Which Companies in Transition are the most successful?

key words: Openness, consistency and engagement.

When talking to experts about successful corporate transformations, there are of course different views and beliefs depending on the answers to these questions: what is a company transformation? Why is it done? When is it completed?

Here at LongShot Impact Studio a corporate transformation is interesting only if it entails a real business transition. So I am not going to talk about quick debt restructurings and effective lay-offs programs. The simple fact that the leadership of a company decides commencing a real business transition process is already a great success, as it demonstrates willingness to change the status quo and take quite some risk.

Company transitions in such a sense are exciting but cannot be taken in a hurry. Transitions require time and solid foundations. The successful ones are those companies able to manage the new and the old in parallel, gradually phasing out the legacy business while cranking up the new one. It all sounds obvious, but when you are looking at it with the eyes of a sustainability expert, this might sometimes appear inconsistent and incoherent. Classic example: if you are transitioning to low carbon, why are you still running most of your plants on diesel and natural gas?

This question, often raised by critical NGOs and other stakeholders, can expose how flimsy certain decarbonisation strategies are. Sometimes it is instead very painful for those within the company to put up with this, as they cannot yet show the progress made in their transition.

Recent regulatory requirements introduced in the EU obliged large companies to publish detailed transition plans, including scope 1, 2, and 3 emissions targets and reduction timelines. This was not much welcomed by the business world, as it was understood as an additional homework which reduced competitiveness and flexibility.

However if you look at it from a business transition perspective, it is a fantastic tool, as it helps openly framing a process that takes time and effort, defining key financial milestones and clarifying expectations. To avoid making it too rigid, its outcomes can be declined into various scenarios depending on variable aspects. Sure, all this sounds complicated, but in practice it can facilitate your job. It is a strategic help for those leaders who are considering the need for a business transition but are struggling to find arguments against short term objections. „It‘s too expensive, we will lose our customers, we will have to close down offices and plants“...these are the most common reactions to anyone who suggests a radical transition. Even if the transition is badly needed, the resistance from within can shut the idea down forever, leading instead to quick fixes such as internal restructuring programs and opex cuts.

So if you are one of those leaders tasked to ensure long term success of the company, maybe you are an executive in some strategy department of a big corporation, the concept of climate transition plans might become useful. Whether you want to leverage on the mandatory aspects of it or rather convince your audience about the urgency of world decarbonisation, the concept can give you a credible way in.

Linking decarbonisation effects with actual business change is bold, but powerful. In the energy sector you could already see it years ago. There were companies which took advantage of the climate transition narrative to divest from fossil assets and enter the renewable energy market. They either re-positioned themselves in the value chain, by carving out their conventional upstream/midstream business or directly benefited from governmental subsidies to decommission or mothball their legacy plants, while pursuing new opportunities. At a time when there was no obligation to publish any climate transition plan, the execution of these strategies was not always understood or welcomed, but now it looks kinda obvious.

With emerging support schemes for industry decarbonisation, we will clearly see the use case of detailed and well-thought climate transition plans as enabling tools to access governmental grants and other subsidies. Rather than a box to check in your ESG compliance program, they might become deeply ingrained into your business planning and investor engagement campaign.

So in a nutshell, successful companies in transition are those able to build a credible narrative, with clear multi-year plans anchored to their financial performance and consistently delivering on them. It‘s not about re-branding, abrupt business sector changes or overnight cost reductions. It‘s about openly defining a road map and following it.