Transformation lever sustainability


More than just fair trade coffee—what a strategy towards more sustainability is all about

Author: Ulrich Hoyer, zeb partner

Some call it a buzzword, others talk about zeitgeist—with regard to the world of finance, we can be more specific: sustainability is becoming the key transformation driver for our industry. It will have far-reaching consequences for banking—making it all the more important for financial institutions to change course now. If you are fast, you can turn the risk of being overtaken by the competition into an opportunity, secure market share and perhaps even gain customers: sustainable finance is a billion euro business.

Top decision-makers in politics, business and society around the world rate climate change as the number one risk; many sections of the population agree—and if they didn’t before Fridays for Future, they certainly do now. Awareness of sustainability is increasingly influencing consumer behavior. For our new zeb.sustainability study, we surveyed German bank customers—with striking results: two-thirds would like to see a significant move towards sustainability on the part of their main bank. Since our last survey in 2014, target groups with an affinity for sustainability have grown by almost 300 percent—this shows that sustainability is now an important issue for a broad section of society. Banks that fail to act will lose customers. This is another insight which was confirmed by our survey. We are also convinced that the coronavirus will further increase popular awareness of sustainable action.

Five fields of action for sustainability 
The key objective of banks must be to establish sustainability credibly in everyday life. In this context, we see five fields of action: socially, ethically and ecologically sustainable service offerings must be developed as part of the business model, especially in the areas of investment, credit and account models. A gradual, transparent further development is more credible and more successful in the long run than a quick, but less viable and supposedly comprehensive solution. At the same time, a customer with an affinity for sustainability will notice if an investment fund with an ESG approach is no more than a front and at odds with the actual market presence and the core offering. 

After all, the services offered to customers must also be reflected stably and efficiently in the processes and systems which are part of the operating and IT model. It is not enough to provide fair trade coffee to staff in the break room or to customers in the branch. Employees and customers must recognize and understand that the bank is serious about sustainability. Eco-friendly paper for brochures, support for local environmental protection and a clear commitment to diversity and inclusion, including defined measures, are further examples.

In a holistic sustainability strategy, the management model is of particular importance—it must correspond to the orientation of the business model and should support the transformation process. If a bank wants to stand for credibility, transparency and fairness in the market, it must also reflect this in its management impulses, reporting and incentives.

Only an explicit strategy for sustainability is also a sustainable strategy
Overall, banks should also integrate sustainability into their strategic structure, for example into their mission statement or vision. This can include guidelines for the evaluation of all business activities or be reflected in a company-specific, defined value system. In this context, it is helpful to initially develop a target picture that defines one's own sustainability requirements and sets out an ambitious path for achieving them. 

Only those who establish an explicit strategy for sustainability in this way also have a sustainable strategy for the future. However, its implementation is not a sprint, but a marathon—which may well take several years. Realigning an organization towards sustainability in a few months or quarters is a wish that is often heard but ultimately unrealistic: the personnel development alone, involving and training employees and turning them into co-creators, takes time and cannot be achieved with a short web-based training. In order to find the right speed and define suitable offers, we usually start our projects with a survey based on our own methodology and develop individually tailored measures.

In parallel, the status quo of the organization as a whole must be analyzed. With our
maturity model, we have developed a transparent tool and successfully used it several times. For many banks, the status-quo assessment is sobering: almost all of them are a long way away from the fifth and highest level of maturity (“pioneer/shaping the future”). Most of them have left the lowest level (“minimum CSR”) behind, but the majority are only at levels two and three—we have respectively called them “selective individual measures” and “sustainable products”. In stage four (“holistic approach”) the field is already very much thinned out. 

Why it is not worthwhile to want to play Champions League at all costs
However, despite all the ambitious goals, it does not make much sense for a traditional bank to want to position itself in the Sustainability Champions League in the short term. This would be neither credible nor helpful, let alone necessary, from a cost-benefit perspective. Customers with an affinity for sustainability simply require banks to move in the right direction and generally take the issue seriously. 

Only the customer group we call “sustainability advocates” expect a banking partner who is sustainable through and through—and they have therefore often been in a business relationship with a pioneer of this former niche for many years. An honest, gradual and even opportunity-driven approach is therefore more credible and sensible for many banks.

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