When Sustainability Becomes Strategy: The Leadership Challenge Every Executive Faces

ESG has come far from its origins as a communications exercise in the late 1990s. 

In fact, more than 75% of S&P 500 companies now incorporate ESG performance measures into their executive incentive plans, up from two-thirds in 2021. What began as reporting requirements has become central to how companies operate and compete. 

In this discussion, Christian Ehl, Partner at Stanton Chase Düsseldorf and Global Functional Leader Sustainability and ESG, sits down with sustainability strategy consultant Dr. Alexis Katechakis to explore how organizations are making this transition and what it means for leadership teams. 

Why Has Sustainability Moved from Being a Support Function to a Business Strategy?

Recent data shows that 84% of S&P 500 companies and 64% of Russell 3000 companies reported climate change as a risk factor in 2024, up substantially from 67% and 30% respectively in 2021. Climate change is often the most visible part of ESG that companies tackle first, so when businesses start treating it as a real business risk instead of just something to report on, it shows how ESG as a whole is moving into actual business planning. 

This progression from reporting to business risk assessment didn’t happen overnight. Christian starts by exploring how this transformation began with the reporting requirements that emerged in the late 1990s and early 2000s. 

Christian Ehl: The other side of communication that you brought up with reporting is the reporting itself. This became increasingly important in the late 90s and early 2000s, when society started expecting companies to report on their sustainability activities. This played a growing role for analysts, at least for publicly traded companies. 

Dr. Alexis Katechakis: Exactly. That’s where we started trying to evaluate companies using different categories—that’s how we got the ESG perspective. But you have to remember this is just one piece of the puzzle. Today, I don’t think you can separate these elements anymore. 

What’s important from a leadership perspective is that at the beginning of the journey, you could still put sustainability topics in staff roles pretty easily. You had legal departments handling compliance, communications people managing the messaging, reporting specialists, and maybe some folks working on corporate citizenship programs. 

But once these topics became relevant for actual business development—your products, services, bottom line success—suddenly R&D teams, business development, senior leadership, even boards and supervisory committees had to get involved. This creates a completely different challenge because now you’re actually setting the direction for where the company goes. 

What Challenges Do Executives Face When Balancing Sustainability Expertise with Business Leadership?

Current research indicates that 40% of executives struggle to balance growth objectives with ESG commitments, while 24% of companies identify internal corporate silos as barriers to advancing their ESG agendas. These statistics reveal a practical problem: the people who understand sustainability topics deeply aren’t always the same people making business strategy decisions. 

Dr. Katechakis addresses this gap directly, explaining why you can’t expect sustainability experts to always develop business strategy, and why business leaders may struggle with the technical depth these topics require. 

Dr. Alexis Katechakis: Here’s what I’ve noticed—you can’t expect people who are experts in specific sustainability topics to automatically be good at developing business strategy. And on the flip side, strategists and business leaders have a million other things on their plates, so they might not have the deep knowledge in sustainability that would be ideal. Do you see this tension in your work too? 

Christian Ehl: I definitely see this. I mean, we talked in our last conversation about how requirements for top decision-makers are changing, partly because of external pressure. You mentioned the capital markets and ESG ratings. We see this with capital costs when companies want to refinance themselves. The better the ESG rating, the better the capital availability and lower the costs, which creates a business case where sustainability brings quantifiable advantages for a company. 

The other point is that people at the leadership level have come to understand that social responsibility matters. It helps when you’re seen as a good corporate citizen, but it also brings many practical advantages for a company. 

You already mentioned how companies affect the outside world. That’s become really important because more and more people are paying attention to how companies position themselves. They’re asking: does this company harm society and the environment, or does it actually help? 

The same thing happens with recruiting and employer branding. Employees want to work somewhere they can identify with, where they see their values reflected. They want to contribute their energy to places where people know how to treat each other well and with respect. 

How Do Companies Determine Which Sustainability Topics Actually Matter for Their Business?

Data shows that 77% of companies now disclose a double materiality process, up from 55% in 2023. Double materiality means looking at sustainability from two angles: how it affects your business financially, and how your business affects society and the environment. More companies are doing this analysis, but many still struggle to turn those insights into real business decisions. 

Christian gets at this challenge by talking about why you can’t just focus on financial numbers and ignore everything else. This opens up Dr. Katechakis’s detailed explanation of how to actually build a sustainability strategy that works. 

Christian Ehl: Appreciation—that’s maybe a good way to put it. It’s an attitude you either have toward people or you don’t. Look, if I just focus hard on financial metrics, I might be successful to some degree. But if I ignore everything else, that’s eventually going to hurt the company’s results. That’s something I’ve definitely seen in the 20 years I’ve been doing this work—things are changing. Decision-makers have to adapt and look at things differently. 

You can’t just keep doing what you’ve always done and expect to stay successful. We talked about this before—it’s like nature and evolution. If you don’t adapt as a leader or as a company to these new conditions, you’re probably going to stop existing. We’re seeing this right now, not even with sustainability, but look at the German automotive supplier industry. 

There are bankruptcies and insolvencies everywhere right now. Why? Because these companies stuck with old business models and never really looked at how they could make money sustainably going forward. That’s actually a perfect bridge to what I wanted to ask you about: sustainability strategy development. How do you approach that? 

