Developing a sustainability strategy: The practical guide

Sustainability is no longer a voluntary commitment, but a strategic success factor for companies. With the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), the requirements for companies to systematically record and report their environmental, social and governance (ESG) aspects are increasing. However, developing a sustainability strategy means much more than just compliance – it can make companies more resilient and competitive in the long term.

In this article, we show how companies develop a future-oriented sustainability strategy and which key concepts such as double materiality, materiality model canvas or transformation premiums play a role in this. We also shed light on how disruption, ESG reporting and stakeholder expectations influence corporate strategy and what practical measures companies should take now.

Drivers for the development of a sustainability strategy

The need to develop a sustainability strategy is determined by various external and internal drivers. Companies that respond to these developments at an early stage secure competitive advantages, minimize risks and benefit from long-term resilience.

1. regulatory requirements & reporting obligations

The EU Green Deal, which includes the CSRD and the EU taxonomy, sets new standards for sustainable business.

CSRD (Corporate Sustainability Reporting Directive): Companies must record detailed ESG data and report in accordance with ESRS standards.
EU taxonomy: A standardized classification system that defines which economic activities are considered environmentally sustainable and contribute to achieving EU climate targets.

In future, companies will have to record detailed ESG data and disclose their sustainable business activities. Those who adapt at an early stage will avoid fines, reputational risks and additional costs for subsequent implementation.

2. rising expectations of investors & financial markets

Capital markets are increasingly favoring sustainable business models. ESG criteria are incorporated into the valuation of companies and influence credit conditions, investor relations and stock market valuations. Companies with a clear sustainability strategy benefit from green financing models, better ESG ratings and access to sustainability-oriented funds.

3. market & competitive pressure due to increased transparency

Customers, business partners and suppliers are increasingly demanding sustainable products and business models. The CSRD and associated ESG reporting obligations ensure unprecedented transparency. Companies not only have to disclose their key financial figures, but also their social and environmental impact.

🔍 Consequences for companies:

Greenwashing is becoming impossible: companies must provide credible evidence of sustainable measures.
Stakeholder demands are increasing: Investors, customers and employees are demanding clear sustainability strategies.
Sustainability as a purchasing criterion: companies that ignore ESG criteria run the risk of losing market share. Sustainability certifications, CO₂ reduction targets and sustainable supply chains are becoming standard and purchasing criteria in many industries.

💡 Conclusion: Companies that do not actively integrate sustainability into their strategy will be forced to rethink as a result of market changes, among other things. Those who act early can use disruption as an opportunity.

4. cost factor & resource efficiency (socio-ecological disruptions)

The costs of environmental and social impacts are rising and are increasingly influencing the profitability of business models.

📉 Examples of rising environmental costs:
✔ CO₂ pricing: companies have to pay for emissions (e.g. EU emissions trading system).
✔ Scarcity of raw materials: sustainable materials are becoming more expensive, while recycling models are becoming more attractive.
✔ Supply chain requirements: Laws such as the German Supply Chain Duty of Care Act (LkSG) or the Corporate Sustainability Due Diligence Directive (CSDDD) oblige companies to comply with human rights and environmental standards.

💡 Tip: A sustainable transformation helps to increase energy efficiency, use circular economy models and reduce costs in the long term. Companies with ESG initiatives avoid financial burdens from CO₂ taxes and environmental regulations.

5 Employer branding & securing skilled workers

Sustainability is a decisive factor for attractiveness as an employer. Especially for younger generations (Gen Z, millennials), clear ESG commitments & sustainable corporate values are an important criterion when choosing a job. Companies with a strong sustainability strategy attract qualified talent, improve employee retention and strengthen their corporate culture.

6. necessity of sustainable management

The planetary boundaries define the ecological limits within which humanity can operate without destabilizing the ecosystem. Areas such as climate change, freshwater use and biodiversity have already been critically exceeded.

