2018, like most years, has begun with statements both hopeful and optimistic about what the new year may bring. And there are many positive developments in global sustainability to acknowledge, including the on-going implementation of the Paris Climate Agreement by many nations; increasing collaboration among business, non-government organizations, and other institutions on renewable energy, food waste, and other issues; the expanding human rights agenda; women’s empowerment; and accelerating investor interest in sustainability. So far…so good.
Such optimism (even cautious optimism), however, needs to be tested against deeper structural obstacles that have the potential to slow down and possibly reverse more positive sustainability trends of recent years. There are five such obstacles, including:
Broken politics. While a dysfunctional U.S. president’s tweets and racist comments are the most obvious symbol of broken politics, the problem is global in scale and impairs the advancement of important sustainability objectives. In Germany, the diminution of Chancellor Angela Merkel’s political influence since the September Bundestag election perpetuates the caretaker government. The political price tag for building another “grand coalition” currently includes abandoning Germany’s 2020 carbon emissions target (a 40 percent reduction from a 1990 baseline). In Brazil, the perpetuation of the corruption-fueled political crisis has significantly weakened the government’s resolve to protect the Amazon rainforest. The number of harvested hectares has risen even while President Michel Temer’s ruling coalition depends on support from “ruralista” agri-business interests. Other instances of broken politics afflict Myanmar, Poland, South Africa, the United Kingdom and a host of other nations and impede political leaders’ ability to resolve human rights, immigration, natural resource and other sustainability challenges.
Transition of major business leaders. Much of the progress in advancing sustainability over the past few decades resulted from private sector commitments and performance among leading companies across multiple business sectors. And yet, on-going transitions at the CEO level create major uncertainties about the ability to continue effective CEO advocacy in major sustainability debates and commit to future progress. In the food and beverage sector alone, 2017 witnessed the departure of major sustainability proponents as Paul Bulcke of Nestlé and Muhtar Kent at Coca-Cola. General Electric witnessed the defenestration of Jeffrey Immelt three months earlier than he originally announced, and Ford fired its CEO Mark Fields. Unilever has retained a search firm to identify a successor to Paul Polman in approximately 17 months, and Andrew Liveris is in the twilight of his career after remaking The Dow Chemical Company. Each of their successors is unlikely, at least initially, to invest major time in sustainability strategy and advocacy as they will confront the need to establish their own leadership imprimatur and credibility with investors, employees, customers, and other stakeholders. At a time when the voice of more sustainable business needs to be clearly heard and expanded, who will fill the void and carry the torch?
Much of the progress in advancing sustainability over the past few decades resulted from private sector commitments and performance among leading companies across multiple business sectors.
Disappearing middle classes. In his 2016 opus on The Rise and Fall of American Growth, economist Robert J. Gordon presented a very dire scenario of declining living standards resulting from an aging population, stagnating education, epidemic levels of indebtedness, rising inequality, and a failure to match innovations achieved by previous generations. Many of these factors are not limited to the U.S. In addition, future innovations may prove highly disruptive to maintaining existing middle class purchasing power and lifestyles due to technological advances that will require even fewer workers and middle managers (think next generation robotics, 3D printing, and what’s already happening to shopping malls and bricks and mortar retail stores from online purchasing). Middle class economic anxieties, pervasive in western democracies, have yielded to a toxic reaction against trade agreements, immigration, and government regulation. Future proposals to advance sustainability through taxes, regulations, or consumption restraints will encounter brisk political headwinds.
Inability to focus. One of the sustainability community’s greatest strengths over the past generation—its ability to expand the agenda across economic, environmental, and social needs—is also its Achilles heel because of a structural inability to mobilize powerful coalitions around key messages and priorities. The result is a cacophony of causes expressed through a liturgy of language that often fails to penetrate the consciousness much less motivate ordinary citizens. A previous generation of public health and environmental activists exhibited greater success in linking language with lobbying, but their objectives—clean air, clean water—were admittedly simpler and ratified by conditions that were verifiable through the common eye. The inability to develop a focused sustainability agenda has yielded a situation in which nations have pledged to the 2030 agenda even while intolerable living conditions and business practices reminiscent of 1970 prevail in some advanced industrial as well as developing countries.
Failure to do some basic things. BlackRock’s CEO Laurence Fink’s recent letter to the world’s largest public companies is a useful reminder of our common failure to implement a few basic decisions that could further align the interests of producers and consumers with more sustainable outcomes. They include more realistic pricing strategies for natural resources and other valuable commodities (e.g., carbon, water) so that their longer-term environmental and societal impacts and costs were more transparent to institutional purchasers and consumers; more realistic time frames for shareholder and institutional investor evaluations of enterprise performance; and more explicit disclosure of business risks that, left unreported, can mask a fuller understanding of risk exposure to senior management (this includes not only health and environmental factors but also the risks of not addressing discrimination or sexual harassment).
BlackRock’s CEO Laurence Fink’s recent letter to the world’s largest public companies is a useful reminder of our common failure to implement a few basic decisions that could further align the interests of producers and consumers with more sustainable outcomes.
These structural impediments will require much time, thought and effort to redirect. What is to be done in the interim? There are four practical suggestions to maintain momentum for sustainability initiatives, including:
- Since not every organization, nation, or region can become or aspire to be leaders, we should aim to mobilize a wider set of institutions to improve their performance. Business federations represent a natural place for such engagement through common standards development, technical support and peer-to-peer engagement at all levels. Such buy-in can reduce the scale of free ridership within individual business sectors while making steady performance progress.
- Strengthening the infrastructure for collaboration on ever larger scales involving more diverse institutions. Progress will be enhanced through a) clear problem definition related to a business purpose and joint goal setting; b) building more efficient collaboration networks; c) co-investing resources (people, knowledge and money) commensurate to what is needed to achieve success; d) focusing on critical issues; and e) agreeing upon the terms of transparency and accountability for governance among multiple partners.
- Recognizing that many factors drive change—values, culture, strategy, and money—but responding to ratings agencies’ multiple and duplicative requests for information, or chasing too many short-term shiny sustainability initiatives flowing in the stream are not among them.
- Stop asking people to park their beliefs, values, and lifestyles at their employer’s door. Values can strongly bind an organization to its employees and to civil society and represents the connectivity that shapes thinking about business strategy, technology development, and relationships with society. Organizations whose values are in general harmony with their employees, and who respect individual differences and preferences, have great potential for creativity, innovation, and internal and external collaboration—all prerequisites for longevity.
Here’s hoping that the sustainability agenda can become more impactful.
This article was originally published on GreenBiz.com. Feature image courtesy of Len Radin.