Half of global C-suite believes regenerative business models 'not working'

20 October 2023 Consultancy.uk 4 min. read

Global research has found that over half of executives do not believe efforts to make their business ‘regenerative’ are working. Businesses are under pressure to shift their focus from becoming ‘resilient’ to becoming ‘regenerative’ from their customers, yet currently only 43% of companies effectively operate in this way.

Climate action is considered a critical priority for all businesses and governments in the modern era. Essential sustainability strategies, such as shifting away from greenhouse gas-emitting fossil fuels to renewable energy and reducing waste, all aim to ‘do less harm’ – but as consumers urge companies to do more to avert the rise of global temperatures, and the loss of biodiversity, polluting less and using fewer finite natural resources is no longer considered enough.

The essence of regenerative business is to ‘do more good’, not simply the damage control of ‘do less harm’. In contrast, a regenerative company states an aim of taking altruistic measures to increase its socio-ecological handprint by regenerating the health of individuals, communities and the planet. The problem is that while many companies already think of themselves as a company driven by sustainable principles, many already struggle to walk the talk on that front. There is evidence to suggest that the same is true of firms which see regenerative business models as their desired goal.

Half of global C-suite believes regenerative business models 'not working'

A new poll by Kearney of 800 executives around the world has shown that while the buzzword ‘regenerative business’ is hardly taking off in mainstream discourse, 99% of business leaders thought transforming their operations to that end was important. The firms also generally recognised the shift could help set them up for success: 58% said developing a regenerative model was a good opportunity for their firm, while in a tight labour market 60% identified it as a way to increase employee commitment.

Alex Liu, Managing Partner and Chairman at Kearney, commented, “The results of our survey make it clear that businesses want to shift from a merely resilient strategy to a fully regenerative one that is more transformative at its core, whether that requires truly digitising their obsolete global supply chains, embedding analytics into the entire operating model or upgrading the way they develop and inspire diverse and sustainable workplaces. A regenerative business model can facilitate fundamental change, at the core. Businesses must take a step back and review their business models and assess their products or services and drive maximum value for all stakeholders and the broader ecosystem that they operate in.”

However, in line with previous efforts on sustainability (and indeed, transformation), the consultancy found that most attempts to shift policy still lead to failure. Only 43% of leaders reported that their companies were already operating as regenerative businesses effectively. Similarly, only 40% of businesses reported effectively implementing a regenerative culture and 45% said they were already operating a regenerative supply chain.

Attitudes are by no means the same across the C-suite, it should be mentioned. While a 48% of CEOs globally said that their business was very effective at operating regeneratively, a contrasting 58% of COOs broadly agreed that their companies needed to make further progress to be made. Overall, 56% of the global C-suite subsequently told Kearney that their efforts to become a regenerative business were not working.

According to Kearney, some industries were leading the way, and could offer best practices for those lagging behind. For example, 53% of retail businesses are operating regeneratively and 35% are doing it very effectively, in part by relying on technology to help limit waste of energy and materials. Similarly, the energy sector is also following suit and taking a regenerative approach to sustainability, with 46% of C-suite leaders in this sector reporting that they are already operating regeneratively very effectively.

Looking ahead, firms adopting regenerative strategies could learn from what groups in these sectors have already done to realise their transformations. Alongside changes to the supply chain, for instance, energy leaders believe the greatest opportunity for regeneration lies with systematic changes to their business model, including leveraging a responsible and deepened view of advanced analytics.

Speaking on the challenges, Abby Klanecky, chief marketing and client services officer at Kearney, added, “While our research confirms that businesses are edging closer to regenerative models, it is equally important that they don’t lose sight of the end goal while on this journey. Becoming regenerative is not just about restructuring and ironing out the pain points. It’s important that any plan sets the pace for long-term success, breaks down internal silos to share expertise, and really adds value back into the world in which we operate. Businesses must build on their strengths and identify new opportunities for growth and impact in the future. Resilience was the watchword of the past few years, now it’s going to be ‘regenerative’.”