Sustainability continues to claim its place in the corporate world next to other traditional corporate functions. More sustainability managers have been hired in 2021 and 2022 than in the previous eight years combined – a welcome development and the result of several ESG regulatory developments across jurisdictions globally. In this blog I offer a practitioner’s observations and insights into how the corporate sustainability profession and industry is changing and what we should keep monitoring for it to remain a driver of positive change and impacts.
1. Candour about emissions reductions is critical if we are to achieve global decarbonisation targets.
In 2022, one could’ve easily gotten lost navigating announcements of new climate funds, net-zero initiatives and pledges, and new offset businesses. As CO2 continues to become a commodity, we need much more discussion from heads of sustainability about the successes and the pitfalls of their decarbonisation efforts. This would make for a much needed debate on how realistic decoupling of physical activity from impacts actually is and what it entails, and will help us progress faster towards our global emission reduction targets.
2. Keeping the commodification of sustainability in check.
Last year was another boom year for sustainability but similar to carbon markets, all of us are responsible for making sure that the industry doesn’t become self-serving where market participants can get away with just about any product or service under the banner of sustainability without adding real value to solving the problems at hand. This covers the market of ESG data collection, management and reporting tools, carbon footprint calculators, charitable giving platforms, certifications, all the way to eco-products and even sustainability experiences.
3. Governance of sustainability reporting.
We are very close to having regulatory clarity on what and how to report on ESG performance. In this context, the ecosystem around the reporting company – assurance providers, data analysts, and rating agencies – becomes critical. Ultimately, these will be the actors who put a seal of approval on a company’s ESG performance and subsequently influence its access to capital. The governance of these actors, and the type of response mechanisms we design to a company’s ESG performance and impacts will be critical to positively stimulate companies’ accountability for their impacts. Immediate punitive action in the context where ESG reporting is mandatory but ESG expertise within companies is nascent or absent might drive a race to the bottom, while a lack of response to poor performance might risk the legitimacy of ESG altogether.
4. Further evolving the role of the Chief Sustainability Officer.
2021 and 2022 continued to beat charts for the number of CSO hires in public companies, which is GREAT. However, the gap between what we’re hiring CSOs to do and the context in which they’re hired to operate is glaring. Assuming the primary mandate of a CSO is impact reduction and really, change management for the organisation, the overwhelming focus on growth is a stark contrasting backdrop for the role. This means that hiring companies are either 1) placing unrealistic expectations on the CSO, 2) want them to do minimum ESG compliance, or 3) want to be challenged but are not prepared to act on the uncomfortable information and the amount of sleeves rolling needed to rewire the company’s ‘DNA’. All of this of course leads to reducing corporate sustainability to philanthropy and the endless mulling of ‘purpose’, both of which are problematic because 98% of companies are vehicles to deliver a return to investors via commercial activities – neither are they meant to fill in for public failures on social issues like gender equity. Answering yourself what you’re hiring a CSO for and how much you are prepared to be challenged and to change is what will separate leaders from laggards and help future proof companies.
5. Brave new world… of investor relations.
Much of the discussion in the investment world last year was about finding the golden standard for ESG metrics, however the best approach to understand the company’s ESG performance remains to be… direct engagement between the investor and the investee. Here, proactivity from the investee can pay off when you reach out to your investors to help navigate where the two of you stand on the approach to material topics and how you’re going to spend their money on managing these topics.
6. Know the people outside your ESG bubble.
In 2022, ESG has made its way onto every major business magazine cover, conference, and corporate title, becoming the ultimate influencer in sustainability. One of the perils of being under such a spotlight was the politicisation of ESG. A recent example here is the Our Money Our Values, a project of a group of US conservatives, which raises questions about why one would ’trust’ ESG at all. For example, will retirement accounts and college savings accrue lesser amounts over time than they would have, had their management been based solely on considerations of the return on investment. The arguments ultimately tie back to ESG compromising what is sacred for many – less money for kids’ college, for parents’ retirement, and less to pass on to help the next generation to build wealth. Fundamentally, the discussion is a matter of perspectives and values – you either acknowledge that environmental and social problems exist and that your business operates within this wider context – being dependent on it and impacting it, which translates to risk, or you don’t. Most of the anti-ESG movement denies the sustainability context and operates by market primacy and individualism when it comes to who and how should solve problems when and if they do occur. It’s helpful to get out of the ESG bubble every once in a while to be prepared to address this difference in values.
7. Greenwashing is only a symptom – addressing the causes is where we should focus.
We’ve made great progress calling out greenwashing as a great peril in corporate sustainability and lots will start to move in 2023 to improve the green marketing game. However, greenwashing is a symptom of much more interesting underlying issues, which I would break down into three key groups. One – companies are genuine in their passion and intentions, they publish a forward-looking ambitions statement, but lack expertise, buy-in from stakeholders, or leadership commitment when it comes to execution. This results in scaling down goals, stretching time horizons, or on the flipside – in hiring sustainability expertise. Two – companies are purely driven by commercial interests and stick a ‘green label’ onto any statement or product to win the green consumer segment. This results in a painful collision with regulation like the one we’re seeing right now in the fashion and consumer goods industries. Three – companies are under pressure to report on their ESG performance but they know they are underperforming in some topics or they play a double game of advocating for climate publicly while privately they make political contributions to politicians blocking climate regulation. This is the most dangerous type of greenwashing because it’s hard to recognise and it is intentional.
8. People are the most rewarding reason to work in sustainability.
Sustainability is the biggest change management project of our lifetime, so seeing people from all levels and functions participate beyond formal responsibilities and do things differently compared to what is easiest and what is common, is the biggest reward in a corporate sustainability job.
Finally, I do love a good quote and this one from Marge Piercy has been very much suiting my observations: “Life is the first gift, love is the second, and understanding the third”.
I share a weekly digest of sustainability news in our corporate sustainability Slack channel – positive stories always get the most likes and reactions. People long for good news and solutions – once the ‘business case’ for sustainability is made with all its CSR textbook arguments for talent retention, brand value, risk management, competitive advantage, and even the market value of ethics, I think deeply we all understand that sustainability is about reciprocity and preserving the connection to the world with all its beauty, wonders, and riches – and that is something we all can relate to and can get on mission to contribute to at work.
Anna Krotova, Director of Sustainability at Mambu (based in Amsterdam)