According to a new report from Accenture, ‘The European Double Up: A twin strategy that will strengthen competitiveness’, how much faster and stronger is affected by relatively low levels of confidence over revenues and profits among a number of Europe’s leading companies. Most expect to return to pre-pandemic profit levels over the next 18 months but the pace of improvement hinges on the concrete action that business leaders take on digital and sustainability within their business strategies.
Two thirds of European companies expect to see negative revenue or profit growth in the next 12 months but the remaining third are gearing up for better, anticipating profitable growth in the same period. And it is these companies, precisely because they are leading in both digital adoption and sustainable practices, that are almost three times more likely to be among those the research classes as ‘tomorrow’s leaders’ in their sectors. Whatever industries they are in, those organisations understand that investment in technology and sustainability shouldn’t happen in isolation.
The challenge is for more companies to recognise the full potential value of such investment and then coordinate its implementation to best effect. Currently, fewer than half (45%) of the companies surveyed say they were prioritising investment in both digital transformation and sustainability. Among those who are taking action though, clear trends have emerged, with AI and cloud receiving particular focus from companies, while a significant proportion (31%) are rebalancing their investments to focus more on sustainable business models.
There are positive indications that UK companies, particularly in business sectors set to be significant drivers for Scotland’s economic growth (like life sciences and tech), are primed to succeed more readily than those in other parts of Europe. Overall, 59% of UK companies are optimistic about reaching their 2021 targets, which is the highest score EU-wide and almost double the figure seen in some southern European economies like Italy and Spain.
Yet even companies that recognise the business opportunity to accelerate their digital and sustainable transitions face barriers at different stages of this ‘twin transformation’ journey of simultaneous investment in digital and sustainability. Key challenges include defining a viable business model around sustainable practices and products, freeing up resources to better mobilise the organisation and moving rapidly from pilot and siloed projects to large-scale and enterprise-wide initiatives.
How should organisations respond? And what are the behaviours and practices that business leaders, particularly here in Scotland, can and should adopt in the year ahead? Best practice from across Europe suggests a number of strategic steps that need to be implemented if they are to overcome these obstacles and successfully execute a twin transformation.
Firstly, companies need to foster an ecosystem-based business model driven by sustainability and enabled by technology, not just in their own organisation but by aligning partners for sustainable product lifecycles and improved traceability throughout their supply chain. Organisations need to appreciate that sustainability is a business opportunity as well as a response to societal challenge and they need to create ownership throughout the organisation, by setting practical KPIs. Our research suggests that twin transformation leaders already generate more than 10% of their revenues this way.
Secondly, they should prioritise combining resources to scale technology applications to sustainable practices. That means investing more in innovation across the board by, for example allocating more than 10% of annual revenue to R&D. Sustainability and technology should not be viewed as separate priorities..
Finally, they need to nurture their people. Twin transformation leaders spare no effort in reskilling/upskilling their workforce, understanding that building and nurturing talent is essential to turning transformation into tangible business value.
If our businesses can get this mix of factors right in the months ahead, recognising and fully building the dual added value in digital and sustainability, then Scotland has a far better chance of enjoying the green recovery that that businesses aspire to create.
The European Double Up researched is published at https://www.accenture.com/us-en/insights/strategy/european-double-up
Michelle Hawkins is Managing Director of Accenture, Scotland