Companies are facing the challenge of adapting their business models to these ecological limits, as resource scarcity, stricter environmental regulations and social pressure are making sustainable business a necessity. Those who invest in climate-friendly innovations, the circular economy and sustainable value creation at an early stage will secure their long-term competitiveness and minimize environmental and financial risks.

7 Disruption as a driver of corporate sustainability

A sustainability strategy is increasingly becoming an economic success factor, as disruptive changes are forcing companies to adapt their business models. Companies that initiate a sustainability-oriented transformation at an early stage can not only minimize regulatory risks, but also exploit innovation potential and secure competitive advantages.

The Innovator's Dilemma: Why companies fail when they don't adapt

Clayton Christensen’s concept of the innovator’s dilemma describes how established companies are often reluctant to adapt to new market conditions – and are overtaken by more agile, innovative competitors as a result.

🌳 Relation to sustainability:

Companies that see sustainability as an obligation rather than an opportunity run the risk of being squeezed out by more sustainable competitors.
Companies such as Tesla and Beyond Meat have challenged traditional industries with sustainable innovations.

💡 Strategy tip: Companies should develop a sustainability strategy and invest in sustainable innovations before they are forced to do so by regulatory or market changes.

➡️ Conclusion: Companies that develop a sustainability strategy at an early stage benefit not only from regulatory certainty, but also from financial advantages, better market positioning and long-term competitiveness.

Developing a sustainability strategy: The most important steps

Phase model of strategy development for sustainability

Developing a sustainable corporate strategy can be divided into four core phases:

Analysis & target definition: Companies analyse their external and internal environment, identify ESG risks and opportunities and conduct a double materiality analysis to prioritize relevant sustainability issues.
Strategy formulation & integration: Sustainability goals are linked to the corporate strategy, sustainable business models are developed where necessary and investment and funding opportunities are identified.
Implementation & reporting: Sustainability measures are integrated into corporate processes, ESG software is used for data collection to enable CSRD-compliant reporting.
Monitoring & further developmentCompanies regularly measure their ESG performance and implement sustainability measures, conduct stakeholder dialogs and adapt their strategy to new regulatory and market developments.

The following sections examine each of these steps in detail and provide practical tips.

Phase 1: Analysis & target definition

Before companies can develop an effective sustainability strategy, they need to comprehensively analyze their internal and external environment. This involves understanding global megatrends, regulatory requirements and market changes and comparing them with their own business risks and opportunities.

A. Developing an external environment analysis for the sustainability strategy

First of all, companies should look at general trends and external factors.

i) Example: WEF Global Risk Report - Sustainability as a top risk

The Global Risks Report of the World Economic Forum (WEF), for example, shows that environmental and climate risks occupy the top four places among the ten most serious global risks. The most important risks include
✅ Climate change and extreme weather events
✅ Loss of biodiversity and ecosystems
✅ Critical changes to the earth system
✅ Scarcity of natural resources
✅ Environmental pollution

💡 Significance for companies: Companies that do not take sustainability into account in their corporate strategy are increasingly confronted with regulatory, financial and market risks.

In addition to the Global Risk Report, it also makes sense to review the planetary boundaries in order to recognize whether the company has dependencies on ecosystem services that will no longer exist in the future or whether the company has negative environmental impacts in these areas.

B. Develop internal analysis for the sustainability strategy

i) Double materiality as a strategic analysis tool

The double materiality analysis is the central concept of CSRD and distinguishes between two perspectives:

Financial materiality (“outside-in”): How do ESG factors affect the company financially?
Impact materiality (“inside-out”): How does the company influence the environment & society?

💡 Practical example: A logistics company must not only analyze the financial impact of climate change on supply chains, but also disclose its own emissions along the value chain.

📌 Tip: Companies should see the double materiality analysis not only as a compliance task, but also as a strategic tool for identifying new business opportunities and reducing risks. The DWA should definitely be taken into account when companies develop their sustainability strategy.

iii) Sustainable business models as a success factor

Sustainability is increasingly becoming a driver of innovation for new business models. Companies can create added value for the environment, society and the economy through sustainable business models. Organizations should rethink their current business model and analyze whether a transformation to a financially and environmentally sustainable business model is possible.

