Sustainability can be compared to teenage sex, right? Everyone’s talking about it. Few are actually doing it. And many that are doing it, aren’t doing it very well. The same could be said of ESG speak—and the fact that many tongues off which this acronym trips, don’t yet have an appreciation for why environmental, social and corporate governance matters.
ESG is intended as a holistic assessment of a company’s operations, considering every aspect of its supply chain and how its existence actively facilitates measurable good. While capitalism and its traditional take-make-waste industrial system is blamed for many problems, it’s a reminder that better business can also repair and regenerate. The route to sustainable growth is simple—it’s aiming to be a good business socially, environmentally and economically. ESG’s evaluation is a welcome tool that encourages investment that supports companies prioritizing purpose over plain old profit. The challenge can be that scores are measured by third-party companies, when the best approach for reformation is from within. Paid-for accreditations, such as the B Corporation’s seal of approval, also signify that a business has gone through rigorous administrative assessments that consider the impact of their decisions on workers, customers, suppliers, community and the environment. All the better if organizations create frameworks that self-regulate and demonstrate a targeted way of tackling the causes of the climate emergency, not just the symptoms, actively bringing down carbon emissions, and striving for better equity and wealth distribution.
In 2019, the Business Roundtable redefined the “purpose of a corporation,” updating its manifesto to state companies have a responsibility to all stakeholders—this marked a profound transformation. Here, the top 200 CEOs advocated better investment in employees, more ethical dealings with every link in their supply chain and the consideration of interests of outside communities—essentially, the cornerstones of good ESG. The idea that capitalism exists solely to serve shareholders and to prioritize profit above everything else not only seems outdated—if we stand a chance of tackling the symptoms of the climate collapse—it is also destructive and detrimental.
Nature and the health of all people are the world’s greatest assets—and the corporate sector has neglected this responsibility. Environmental protection is often considered an obstacle to economic progress. As professor Dieter Helm presented in his 2015 book Natural Capital: Valuing Our Planet and as demonstrated in his work with the Natural Capital Committee, this isn’t the case. The U.S. rejoining the Paris Agreement and then the United Nations Intergovernmental Panel on Climate Change’s publishing of scientific analysis proves “unequivocally” human influence has warmed the atmosphere, oceans and land. This was a klaxon to put the environment at the core of economic planning.
Satish Kumar, founder of the Schumacher College International Centre for Ecological Studies, is an eloquent articulator of the inextricable link between economy and ecology. Giving a talk at the London School of Economics (LSE), he proposed they changed their name. “Environment and ecology are not the same, and climate change is a consequence of harmful economic growth, whereas the study of ecology would mean knowledge, understanding and experience of the entire ecosystem and how the diverse forms of life relate to each other,” he explained. “London School of Economics was a radical and pioneering university in the Age of Economy. But now, we are entering the Age of Ecology, LSE needs to respond to the need of our time.” He proposes the LSE should become the LSEE, the London School of Ecology and Economics.
Ecologically minded entrepreneur Jochen Zeitz, former CEO of Puma for 18 years, created The B Team with Richard Branson to advocate for business practices centered on humanity and the climate. “Without business, we’re not going to save our planet—so ultimately, we need a new way of doing business.” In the process of turning the once-ailing Munich-based sports brand around, he formed a framework for leveraging the power of business to do the right thing. Zeitz established a ‘4Cs’ model based on conservation, community, culture and commerce. In the travel sector, this framework is used by his 2009-formed charitable initiative The Long Run to support member lodges aiming to integrate sustainability into all business decisions. “You need to look at where your impact is—and take full responsibility,” he stresses, emphasizing that to succeed as conservationists and in supporting local communities, businesses need to make money following this standard of thinking globally, but acting locally.
Investment in community is key. Economic draftsmanship comes care of an architecturally arresting design hotel on a tiny, rugged Newfoundland island which has proven its power. Ready to roll out this blueprint for community economics is the founder of Fogo Island Inn. “Until we see community as an integral part of resilience, the economic system will continue to fail us,” says Zita Cobb. The former CFO and senior vice president of strategy for a fiber optics manufacturer was awarded a Member of the Order of Canada in recognition of her social entrepreneurship. Cobb retired almost two decades ago, having once been the highest-paid woman in Canada. She doesn’t just preach what she thinks is the most effective driver of a global economic order that will better serve people and the planet—she’s shown us. Fogo Island’s regeneration started with the arts supporting Shorefast Foundation. The for-profit hospitality business, Fogo Island Inn, became the economic engine that supported the charity in serving its mandate of fostering economic and cultural resilience for the island community. Cobb credits economist Raghuram Rajan, author of The Third Pillar: The Revival of Community in a Polarised World, for best illustrating that a society’s pillars are government, business and community—with the latter neglected and weakened. “We knew this before COVID-19, and it is now even more plain to see.”
