edie at 20: How did sustainability become so business-critical?

In the corporate world, 20 years is a very long time. Businesses – entire industries, in fact – have emerged and disappeared, struggling to remain profitable against a tide of economic pressures and ever-changing consumer demands.

In the mid-to-late 1990s, corporate sustainability was still viewed as an add-on, chiefly as a means to meet regulatory requirements. There was an alarming gap between global pressures and the focus of business chief executives. Stakeholder concerns, resource pressures and societal damage were failing to traverse into the business sphere, with most companies instead pulling up the drawbridge to focus purely on economic gains.

Sustainability was still in its infancy in 1998, with most of the top companies only looking at it from the perspective of lowering costs and increasing efficiency in energy and resource use. There were, however, a few notable exceptions.

In fact, it was in 1994 that Interface’s founder Ray Anderson had an “epiphany”, leading to the creation of the carpet tile manufacturer’s ‘Mission Zero’ sustainability initiative – a world-leading pledge to ensure that the company would leave no negative impacts on the environment by the year 2020.

Meanwhile, in 1995, John Elkington coined the triple-bottom-line approach of ‘people, planet, profit’. And one year later, sustainability heavyweight Unilever launched its inaugural Environment Report and established an external Environmental Advisory Group.

The 1997 Kyoto Protocol then pushed climate action into the policy sphere, and politicians began to push more demands onto the private sector. Slowly but surely, corporate social responsibility (CSR) – incidentally, a term first coined back in 1953 by Howard Bowen – was finally extending beyond the realms of environmental policy mitigation.

In 1999, the Dow Jones Sustainability Indices (DJSI) launched, acting as the first mainstream criteria for corporate sustainability. In a world where the cornerstone of reporting has been that of financial information, the DJSI sparked a significant mindset shift.

With the DJSI now offering comparisons as to how companies were behaving and performing, some realised the need to change. Sportswear giant Nike, for example, acknowledged that the brand had “become synonymous” with poor wages, slavery and abuse and eventually published its first CSR report in 2001. Finally, pressing societal issues were beginning to reach the boards of big companies, and these boards would act as a catalyst for change.

Millennium moment

For the early adopters, changing course was not easy. But, by the time the 2000s arrived, those swimming against the tide of corporate climate action were thrown lifejackets. The eight Millennium Development Goals were launched by the United Nations, while the first full version of the Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines was released. Respondents to CDP’s first survey soon followed and today more than 33,000 sustainability reports have been collected in the GRI Sustainability Disclosure Database. With a global framework outlining the world’s pressing issues in place – which has since been expanded to the 17 Sustainable Development Goals (SDGs) – and reporting requirements able to shine a light on corporate action, the CSR pioneers were ready to march.

As this newfound sustainability awareness spread across industry sectors, exciting new green business ideas began to emerge; encouraging more sustainable operations, outputs and even products. In 2005, Walmart’s three-pillar plan, covering zero-waste, renewable energy and consumer-facing products stood out among the pack for its level of comprehension.

But for every step forward made by those in the vanguard of sustainability, the private sector seemingly took two back. The 2010 Deepwater Horizon oil rig disaster in the Gulf of Mexico and the collapse of the Rana Plaza garment factory in Bangladesh in 2013 stood out as two examples of businesses becoming something of an enemy to the climate fight in the eyes of the public.

Trust, or a lack of it, was beginning to impact the bottom-line. But, in a time where the policy backdrop had seen the likes of California and the EU set ambitious climate targets, some businesses began to realise that sustainability pays.

Companies that had, or were, embedding sustainability at the heart of their purpose, strategy and investments were unanimously outperforming industry averages. The likes of Unilever and Ikea were generating record levels of income at a faster rate than the rest of their businesses by focusing on sustainability – feats that are still being seen in today’s market.

Even the previous laggards of sustainability and environmental stewardship were turning over a new leaf. Greenpeace, for example, suspended a high-profile campaign against Singapore palm oil producer Golden Agri-Resources (GAR), while Asia Pulp & Paper (APP) combatted wide-ranging NGO and stakeholder pressure by launching a Forest Conservation Policy (FCP), including a bold pledge to cease all natural forest clearance. Finally, the voices of wider society were reaching the boardrooms.

Paris and purpose

Corporate action on sustainability reached a groundswell in the 2010’s, and it was 2015 that became the year that will forever be synonymous with CSR and climate change mitigation efforts.

The UK Modern Slavery Act – combined with the 2014 EU Directive on non-financial reporting – attempted to pull back the curtains of business ethics, ensuring that transparency was now a pressing necessity.

The aforementioned SDGs were also launched in 2015, strengthening the global framework to act on societal, environmental and ethical megatrends. Action against the Global Goals has been slow-paced, however, and businesses will need to enter a new era of collaboration – as witnessed by the willingness of UK retailers – to tackle goals much bigger than their own presence.

And it was also in 2015 that the emblematic Paris Climate Accord was signed, with governments and businesses alike pledging to limit global warming to 2C, at the very least. The Paris Agreement may have been forged through policy, but the business appetite to assist in the low-carbon transition was nothing short of staggering. More than 430 companies have since committed to emissions reductions aligned to climate science through the Science Based Targets Initiative (SBTI) – proof that the ambitions are now being turned into action.  

This may be a drop in the ocean. But in an ocean choked by oil and plastic, initiatives like the SBTI and indeed the RE100 (which has created more than 146TWh of demand for renewable electricity annually, similar to the electricity consumption of Poland) are very welcome and very necessary. It is through these initiatives, which extend to electric vehicle (EV) purchasing and resource efficiency, that businesses are entering a new frontier.

The role of business has changed in the wake of President Trump (who would’ve envisioned that 20 years ago?) and his declaration that the US would withdraw from the Paris Agreement. The We Are Still In declaration, signed by more than 900 businesses, is one of many initiatives that have seen CSR become a form of political activism.

This “in-it-together” mentality (let’s not mention Brexit) has helped to breed the notion that sustainability in the corporate sphere is pre-competitive, and many historic rivals across numerous sectors are now collaborating on common solutions to improve resource efficiency, build supply chain worker resilience and, as mentioned, help deliver on the Global Goals.

March of the investors

One of the unintended benefits of Trump’s neglection of all things climate is that it has pushed the green business agenda to an increasingly engaged and global audience, and investors are now finally taking notice.

Blackrock’s Larry Fink expertly set a new tone for the financial sector through his letter to business and stakeholder chief executives, outlining a “new model for corporate governance”. Fink called on businesses to develop a social purpose and pursue low-carbon strategies for long-term growth. The subsequent rise in green bonds and loans have created an enabling environment for businesses to do just that.

There’s also the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which have created a common language for the sustainability and financial departments to discuss business-critical action plans that target long-term growth through strategic plans that account for the triple-bottom-line.

Businesses are now being examined from all angles. While the heated plastics debate has pushed sustainability into mainstream news outlets, companies are still largely reactive with their responses. As investors call for more climate-related disclosures and consumers increasingly demand better transparency, businesses can no longer stand idly by until a problem emerges.

When looked at relative to where we were, the sustainability progress made by businesses has been truly remarkable. But when looked at in the context of where we need to be, it is clear that the next 20 years will be even more crucial than the last.