🌱 Examples of sustainable business models:

Dematerialization: Products are offered with fewer raw materials or purely digitally in order to minimize resource consumption (e.g. Spotify & Netflix, which replace physical media with streaming).
Green Razor & Blade: Sustainable basic products with reusable or environmentally friendly consumables (e.g. Fairphone, where individual components can be repaired or replaced).
Circular economy: products are not sold, but offered as a service (e.g. “Product-as-a-Service” for Philips lighting solutions).
Sharing economy: products and services are shared instead of owned, which saves resources (e.g. car sharing providers such as ShareNow or Airbnb for accommodation).
Impact models: Business models that actively solve social or ecological problems (e.g. Too Good To Go against food waste).

These models show how companies can integrate sustainability into their strategy and at the same time create new market opportunities and competitive advantages.

C) Other tools and frameworks for business analysis

A well-founded analysis of the internal company environment can identify existing strengths, weaknesses and potential in the area of sustainability. Various strategic tools help to identify relevant influencing factors in a structured manner:

SWOT analysis: Identifies strengths (e.g. existing ESG programs) and weaknesses (e.g. lack of sustainability expertise) as well as external opportunities (e.g. green financing options) and risks (e.g. new ESG regulations).
PESTEL analysis: Looks at external influencing factors such as political (EU taxonomy, CSRD), economic (CO₂ pricing, ESG financing) or technological developments (green innovations, digital ESG tools) that affect the company.
Five Forces Analysis: Helps to understand how sustainability influences competition, e.g. through changing customer requirements, new market participants or regulatory pressure.

By combining these analysis tools, companies can develop their sustainability strategy in a targeted manner, make optimum use of internal potential and proactively prepare for external challenges.

Phase 2: Strategy formulation & integration

Developing a successful sustainability strategy must be more than just a mandatory reporting exercise. Companies should strategically integrate sustainability with their business strategy in order to realize long-term benefits. Key concepts such as double materiality, the Materiality Model Canvas and sustainable business models help to integrate sustainability into the corporate strategy in a targeted manner.

A. Materiality Model Canvas: Developing and systematically presenting a sustainability strategy

The Materiality Model Canvas (based on the Business Model Canvas) helps companies to combine sustainability with strategy and business model. It enables:
✅ A structured overview of the relevant ESG topics
✅ The linking of strategic opportunities & sustainability requirements
✅ A clear presentation as a basis for strategy development and to convince decision-makers

💡 Example: A company in the retail sector can use the model to demonstrate how it can increase both environmental impact and customer satisfaction through sustainable packaging.

📌 Strategy tip: Companies should use the Materiality Model Canvas to integrate sustainability into business decisions at an early stage.

B. Developing a sustainability strategy

An effective sustainability strategy should clearly define which ESG goals are being pursued, which measures are required for implementation and how progress is measured.

i) What belongs in a sustainability strategy?

✅ Vision & strategic objectives: How does sustainability contribute to the corporate strategy?
✅ Key ESG topics & fields of action: Which sustainability topics are relevant for the company (e.g. CO₂ reduction, circular economy, social standards)? Switch to a sustainable business model?
✅ Key figures & success indicators: How is target achievement measured (e.g. reducing CO₂ emissions by X%, increasing the proportion of recycling to Y%)?
✅ Governance & responsibilities: Who is responsible for implementing and managing the sustainability strategy?

ii) Practical examples of a successful sustainability strategy

📺 Netflix: Transformed its business model through dematerialization by switching from a physical DVD rental service to a digital streaming service. By eliminating physical media, transportation and storage, Netflix was not only able to reduce resources and emissions, but also create a scalable, sustainable business model with global reach.

🌍 Unilever: Has consistently aligned its corporate strategy with the SDGs and integrated a program to reduce plastic & CO₂ emissions.

