The international business landscape is dynamic, and navigating it successfully means companies and executives must adapt. An innovative mindset is key, allowing leaders to create solutions and forge new paths forward for their organisations.

Sustainability is one crucial area that is driving firms to transform. Environmental, social, and corporate governance (ESG) targets are taking increasingly important positions in KPIs. Performance is no longer measured in purely financial terms.

As of 2024, the European Commission will require listed companies, credit institutions, and insurance companies to include sustainability information in their reporting. The same applies to companies that fit two of the following three criteria: more than 250 employees, more than €40m in turnover, or more than €20m on the balance sheet.

Transition drivers

Needless to say, these regulations will have a huge impact on organisations. Businesses are incentivised to go through sustainable transitions by the prospect of attracting more investments from groups that target green companies. International regulations will shepherd firms that drag their heels.

It is preferable to stay at the cutting edge, but this requires a change of culture. Sustainability has been used in marketing strategies for many organisations for a long time. Greenwashing often lurked beneath the lip service. The new European regulations mandate that certain firms must now be able to demonstrate they are walking the talk.

Organisations are expected to comply with the UN sustainable development goals (SDGs), meaning transitions need to start as soon as possible, if they have not already. In many cases, this is not just a situation where businesses feel the need to fall in line with the rule book; the intrinsic motivation of building a more sustainable environment in which to conduct business seems to be a major success factor.

This is encouraging, as is the fact that companies and businesspeople are turning to higher education institutions such as ours—Nyenrode Business Universiteit in the Netherlands—to learn how they can develop more innovative mindsets.

In partnership with KPMG, Nyenrode launched the ESG Innovation Institute, which helps directors of organisations flesh out creative strategies to guide their companies through periods of sustainable transition.

Focusing on new, sustainable technologies and services requires a certain frame of thinking. It is not just a way of doing, it is a way of being. This means ESG concepts must become embedded in your organisation, which requires leaders to find holistic approaches to incorporating sustainability into all business operations and processes.

The rise in the importance attributed to ESG values marks a paradigm shift. Meeting the various SDGs is a complex mission that cannot be achieved through a one-dimensional solution-oriented approach. This will only lead to more questions and more problems.

Instead, it is time to start examining current business models and strategic choices with a critical eye. Economic contribution is not the only measure of a company’s impact on society. A range of social and environmental factors must be taken into account.

Companies such as Greenwheels and MUD Jeans are great examples of how traditional business practices can be reimagined. Both are examples of enabling consumers to lease products (vehicles and clothes, respectively) rather than buy them. Models like these allow businesses to recycle and reuse services and materials.

Early days

Nevertheless, it is important not to think of this as the endgame. The global transition is still in its early stages, and it is difficult to predict to what extent firms will have evolved in ten years’ time. There is still much to discover.

Innovation strategies always start with the internal organisation. Directors can exert influence by encouraging executives to brainstorm new ESG-related ideas, or by encouraging cooperation between departments on this topic. This should be paired with continual learning through developing new competencies and evaluating progress.

Incidentally, this is beneficial to recruiting talent. Young people are especially likely to prioritise working for companies that have a strong ESG focus over those that do not. The fresh perspectives they bring to their respective teams in turn boosts the capacity for innovation.

Exchanging ideas and collaborating to complete tasks helps to stimulate creative thinking. This is why the ESG Innovation Institute aims to support the formation of a community of sustainability-focused change-makers.

For instance, the Johan Cruijff ArenA—home stadium of the Dutch national football team—acts as an ecosystem together with partners to generate innovative ideas. They partnered with students from the University of Applied Sciences Amsterdam on a project researching mobility in the ArenA Poort area. The results of this investigation were implemented in a number of schemes that allow visitors to travel more sustainably.

An important first step for firms is ensuring executives and corporate leaders are up to speed on the organisation’s social and environmental impact. Then, teams can be assembled to brainstorm how this can be improved.

Crucially, this should not be seen as simply complying with changing regulations. Meaningful transitions will require heavy investments of time and energy, so they should be intrinsically motivated by the desire to be more sustainable for their own sake.

Jeroen van der Velden is an associate professor of strategy alignment at Nyenrode Business University, and director of its Center for Strategy, Organization & Leadership. Also at Nyenrode, Jeff Gaspersz is a professor of innovation, and one of the speakers in its module on ESG & Innovation.