In a utopian world, just as food items have a nutrition label, every business and product would have Cobb’s Economic Nutrition Certification Mark detailing every cent. “If you could have anything printed on a T-shirt, and every person on the planet gets that T-shirt in their own language, what would you put on it?” Cobb asks me over Zoom. “‘It matters who owns what’—that’s what I would put on that T-shirt for all to wear.” Cobb’s unwavering answer to better sustainability is a regard for ownership—and that a new sustainable capitalism entirely depends on transparency to allow for accountability. She asserts that when ownership is closely connected to place, ESG is less about boxes being ticked. For the economy to be rebuilt, we need more clarity around ownership and for more businesses to be owned locally. “How else can we judge if that anonymous, private-equity fund has genuinely invested in that community in every sense?” asks the Newfoundlander. “If the bigger fish keep buying everything up, the relationship between the capital owners and place is broken.”
Well-run, values-focused businesses present solutions to many social challenges. Those modeling long-term goals, not just short-term gains, are what’s winning ESG-focused hearts and heads. Before the pandemic was even a twinkle in the eye of science-fiction fantasists, Steven Overman, author of The Conscience Economy, prophesied it would soon be all about the S in ESG. Overman flies the flag for one simple economic principle: that which is valuable will eventually become profitable. “Addressing climate change is clearly valuable. We’ve woken up to the urgency—and profitability—of environmental action. For example, the acceleration of vehicle electrification, alternative energy production, carbon recapture innovation—the E in ESG is a well-established opportunity.” He cites the social dimension of rapid change as the next frontier. “Social mental health, particularly among the next generation who have been disproportionately affected by the pandemic, this impacts learning, productivity and even, new research suggests, IQ.” He recognizes the growing divisiveness as being an impediment along with conflicting belief systems and diminishing faith in leadership institutions. “And this is where there’s opportunity for innovation and exponential growth.”
Gro Harlem Brundtland gave what’s become the most widely acknowledged definition of sustainability when she became Norway’s prime minister in the 1980s: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” What may have once been written off as radical or socialist political declarations are being acknowledged as practical and pragmatic solutions. We can’t buy our way out of the challenges created by mass consumerism, we need to be more mindful of where every cent is going, how it is used and who it benefits.
As a sustainability consultant in the luxury travel sector, I’ve long evangelized that being a better business isn’t merely being more ethical. Improved efficiency future-proofs operations and benefits the bottom line. Fighting the climate catastrophe and championing social issues go beyond ideology or nice things to talk about in press releases. The trust and loyalty from the effects of an ESG-focused methodology cultivate better loyalty from customers and employees, which, when done right, converts into higher revenues.
Sure, ESG alignment is about setting bold targets to reduce energy or natural resource reliance and less emissions and waste to landfills. And it is about a commitment to cultivating more inclusive and equitable company cultures. It’s not about bandying around buzzwords but measurably being less extractive and abler at improving quality of life for society’s most vulnerable. Larry Fink says it comes from good leadership. If we could ask future generations, surely, they’d tell us it was about being less selfish with less emphasis on “me” and “mine.” Let’s aim for a legacy as considerate custodians of nature and kindness shown to fellow human beings.
A student recently asked: What’s the point of the United Nations? Their 17 Sustainable Development Goals (SDGs) are an invaluable metric and map of the greatest challenges facing people and the planet. The official line is that this international peace-seeking organization strives for cooperation in solving global economic and humanitarian problems, promoting respect for all rights and freedoms. It’s as much the responsibility of individuals, corporations and policymakers to elevate the health of the planet and its people where it can—and a profitable, robust private sector has a powerful role to play in this.
Since finance firms and insurance institutions exist to make money from money, investing in what’s greener, more humane and all that goes into nurturing higher ESG scores is as commercially essential as profit. To redress the imbalance between us and nature—and indeed, our relationship with money—we must enable more purpose-driven capitalist models to flourish. And how we measure and celebrate success in business needs to be recalibrated. More helpful than rich lists lauding those who have made the most money would be impact lists outlining how those who performed exponentially did business the right way. “You never change things by fighting the existing reality,” is how architect and futurist Buckminster Fuller put it almost a century ago. “To change something, build a new model that makes the existing model obsolete.” We’ve got the tools.