🏗 Holcim: Leading building materials manufacturer striving for a sustainable transformation of the construction industry through CO₂-reduced concrete & circular economy.

💡 Conclusion: A successful sustainability strategy is not just a compulsory exercise for reporting, but a key lever for growth, innovation and risk management. Companies should see sustainability not as an add-on, but as an integral part of their corporate strategy.

C. Integrating sustainability strategy

A sustainability strategy can only be successful if it does not remain an isolated CSR project, but is closely interlinked with the business strategy. Companies must understand sustainability as an economic value driver and integrate ESG goals into their core processes, investment decisions and innovation strategies. This means linking sustainability goals to financial KPIs, anchoring them in management structures and incorporating them into strategic planning. Successful companies no longer view sustainability as a separate initiative, but as a new way of doing business that ensures long-term stability and competitiveness.

This change requires a new understanding of corporate management, which has evolved steadily over the last few decades – from a one-sided focus on shareholder value to a business model that creates long-term value for companies, society and the environment.

Sustainable corporate governance: from shareholder value to future value

The view of sustainable corporate management has changed significantly in recent decades. While companies have long focused primarily on shareholder value, ecological and social aspects are now becoming increasingly important. This change can be divided into three stages:

i) Shareholder value: companies as value drivers for investors

In the 1980s and 1990s, the focus of corporate management was on maximizing the company’s value for shareholders. Sustainability aspects were only taken into account if they had a positive impact on the financial value.

Mindset: “What can my company do for shareholders?”
Dominant stakeholder: Investors & capital markets
Time horizon: Short-term quarterly reports or medium-term return targets
Dealing with externalities: Sustainability impacts were only taken into account if they had a direct influence on the company value.

💡 Criticism: This view was challenged by Paul Polman (former CEO of Unilever), among others. He stopped quarterly reporting in order to promote long-term growth strategies that were not blocked by short-term financial market thinking.

ii) Shared value: sustainability as a business case ("win-win")

From the 2000s onwards, companies began to actively integrate environmental and social issues into their strategy if they promised economic benefits. This model is based on the “triple bottom line” approach, in which social and ecological aspects are taken into account alongside economic ones.

Mindset: “What can sustainability do for my company?”
Dominant stakeholder: Companies are actively looking for sustainable business opportunities (e.g. energy-efficient products, sustainable supply chains).
Time horizon: Short to medium term, depending on the business case.
Dealing with externalities: Only if they fit into the “win-win” logic (e.g. reduction of CO₂ emissions to reduce energy costs).

💡 Criticism: This way of thinking has its limits because it only applies where financial benefits are apparent. Not all sustainability issues can be directly translated into a business case, meaning that key environmental challenges remain unresolved (e.g. biodiversity loss).

iii) Future value: sustainability as business logic

Today, more and more companies are grappling with the question of how their business model can contribute to the long-term preservation of ecological and social systems. This concept aims to achieve profitable growth in harmony with the planetary boundaries and social requirements.

Mindset: “What can my company do for sustainability?”
Dominant stakeholder: Environment & society are on an equal footing with economic interests.
Time horizon: Long-term competitiveness and viability of the company.
Dealing with externalities: Sustainability is seen as a central component of business strategy – companies must avoid or regenerate damage to the environment and society.

💡 Criticism & challenges:

Technological solutions often have unintended side effects.
Green consumer behavior alone is not enough – structural changes are needed (e.g. sufficiency strategies).
Investments with the highest returns usually win, even if they are not the most sustainable.

Phase 3: Implementation & reporting

Once the sustainability strategy has been formulated, the implementation phase involves translating the defined goals into measures and actively integrating these into the company’s day-to-day operations.

A. Develop a sustainability strategy and translate it into concrete measures

A sustainability strategy remains ineffective if it is not integrated into day-to-day business through concrete measures. Companies must derive clear operational steps from the defined ESG goals and KPIs in order to achieve measurable progress. This includes defining action plans, assigning responsibilities and implementing suitable control mechanisms.