Dr. Alexis Katechakis: I found several things you mentioned really valuable when you put them together. Let me give you some background—I work a lot in the DACH region, Germany, Austria, Switzerland, plus internationally through supply chains. In Switzerland, I partner with a consultancy called Hilda that focuses heavily on three concepts: values, value creation, and appreciation. 

This fits perfectly with what you’re saying. In strategy work, you can’t separate these three anymore. You need to start with having some kind of position on these topics. Like you mentioned before, people can have very personal, individual views on different sustainability issues. But you also need to figure out what these topics mean for your business. Your personal views and business needs don’t always have to match up, but from a business perspective, you need to look very carefully at what these topics mean for how you develop and succeed. 

That’s really the first step in developing strategy—figuring out which topics matter for your company today and down the road. We call this materiality, and I’ve been doing this kind of analysis for 12-15 years because you need it for any serious strategy work. These days, “double materiality” is also required for reporting under the CSRD. Basically, it asks two questions: which sustainability topics affect our company, and which ones does our company affect from a societal standpoint? The overlap between those two is usually where you find the topics that matter most for business development. 

To do this right, you need to understand how everything connects, and you need the right business mindset about it. You have to look at your competitive environment—analyze your competitors, your markets, societal trends. What do these topics mean in different markets? How mature are they? This usually involves really deep stakeholder analysis throughout your value chains. 

Who are my direct stakeholders—business partners, customers along the value chain? But also indirect stakeholders like industry associations, NGOs, scientific institutes. And very importantly, the company’s own employees. Once you’ve examined all this and completed such a materiality analysis, identifying the relevant topics, then you move to strategic derivations and operational implementation. 

For strategic derivations, it’s often useful to cluster these topics into thematic areas. Quality is often more important than quantity because eventually it comes down to the resources needed to address these topics. Then you determine which goals, derived from corporate strategy, you assign to these thematic areas. Ideally, it works hand in hand. This becomes an integrated part rather than an add-on, and sustainability topics almost always contribute to original corporate goals. 

What Organizational Changes Are Needed To Implement Sustainability Plans Effectively?

Research indicates that 71% of chief executives take personal responsibility for ensuring their company’s ESG strategies align with their customers’ values, while organizations increasingly recognize the need for cross-functional collaboration. However, executive commitment at the top doesn’t automatically solve the practical challenge of getting different departments to work together. 

Dr. Katechakis tackles this implementation challenge head-on, explaining how sustainability strategy requires breaking down organizational silos and getting business units that previously worked separately to collaborate effectively. 

Dr. Alexis Katechakis: We’re back to that values thing again. Everyone needs to understand what role these topics play for the company. That’s the only way value creation works, because then you get to what you were talking about—figuring out what products and services you need to succeed in different markets going forward, how to position yourself competitively, maybe even differentiate yourself with unique selling points. 

When you implement this well, the appreciation piece works too. And appreciation works on two levels—there’s the personal, non-financial side where we’re talking about values and how people feel about their work, but in business there are also the hard financial metrics, the actual business success, which shows up in everything from your bottom line to your employer brand. 

That’s the rough outline of how you go from initial analysis through strategic planning to your core business and the products and services you need to actually sell. Every part of the company really needs to work together on this. 

What This Means for Executive Leaders

This conversation shows some realities that senior executives need to understand: 

• You can’t keep sustainability in a corner anymore. As Dr. Katechakis explained, these topics used to live comfortably in legal, communications, and corporate citizenship roles. But once sustainability affects your products, services, and revenue, your R&D teams, business development people, and senior leadership have to get involved. There’s no way around it. 
• There’s a real expertise gap. Ehl and Dr. Katechakis both pointed out that sustainability experts aren’t automatically good at business strategy, and business leaders often don’t have the deep sustainability knowledge they need. The most successful companies are finding ways to close this gap rather than expecting one person to be good at everything. 
• Sustainability delivers financial benefits too. Ehl explained that companies with stronger ESG ratings often secure funding more easily and on better terms, which gives leadership a clear business reason to prioritize it. 
• Public perception matters for business success. Ehl noted that being seen as a responsible corporate citizen helps companies build better market positions and attract the kind of talent that shares their values. 
• Materiality analysis works if you use it right. Dr. Katechakis walked through how to figure out which sustainability topics matter for your business by looking at both what affects your company and what your company affects. With 82% of investors saying sustainability should be part of company strategy, getting this analysis right helps you focus your limited resources on what actually moves the needle. 
• Breaking down silos is harder than it sounds. Dr. Katechakis was frank about this as well. Suddenly departments that never worked together closely need to collaborate, often across different countries. Middle management becomes really important because they connect high-level strategy decisions with day-to-day operations. 

About the Author

Christian Ehl is a Partner at Stanton Chase Düsseldorf and the Global Functional Leader of Stanton Chase’s Sustainability and ESG Specialization.  He has 20 years of experience in executive search, leadership advisory, sustainability, and ESG. He is the author of several sustainability related whitepapers and articles and supports his clients in transitioning to more sustainable business models with the right people in place.     

About the Interviewee

Dr. Alexis Katechakis is a senior sustainability expert with extensive experience across the healthcare, automotive, food, and technology sectors globally. He holds a PhD in Marine Ecology from GEOMAR/LMU Munich and a Master’s in Sustainable Resource Management from TU Munich. A Board Member of the German UN Ocean Decade Committee, his consulting portfolio includes major brands like Evonik, Volkswagen, and Novartis. His expertise spans sustainability strategy development, change management, and ocean conservation.