It’s been fascinating to watch sustainability initiatives progress along their lifecycle – particularly in recent months as corporate efforts appear to be slowing down, and are doing so at an increasing speed.
As with any concept – which starts with an idea that is then designed and tested until it’s fully formed and widely accepted – sustainability is evolving. And that’s exactly as it should be. Companies and capital markets picked up the idea, money flowed like a river into sustainability-themed investment funds, sustainability initiatives took off and anyone with ‘ESG’ in their LinkedIn profile had an onslaught of calls from recruiters.
So many aspects of ‘sustainability’ are just part of doing business
Now, as sustainability matures, it rightfully needs to justify why it matters, defend itself against its detractors and, as it does so, respond to the criticism it’s received.
But what are companies to do when they want and need to continue addressing and reporting about sustainability issues in their business? The answer lies in how we got here.
Connect to business
What we know from the outside about a company’s sustainability activity comes from what it reports about it publicly. And it’s astounding just how disconnected ‘the business’ and ‘the reporting’ are.
Often those charged with reporting don’t think – or write – about sustainability in terms of what the company is in business to do. They may talk about their ‘sustainability journey’ or ‘embedding sustainability into the business’, but these words make no logical sense because so many aspects of ‘sustainability’ are just part of doing business. They also make it incredibly hard to know from the outside what, if anything, a company is actually doing, or if it is just bad at talking about it.
Because there is confusion about what sustainability means in the context of doing business, investors have a hard time knowing which sustainability issues really matter. As a result, sustainability-focused information doesn’t get their attention, which means that those sustainability initiatives don’t get the oversight and accountability they need to be effective.
The imprecise and vague explanations in sustainability reporting make it a bit ‘meh’
In large part that’s because companies don’t clearly differentiate between the sustainability-related matters that are relevant to their strategy, performance and risk exposure; those that are relevant to their culture and reputation; and those that are about having positive impact on the world around them. And that makes it easy for critics to challenge the business rationale for ‘sustainability’ – all the easier to do because many companies don’t seem to have a clear one.
The imprecise and vague explanations we see in today’s sustainability reporting make it, at best, a bit ‘meh’ and, at worst, misleading. This has practical implications for resilience and viability. When it’s difficult to explain why taking a particular action matters for what the company is in business to do, executives (and boards) can’t justify making the investment needed – including, ironically, in the systems that can give decision-makers better-quality sustainability-related data to make such decisions. They simply don’t know whether they are throwing away money on something that is not actually the most effective thing to do. Understandably, they can’t take that risk.
Think differently
The answer to all this, especially in an environment of heightened scrutiny and scepticism, is to think and talk differently about what ‘sustainability’ means for your business. Here’s how.
- Always start with – and come back to – your strategy. Whatever your company makes or does, there are aspects of your sales, production and operating processes that are affected by sustainability factors. The effects will differ from sector to sector and from company to company. Make sure you look at the many sides of an issue to understand and acknowledge the trade-offs involved.
- Communicate honestly and in the context of your business. Talk about sustainability factors in the context of your strategy and why they matter to its success. Differentiate between information that is about your resilience, about your reputation or about your desire to ‘give back’. Make sure the story is balanced and that it adds up. If you are open about what you won’t or can’t do, and why, you’ll avoid boxing yourself into a corner that will be harder to explain your way out of later on.
- Inform your decision-making with real, reliable information. What gets measured gets done, so avoid making significant and potentially expensive decisions without having the necessary information. Spreadsheets won’t suffice for much longer. There are a lot of data platforms in the market, and the choice can be overwhelming. Ask around: who is using what, and why? What does your ERP partner think would work best with its system?
Context is all
Fundamentally, companies exist to create jobs, pay taxes, supply valuable products and services (and buy from suppliers who do the same), and to provide a return for shareholders (including pensioners and savers). And they should do it all in the most responsible way they can, using the best information they can get.
When companies start talking about sustainability in the context of what they are in business to do, it will be harder for critics to condemn their actions. This will also help them avoid being blindsided because they will be on top of the wide range of issues that can affect their resilience and viability. After all, that’s what being sustainable is all about.