Examples of measures to achieve ESG KPIs:
✔ CO₂ reduction: conversion to renewable energies, optimization of logistics, promotion of climate-friendly mobility.
✔ Resource efficiency: introduction of circular economy models, sustainable procurement, waste reduction.
✔ Social responsibility: diversity programs, training on human rights in the supply chain, fair working conditions.

By closely dovetailing sustainability targets with operational measures, companies can ensure that their strategy not only exists on paper, but actually has an impact.

B. Sustainability key figures & performance measurement

For the strategy to remain effective, progress must be monitored regularly. Companies should define clear KPIs (Key Performance Indicators) to measure the impact of their measures.

Examples of sustainability KPIs:

CO₂ reduction in %
Share of renewable energies
Recycling and circular economy rate
Diversity and equality indicators

Regular progress checks and adjustments are essential to ensure that the defined KPIs are achieved.

C. Anchoring the sustainability strategy in corporate processes

Integration into business processes: Sustainability goals must be embedded in all relevant areas of the company – from product development and procurement to HR and financial planning.
Using technology & innovation: Digital solutions, e.g. for CO₂ monitoring or the circular economy, help with operational implementation.
Employee participation & change management: Sustainability can only be successfully implemented if it is actively anchored in the corporate culture. Training, incentive systems or sustainable benefits (e.g. job bike) promote acceptance.

D. Sustainability reporting & CSRD compliance

The Corporate Sustainability Reporting Directive (CSRD) requires companies to systematically disclose their sustainability performance. This is not just about individual ESG indicators, but also about the underlying strategy. Companies must explain how sustainability is integrated into their business strategy, what goals they are pursuing and what measures they are implementing to achieve these goals.

Strategy as a core component of CSRD reporting:

- Companies must disclose which sustainability issues they identify as material and how these influence their long-term strategy.
- The link between strategic goals and financial and non-financial key figures is crucial.
- Reporting obligations also include transition plans for climate neutrality, adaptation strategies to environmental changes and ESG risk management.

Best practices for CSRD-compliant reporting:

✅ Data quality & digitalization: Use of CSRD software for precise data collection and automated reporting.
✅ Transparency & credibility: Clear link between strategy, measures and measured results – avoiding greenwashing.
✅ Stakeholder communication: Integrating sustainability strategy into annual reports, investor relations and corporate communication in an understandable and convincing way.

As a result of the omnibus proposal, it is possible that some companies will not be affected by the CSRD reporting obligation. However, many organizations will voluntarily report according to the VSME standard. If you are not yet familiar with the VSME, our VSME workshop may be of interest.

💡 Conclusion: Credible and strategically well thought-out sustainability reporting in accordance with CSRD not only enables compliance with regulations, but also strengthens the trust of investors, customers and other stakeholders. Companies that actively and transparently communicate their sustainability strategy gain a decisive competitive advantage.

Phase 4: Monitoring & further development

A successful sustainability strategy is not a static concept, but a dynamic process that must be regularly reviewed and further developed. Companies should continuously measure how effective their sustainability measures are and adapt their strategy to new regulatory requirements and market changes. CSRD reporting not only helps with KPI performance measurement, but also creates transparency for internal and external stakeholders.

A. Regular ESG performance measurement & optimization

To ensure that the ESG targets set are achieved, companies must regularly measure and analyze their sustainability performance using defined KPIs (Key Performance Indicators). Digital ESG tools play a key role in systematically recording data, identifying deviations at an early stage and deriving optimization measures.

Best practices for successful ESG monitoring:
✔ Regular data collection & analysis (e.g. CO₂ emissions, water consumption, diversity indicators)
✔ Comparison with benchmarks & industry standards to better classify own ESG performance
✔ Use internal audits & external ratings to objectively assess progress
✔ Dynamic adjustment of the strategy if KPIs are not achieved or new opportunities arise

B. Adaptation of the sustainability strategy to new regulatory developments & market trends

The requirements for sustainable corporate governance are constantly evolving – due to new ESG regulations, investor requirements and changing consumer preferences. Companies must remain flexible and proactively adapt their strategy to ensure compliance and exploit new market potential.

