Charting the course of sustainability in business

Charting the course of sustainability in business

Today’s businesses are under the spotlight like never before. They are expected to play a leading role in fighting climate change, achieving globally agreed sustainable development goals, and ensuring that 9 billion people can live well on the planet by 2050. Progressive businesses are widening their focus beyond profit, to consider how they can create value in society and thrive in the future.

It hasn’t always been this way. So how has the concept of sustainability in business evolved?

1960s-1970s: turning up the heat

In 1962, conservationist Rachel Carson sparked international outcry with her seminal work, Silent Spring, shining a spotlight on the harmful effects of toxic pesticides on nature, wildlife and humans. She called for businesses to be held accountable for their actions.

Environmental activists founded new organisations, scaled up their ambitions, and targeted corporate organisations for the first time. NGOs including WWF (1961), Friends of the Earth (1971) and Greenpeace (1971) formed in this period, with Greenpeace sailing its iconic Rainbow Warrior to challenge Norwegian and Icelandic whaling fleets in 1978, unleashing a chain of events that culminated in a global commercial whaling ban in 1986.

So began a growing activism movement, that drew public attention to the impact of businesses on people and the environment.

1980s-1990s: globalisation and a growing responsibility

Disasters such as the Bhopal gas tragedy in India (1984), the Chernobyl nuclear disaster (1986) and the Exxon Valdez oil spill(1989) re-emphasised the potentially catastrophic impacts of industry. Elsewhere, the push to promote free trade opened up resources and markets to businesses but also raised serious concerns about the mass exploitation of people and resources in developing countries.

The high profile exposé of the labour conditions in Nike’s supply chains became a focal point for growing public anger surrounding human rights abuses in production countries in the early 1990s. Nike and others introduced codes of conduct for suppliers by the late 90s, and began auditing their supply chains. This was a huge “policing” operation, and companies tended not to look beyond their direct suppliers, with practices further up the chain remaining largely invisible. Today, responsible companies are expected to partner with their direct suppliers to exert a positive influence all the way back to the people producing their raw materials.

Voluntary guidelines and standards emerged to help guide companies’ responsible sourcing efforts, developed by organisations including the Fair Labor Association and the International Labour Organisation. Concepts of fairer trading also began to take shape, with the Fairtrade Foundation forming in 1992. In the same year, BSI Group created the first environmental management standard (BS7750) to help companies lower their environmental footprint.

At a global level, the Rio Earth Summit and Kyoto Protocol brought civil society and business together over environmental issues such as biodiversity and carbon reduction targets.

While companies faced accusations of “greenwashing” – communicating unsubstantiated or misleading sustainability claims – more strategic approaches to sustainability in business began to evolve. In 1994, John Elkington introduced the concept of the triple bottom line: people, planet and profit.

2000-2014: towards collaboration and transparency

Businesses were encouraged to support the Millennium Development Goals (MDGs), while the UN Global Compact became the first major membership body for corporate sustainability. And an influential and increasingly vociferous group of investors began pushing for greater transparency. CDP formed in 2000 to provide investors with detailed information on companies’ environmental performance (its current investor network represents $100tn).

“We are convinced that our focus on sustainability is more important than ever before,” says Uwe Bergmann, Henkel’s director of sustainability management. “We achieved our first set of group-wide goals in 2010 and have since set more ambitious goals looking ahead to 2030. Challenging ourselves to do more with less supports our growth, helps to increase our cost-efficiency, and reduces risks.”

Measuring and reporting impacts became increasingly sophisticated, supported by new voluntary standards such as the Global Reporting Initiative’s sustainability reporting guidelines and the Greenhouse Gas (GHG) Protocol. By 2016, 92% of Fortune 500 companies responding to CDP’s surveys were using the GHG Protocol.

In 2010, the World Business Council for Sustainable Development introduced its Vision 2050, calling for businesses to play a leading role in enabling 9 billion people to live well within the resource limits of the planet by 2050.

As the scale and complexity of the world’s interrelated business and development challenges came into focus, companies were vocal about not being able to tackle them alone. A proliferation of partnerships and collaborations erupted across sectors and industries to address these systemic challenges (such as Better Cotton InitiativeTropical Forest AllianceElectronic Industry Citizenship Coalition). In 2011, chemical industry initiative Together for Sustainability was founded by Henkel, among others, to develop a global approach to assessing and improving sustainability practices within the industry’s supply chains.

