business a more sustainable business,” as she put it.

3. Engage employees and stakeholders: The key question for companies that want to succeed in this new business reality, Grosmaitre said, is, “How much are they engaging employees, partners, clients in the process to achieve this genuine transformation?” That’s because, “You need to shift the way you operate.” When she was at Danone, she said, “twice a year, we would ask all of them (100,000 employees) on the nine strategic priorities of the company, what was the most urgent, the most important priority for them.” Then leadership would integrate their responses into the company strategy. “Employees are the changemakers in the process,” and need to feel engaged and heard.

4. “A new era of governance”: Grosmaitre believes we are beyond compliance now and that the questions a board asks are key: “You're not asking the same question to the board if you are taking it from a compliance perspective or if you're taking it from a competitive perspective.” She says, “We are entering actually this new era of governance, and I believe the only way to succeed is to build a more collaborative and inclusive governance,” which includes diversity of ages, roles and backgrounds, as well as of gender and ethnicity, and people with experience in sustainability.

5. Focus on sustainability as a competitive edge, even with suppliers: “It's not about the checking the box about the compliance, the what needs to be done,” she emphasized. “It's really about building the competitive edge. How can you be preferred because you are doing good? So it's really about involving your brands, involving your suppliers in a different way,” such that suppliers want to work with you because of this new focus on sustainability.

6. Accountability standards are critical: Grosmaitre welcomes the new climate risk disclosure rules, regulations, reporting standards and frameworks – such as the new ones from the International Sustainability Standards Board and those coming soon from the Securities and Exchange Commission (SEC), among others – because they push boards and leadership to make sustainability “everyone’s business,” not just a random sustainability committee or department.

However, she thinks more is needed: “How can we invent incentives scheme that works for the board members to encourage them to work in the right direction, not just, from a shareholder perspective, short term? So, we need to reinvent something here.”

Grosmaitre says the sustainability- and purpose-focused economy is here, so it’s a question of whether you want to seize the competitive advantage, try to catch up later, or get pushed aside.

“Whatever type of business you are in, whatever sector you are in, this is coming. So, you have a choice to either wait for the moment to happen where you will have to be reactive and it's going to be challenging, or you can decide to take your own path to really shape and build your own journey for positive impact.”

Listen to the full interview with Isabelle Grosmaitre on Electric Ladies Podcast here.