Important drivers for strategic adjustments:

New regulatory requirements (e.g. changed requirements such as the CSRD omnibus proposal, EU taxonomy changes)
Market & competitive developments (e.g. increasing demand for climate-neutral products)
Technological innovations (e.g. new CO₂ reduction technologies, digital ESG tools)

💡 Conclusion: Companies that continuously measure, evaluate and adapt their sustainability strategy to new developments remain competitive and avoid regulatory risks. A dynamic, data-driven ESG approach helps to achieve long-term goals and establish sustainability as a genuine value driver.

Developing a sustainability strategy: Challenges & solutions

The development and implementation of a sustainability strategy is associated with challenges for many companies. In addition to increasing regulatory requirements (e.g. CSRD, EU taxonomy), companies need to collect data, change internal processes and integrate ESG criteria into their corporate strategy. In this section, we show the most common hurdles – and how companies successfully overcome them.

Typical challenges in developing a sustainability strategy

Unclear strategic prioritization – sustainability is often treated as a side issue rather than a central component of the business strategy.

Lack of alignment with the corporate vision: Sustainability goals are not sufficiently linked to growth and innovation strategies.
Internal resistance & cultural change: Sustainability often requires a rethink, but is met with skepticism when the focus is on short-term economic goals.
Difficulty in identifying relevant ESG issues: Which sustainability aspects are really strategically crucial for the company?
Double materiality analysis as a challenge: The assessment of impact and financial materiality is complex and requires interdisciplinary perspectives.
Lack of integration into decision-making processes: Sustainability considerations are often not integrated into investment, innovation and business model decisions.
Unclear governance & responsibilities: Who is driving the issue internally? Without clear roles and structures, the strategy remains ineffective.
Lack of incentives for sustainable transformation: If ESG targets are not linked to financial KPIs and remuneration models, there is often a lack of motivation to implement them.

Best practices for successful implementation of the sustainability strategy

✅ 1. embed sustainability as part of the corporate strategy
✔ Do not view sustainability in isolation, but link it to the corporate vision and long-term business goals.
✔ Involve top management to make sustainability a strategic priority.
✔ Integrate sustainability into strategic decision-making processes (investments, innovation, business models).

✅ 2. identify material sustainability issues in a targeted manner
✔ Conduct a structured double materiality analysis to define the most important ESG issues for the company.
✔ Use industry benchmarks to align with best practices and identify strategic gaps.
✔ Involve stakeholders in a targeted manner to align external expectations with the corporate strategy.

✅ 3. develop sustainable business models & promote innovation
✔ Consider sustainability as an opportunity for new business models (e.g. circular economy, sustainable services).
✔ Adapt innovation processes to specifically develop sustainable products, technologies and services.
✔ Establish strategic partnerships with research institutions or sustainable start-ups.

✅ 4. clarify governance structures & responsibilities
✔ Integrate sustainability into existing decision-making structures (e.g. board level, strategy departments).
✔ Clearly define roles & responsibilities so that sustainability is not just treated as a CSR issue.
✔ Create remuneration & incentive systems to integrate ESG indicators into the management of the company.

✅ 5. link sustainability strategy with financial targets
✔ Link long-term ESG targets with financial KPIs and business cases to make sustainability economically measurable.
✔ Use ESG financing options (e.g. green bonds, sustainable credit lines) for strategic implementation.
✔ Expand risk management to include sustainability in order to hedge against future ESG risks.

Conclusion: Developing a sustainability strategy

For companies today, developing a sustainability strategy is no longer just a question of social responsibility, but a decisive success factor. Regulatory requirements such as the CSRD, rising stakeholder expectations and disruptive market changes make a sustainable transformation unavoidable. Companies that strategically integrate sustainability into their business models benefit from competitive advantages, cost savings and improved financing options.