Despite progress, high profile industrial disasters persisted. In 2010, BP’s Deepwater Horizon explosion released 4.9m barrels of oil into the Gulf of Mexico. The Rana Plaza building in Dhaka, Bangladesh, collapsed in 2013, killing more than 1,100 garment workers. This prompted the legally binding Bangladesh Accord, which has seen major fashion companies partnering with trade unions to improve building health and safety in Bangladesh garment factories.

In 2015, the VW emissions scandal exploded, undermining corporate sustainability efforts and putting the company’s business ethics in doubt. VW has since pleaded guilty to criminal charges and paid more than €25bn (£22bn) in damages.

Importantly, a growing bulk of regulations and laws evolved to push companies towards greater transparency and cut their social and environmental impacts (with progressive companies tending to stay a step ahead of regulations). In 2014, the European Commission introduced its non-financial reporting directive and India became the first country to enshrine corporate giving into law.

2015-present day: doing well by doing good

For the evolution of corporate sustainability, 2015 was a momentous year. The UN launched the sustainable development goals (replacing the MDGs), a global vision for a fairer, sustainable world supported by 193 countries. Global leaders made history by forging the Paris agreement on climate change, and the UK’s Modern Slavery Actbecame the first legislation to address slavery in the 21st century.

Corporate sustainability efforts are becoming more strategic, as businesses realise that being a force for good in society is inextricably linked to ensuring long-term profitability. But in a rapidly changing world with pressing challenges including political instability, climate change, resource scarcity and social inequality, there is no time to lose. Expectations are growing. Stakeholders – consumers, NGOs and investors – are pushing for radical transparency.

“An inclusive, sustainable and low-carbon economy benefits everyone,” says Gail Klintworth of the Business and Sustainable Development Commission. “It can attract new investment, create jobs, open new markets and ensure the future abundance of natural resources.”

Some companies are integrating social and environmental priorities into the fabric of their organisations, no longer making a distinction between sustainability and their core business goals. Targets are becoming more precise and ambitious, with 200 multi-nationals committing to the science-based climate targets initiative in 2016, and more than 110 companies vowing to use 100% renewable energy through the RE100 initiative.

However, corporate commitments vary greatly and efforts are not consistently successful across the board, according to Jeremy Oppenheim of Systemiq.

“There are pioneering companies that are taking action,” he says. “But in practice, most major companies are only taking small steps toward seeing how sustainability can unfold into transformative innovation.”

Klintworth agrees: “There’s a significant difference between outfitting your company with solar panels to reduce your carbon footprint and proactively seeing business opportunities in a low-carbon world,” she says. “In order to create the sea change we need, CEOs, as well as boards, will need to transform their business models so that sustainability becomes the norm across everything they do.”

The pioneers are already taking steps to reimagine their core products and services and their purpose in society. Dell, BT and Kingfisher have created “net positive” strategies, designed to create an overall positive impact. Nike has undergone profound change, helping to lead the way on sustainable design and materials. Philips is championing the circular economy. Henkel is helping consumers to understand the impact of their lifestyle on the environment with a footprint calculator. And Ikea plans to become a net exporter of renewable energy by 2020.

Importantly, companies are proving that they can do well by doing good, and CEOs are increasingly speaking out. Business leaders were vocal in their support of the Paris agreement; and in the US, CEOs of companies including Disney, Tesla, JP Morgan and Walmart have taken a stand on issues including diversity and inclusion and climate action, despite the current US president’s stance on these issues.

The financial community is increasingly making its voice heard too. In 2016, the governor of the Bank of England, Mark Carney, and business leader Michael Bloomberg called for greater disclosure of climate risks to inform investment decisions, re-emphasising the role of responsible finance in the march towards sustainable development.

The future: purpose over profit

Adopting and implementing a purpose over profit strategy takes time, and more substantial progress on the SDGs is needed far more rapidly. Empowering small businesses and consumers to take action on sustainability will also be vital. But the leaders in this space are determined, and with transformative ambitions and the right combination of people, investment and policy, there is no doubt that business can change the world.

This article was originally published on the Guardian website.