Sustainable Strategy Brief – Issue #2

Beyond ESG: From checklists to capabilities – McKinsey’s 2025

McKinsey asserts that, after a decade of expansion, ESG, as a framework for measuring a company’s societal impact, is undergoing a rethink.

Boardroom questions to open with
→ Are we building a capability system—or running an ESG checklist?
→ What are the 3–5 enterprise capabilities we must master (data/control, product & pricing, supply chain, capital allocation, operating cadence) to turn sustainability into performance?
→ What is our compliance trajectory, and what would we stop doing to fund it?

Why this brief? Who it’s for?

In a world where strategy and finance interact with sustainability and ESG, the difference between aspiration and impact lies in how you frame the problem and how you execute.

Sustainable Strategy Brief is a monthly newsletter for
→ Boards and executive teams (CEOs, CFOs, COOs, and CSOs).
→ Senior leaders responsible for strategy, finance, risk and transformation.
→ Organisations that want to turn scarce resources into sustainable value.

Each edition offers insights on the following topics:
→ Frameworks and tools that help embed sustainability into your core strategy.
→ Overcoming the implementation gap between vision and turning strategy into results.
→ Moving from reporting to P&L-linked execution.
→ Board-level playbooks, case studies, and metrics across various industries and markets.

Boardroom questions for you
→ Who around your table is responsible for sustainable strategy, not just target setting?
→ Do you see the implementation gap present in your organisation?

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We launched a YouTube channel @SustainableStrategyBriefLive

Episode 1: Strategy Eats Compliance for Breakfast went live on December 3, 2025, with 322 people registered to join us.

Our discussions and questions confirmed how ready leaders are for fresh knowledge for the sustainability and ESG 2.0 phenomenon.

Together with EU sustainability standards expert Cecilia Thorn and Michael Baxter – The ESG Show we explored some salient issues.

Key Lessons
Here are seven issues we surfaced together:

From ESG 1.0 reporting to ESG 2.0 business models – We explored ESG 2.0 as more than disclosure, with sustainable value as the wiring between business model, purpose, performance, impact and inclusive access for stakeholders. That’s a very different conversation from “frameworks currently in use?”
Strategy really does eat compliance for breakfast – You can now be fully compliant but still strategically exposed. Regulators are moving faster than most organisations were designed for. Capital providers want to see how sustainability decisions flow through revenue, cost and risk, not just policy statements.
Regulation creates turmoil – but ESG isn’t “dead” – We unpacked how the Draghi report, CSRD and due diligence directives are being “watered down”, yet the business case for ESG is intensifying, not disappearing. The centre of gravity is shifting from box-ticking to investor and business-led value creation.
Turning ESG from a cost leak into a cost engine – We discussed the “plumber” analogy when looking for leaks: where are energy, water, nature and waste quietly leaking value from your P&L? And how could those same flows become efficiency, resilience and sources of new revenue.
Growth vs degrowth: stop treating growth as a negative word – In the current geopolitical and economic context, a pure “degrowth” story simply won’t fly. The challenge is profitable, lower-impact growth –using tools like circular economy models and clean tech so that expansion and impact reduction move together, not in opposition.
New skills, new roles, new conversations – The classic “reporting-only” chief sustainability officer is no longer enough. ESG 2.0 demands finance-literate, strategy-literate sustainability leaders – and much tighter collaboration between strategy, CFO, COO, CMO and CSO around sustainable value creation, not just disclosure.
90 day cycles, not one-off hero projects – With around 70% of sustainability projects still failing to deliver, we argued for 30/60/90 day cycles that keep momentum visible quarter after quarter, instead of big-bang programmes that eventually stall.

Next steps→ If these themes resonated, I’d love you to: watch a short 1-minute video/share it with a colleague.

Royal Society of Arts – ESG 2.0: From backlash into boardroom advantage

Inspired by a post I made on the RSA Circle earlier this year, I was invited to deliver two place-based events to explore how to move the dial beyond talking to tangible ESG 2.0 solutions for Kent-based organisations.

Participants joined to hear live case study examples from the corporate and public sectors. An overarching goal is to play a role in the long-term future of the county of Kent and its organisational incumbents by helping to reframe the big ESG 2.0 questions and identifying solutions.

Five interconnected ESG themes were:

1) Scale Dynamics – Organisational scale and positioning power shape how ESG ambitions are set and executed.
2) Profit and Purpose and Mission Tensions – These tensions force a trade-off between immediate commercial survival, growth and cultural or societal mission, especially under funding pressure
3) Time Horizon Misalignment – Short-term funding cycles, performance targets and stakeholder-driven timetables can clash with the long-term effects of low carbon and climate change.
4) Cultural and Employee Dynamics – Cultural and leadership dynamics were a key feature of both Cases, with ESG seen as a hearts-and-minds issue, overly dependent on a few in-house champions
5) Evidence, Data and ROI Gaps – May cause ESG initiatives to stall. Organisations seek evidence for their activities but may end up measuring everything—climate, emissions, inclusion, and supply chain impacts.

A pertinent equation was proposed by one of the case organisations:

Sustainable value = business model + Purpose + Measurable impact + inclusive access

Boardroom questions for you
→ What is our “ESG 2.0 proof standard” for Kent—i.e., the minimum evidence we will accept before we fund, claim, or scale anything?
→ If “sustainable value = business model + purpose + measurable impact + inclusive access,” which part of the equation is your weakest link today—and what is the single move in the next 30-90 days that strengthens it most?
→What is your “ESG 2.0 proof standard”—i.e., the minimum evidence you need before your board will fund, or scale anything?

Your organisation’s most significant threats and constraints could become its strongest differentiators. While your competitors develop more sustainable strategies, will you also be a leader known for implementation?

Three Steps to Take:

Schedule Your 20-Minute Sustainable Strategy Starter Conversation—we’ll discuss your organisation’s untapped sustainability advantages and implementation challenges. Email pap@drpaulphillips.com today. Limited diagnostic slots are available.
Join Sustainable Strategy Brief Live – Reserve your seat for our second live stream episode of Sustainable Strategy Brief Live – Turning sustainable growth ambition into credible business cases. This is a focused 30-minute live session in which we will cover what sustainable growth ambition really means, what turns a good sustainability story into an investment-grade business case, and where most sustainability business cases leak value today.
Strategic Content Co-Creation – As a Sustainable Strategy Brief executive reader, your insights on emerging strategic challenges enable us to deliver the most relevant, actionable content. Share your priority strategic themes for future issues of Sustainable Strategy Brief Live

Sustainable strategy is not merely a statement of intent; it is a repeatable system for converting resources into advantage—measured in costs, revenue, risk, and trust.

Warm regards, Paul