Companies globally are facing pressures to become sustainable. Customers are increasingly shifting their buying habits; preferring to buy sustainable products and even choosing to do business with a sustainable company.
Governments across the world are also increasingly implementing policies and mechanisms to reach their carbon neutrality targets. Additionally, carbon taxes are increasingly becoming a common norm for enforcing more sustainable practices among corporates. To know more, we speak with Raimund Klein, CEO of International Centre for Industrial Transformation (INCIT) to understand INCIT’s recently launched sustainability tool COSIRI, and how it can help companies realise both sustainability and profitability.
Unravel: What does the Consumer Sustainability Readiness Index (COSIRI) do?
Raimund Klein: COSIRI is the first global quantifiable sustainable readiness index that benchmarks the sustainability maturity of organisations, and their ESG transparency and reporting. The framework is built on four building blocks that encompass 24 metrics, based on which companies are rated on a scale of one to five.
It helps determine a company’s state of sustainability maturity, and also helps companies prioritise their future actions to attain their desired sustainability outlook.
Unravel: Why is this an important time now for something like COSIRI?
Mr Klein: Increasing focus is being given towards carbon neutrality. Concerted efforts by both governments and business leaders can now be observed to offset their carbon footprints, while providing greener alternatives to goods and services.
Sustainability is no longer an option for companies. A 2019 CDP Climate Change Report reveals that customers are more willing to pay a premium of 15% to 30% for sustainably produced goods and services across B2B and B2C sectors. And around 50% of corporate profits are at stake from bolder environmental regulations. Brands that are first-movers in sustainable products are realising 50% faster growth. For example, Unilever’s sustainable living brands are realising better growth than the rest of its portfolio.
The manufacturing sector is by far the leading greenhouse gas (GHG) emitter in the world. It is imperative that manufacturing brands move quickly to reduce its impact on the environment. Customers of FMCG brands are also demanding that the products they use are sustainably sourced and would prefer to buy products that are sustainable.
Across the world, governments are also enacting stricter regulations to encourage a more circular and sustainable economy. The EU Emissions Trading System, requires EU producers to buy carbon allowances to offset their carbon emissions. This now impacts EU importers too who import high carbon-related products such as steel and cement. Many countries have also implemented carbon taxes or its equivalent to help reach their net-zero targets.
Unravel: You’ve said that through the use of COSIRI, manufacturers will be better able to set, monitor and track their progress towards sustainability goals. How so? Can you provide an example of this?
Mr Klein: COSIRI will rate companies based on 24 sustainability metrics. These metrics are distributed among 9 pillars starting from a company’s ESG strategy to its ESG governance. For example, a company’s ESG strategy and targets is one such metric which is then further rated between Band 0 to Band 5. Band 0 – None; Band 1 – Formalising; Band 2 – Basic; Band 3 – Defined; Band 4 – Developed; and Band 5 – Leader.
Using the COSIRI TIER Framework, businesses can also choose to create an individual transformation roadmap.
Unravel: What specific types of sustainability-related metrics will COSIRI track?
Mr Klein: COSIRI has been created using six core design principles: holistic, impact-oriented, neutral, comparable, transparent, and flexible. Below is the table that clearly depicts the 24 sustainability metrics that govern COSIRI.
Pillars | Sustainability metrics |
Strategy | Strategy & targets ESG integration Green Business Modelling Capital allocation |
Risk Management | Physical climate risk Transition climate risk Compliance risk Reputation risk |
Operation | Greenhouse Gas emissions Resources (water, energy) Material waste Pollution (air, soil, water) |
Procurement | Supplier assessment Sustainable procurement process |
Supply Chain | Transportation & distribution Supply chain planning |
Product lifecycle (circularity) | Product design Circularity process management |
Clean technology | Adoption Transparency & optimisation |
Talent readiness | Workplace development Leadership involvement |
Structure and management | External communication and engagement Governance |
Unravel: Will this work like a standards/ ratings system?
Mr Klein: Yes, it will work like a standards/ ratings system that will provide a quick overview of a company’s sustainability performance. Companies will be given a star emblem after the COSIRI assessment is completed. A single-star rating means that the company has the basic foundations in place to start measuring its ESG stance.
Meanwhile, a company that receives a five-star rating has been successful in realising at least 80% of its sustainability targets, including GHG emissions. Assessed companies are encouraged to disclose their star emblem as part of their sustainability reporting.
There’s much to accomplish because most companies have only just started their ESG journey. A concerted effort will be required, both from policymakers and industry associations to support a holistic transition towards ESG compliance for all companies.
Unravel: How does it link to company performance and profitability?
Mr Klein: Sustainability is no more a trend, but a reality that companies cannot ignore. Companies need to adapt to changing sustainability needs to remain relevant. Those who have shifted to embracing a more holistic sustainable approach are realising better productivity and hence increased profitability.
Going forward, sustainable goods and services will also receive better response in terms of higher preference and loyalty, not only from in-country customers, but also in cross-border sales. Countries are increasingly implementing stricter sustainability regulations on goods coming from outside the country.
This puts increased pressure on multinational companies to comply and update their processes and operations and develop future strategies that are aligned with the global emission targets.
Unravel: What are some key challenges in the adoption of COSIRI, in your view?
Mr Klein: Some of the key challenges in the adoption of COSIRI are the lack of relevant policies and regulations that are still under development in most countries. This is coupled with a lack of talent. There are very few people in the labour market that are trained in green skills. Alongside this, the impacts of the pandemic have led many investors to rethink or pull back on their ESG commitments.
Climate change commitments lack among countries. Although most have stated or announced ambitious targets to go net-neutral, many have a long way to go before they achieve their desired targets in sustainability.
This makes it equally hard for companies to significantly contribute to realisation of carbon-neutrality or sustainability. Green financing is also lacking in most countries. Many policymakers do not have the knowledge and understanding to effectively introduce favourable financial incentives or SDG loans to invigorate the sustainability agenda.
These need to be addressed and a collective effort needs to be driven from every front for a sustainable future. And COSIRI is just one small effort to realise this monumental task.
Unravel: When do you expect to see this launched, and in which markets?
Mr Klein: COSIRI already has been launched and INCIT is now working with the World Economic Forum and Capgemini, a business and technology transformation company, to scale and accelerate COSIRI globally.
Learn more about COSIRI here.
Raimund Klein
Raimund Klein is the founder and chief executive officer of the International Centre for Industrial Transformation (INCIT), an independent environmental, social and governance (ESG) institution which champions manufacturing transformation globally and advocates the rise of smart manufacturing. In his current role, Raimund actively fosters collaboration between public and private sector manufacturing-related organisations to catalyse industrial transformation across geographies and industries. Previously, Raimund was head of Digital Industries ASEAN at Siemens and was accountable for developing new business models for digitalisation and automation.
