Climate change and its negative effects on our current way of life are arguably the largest topics of discussion in the public consciousness. From unprecedented international co-operation agreements like the Paris Climate Accord being signed by 195 countries in 2016, to teenage climate hero Greta Thunberg dominating our media consciousness on the issue, one would expect such a prominent topic carrying such potentially grave consequences to garner wide support by way of urgent, meaningful action.
In fact, the world is careening towards irreversible climate change with carbon emission concentration recording yet another record-breaking high of 407.8 parts per million, or 147% of pre-industrial level in 1750 (World Data Centre for Greenhouse Gases, 2019). Yet these developments and their associated runaway effects which could destroy our livelihoods, survival and surrounding environment still bring about slow action and response.
...Systems of natural environment, economic growth and social well-being are intrinsically linked and thus difficult to address without a holistic approach.
One of the key complexities hindering communication, discussion and action on this urgent topic is the interconnectedness of elements and stakeholder groups; systems of natural environment, economic growth and social well-being are intrinsically linked and thus difficult to address without a holistic approach. Being a ‘wicked’ problem (Incropera, 2015; Lehtonen et al., 2018), the issue of climate change and the mitigating actions required is further compounded by the sheer number of participants involved, which often also see the stance of each interest group opposing each other, paralysing actions to be taken.
Multiple factors contribute towards this inaction, one of which is the fact that current metrics measuring ‘performance’ or ‘progress’ do not take into account impact other than financial performance. For example, countries usually measure their ‘performance’ by utilising one-dimensional indicators such as gross domestic product (GDP), which is now increasingly being argued as an insufficient or incorrect measure of sustainable progress (Stiglitz, 2019). An extract from the book Beyond GDP: Measuring What Counts for Economic and Social Performance (Stiglitz et al., 2019) argues: “…growth that increases a GDP number but does not reflect an increase in the well-being of most citizens, does not reflect the degradation of the environment and the depletion of natural resources, makes the economy and its citizens more insecure, erodes trust in our institutions and society, opens up conflicts because of disparate treatment of those of different ethnic or racial groups, is not ‘real’ growth.”
As a result, new measurements have been introduced to ensure a more holistic approach in measuring progress from various dimensions such as natural capital and well-being of society. The United Nations has begun to measure environmental and economic impacts in tandem through the System of Environmental-Economic Accounting (SEEA) – “an international statistical standard that uses a systems approach to bring together economic and environmental information to measure the contribution of the environment to the economy and the impact of the economy on the environment” (UN SEEA, 2019). These two examples show that moving forward, the interlinkage of environment, economy and social needs to be addressed together for sustainable development.
...Corporations are increasingly influencing suppliers and partners to adopt sustainable practices... This results in larger changes to be driven.
On the corporate and business level, performance is also often only measured in financial terms although there are encouraging signs that companies are beginning to adopt multi-dimensional measurement through the reporting of their performance and activities. In 2018, 86% of S&P 500 Index companies reported their sustainability policies, initiatives and performance – a sharp increase from a mere 11% in 2011 (Governance & Accountability Institute, 2019). Often the most visible targets, corporations and businesses are expected to take responsibility and clean up their act (at times, literally). Despite the common reasons for slow or no action by corporations to adopt sustainability policies, many notable corporations are already taking steps to safeguard the very sustainability of their organisations. More than 680 companies in the US are taking a myriad of such measures, driven by the need to ensure that their businesses remain operable – the crux of sustainability (Environment Defense Fund, 2019).
What is driving this behaviour, given the complexity of the situation and the often conflicting interest of different stakeholder groups? In the age of transparency and accountability, corporations and governments are required to respond quickly, honestly and humbly. This is especially so when backlash from customers or citizens can swiftly damage corporations or governments. In 1990, Nike found itself losing significant sales and associations with three US universities with ties to the Worker Right Consortium, resulting in an estimated USD4 billion loss, due to the utilisation of forced and child labour in Asia in the manufacturing of its goods. It took Nike a decade and numerous improvements before the perception was changed.
Fast-forward to 2019 where the usage of social media is prolific, consumers are also becoming more conscious – 57% of respondents surveyed in the Edelman Earned Brand Report said they would boycott companies that were not aligned to their social beliefs (2017) and demanded that corporations be responsible in their practices. With Gen-Z expected to have the highest spending power ever, at an estimated USD29 to 124 billion (Barkley Inc., 2018), the stakes are even higher. This is evident from the findings that more than 61% of business leaders are adopting sustainability policies driven by the need to mitigate reputational risk, followed by consumer or customer demand and to minimise operational risks or maximise operational benefits (The State of Sustainable Business Report, 2018).
As such, it is no surprise that large companies have begun to partner with other organisations in addressing issues that could impact their reputation and operations. For example, Tyson Foods has begun partnering with Proforest to assess its deforestation risk, and plans to use the findings to develop its Forest Protection Policy in 2020. One of the largest fast-moving consumer goods companies in the world, Unilever also communicates clearly their long-term sustainability plan to the public – including achievement progress for initiatives outlined as well as areas of improvement required.
Through consumer demand and increased disclosures, corporations are increasingly influencing suppliers and partners to adopt sustainable practices. Whilst it may be challenging, companies have found that communicating with their suppliers about the benefits of adopting sustainable practices could also help lower costs of doing business. This results in larger changes to be driven (Carbon Trust, 2018). Take Verizon, one of the leading telecommunication providers in the USA, as an example. When they embarked on reducing their carbon emissions, it also meant having to work with suppliers who would look at reducing their emissions in turn. That has not always worked and has seen some working relationships ending. Realising that suppliers require assistance and support on this transformational journey, British Telecom initiated the Better Future Supplier Forum where suppliers can exchange and access learnings and best practices on their journey to becoming more sustainable. This is yet another underestimated area where wider adoption of sustainable practices can be driven, given the interconnectedness of supply chains and business operations worldwide.
Investors are also increasingly realising that companies with strong sustainability policies tend to outperform those without, based on conventional financial metrics (Schneider Electric’s Corporate Energy & Sustainability Progress Report, 2019). Further research from the Brookings Institution (2019) also found that every USD1 invested in companies with strong sustainability policies yielded a return of USD28, as opposed to USD14 from those with poor sustainability policies. It is unsurprising that 57% of companies in the Corporate Energy & Sustainability Report (2018) have committed publicly to sustainability targets, with another 9% planning to follow suit. In a simple sense, sustainability can mean good business.
This is especially relevant when businesses are also increasingly required to disclose risks associated with their investments and potential risks in relation to climate change in order to secure financing. Frameworks like the Task Force on Climate-related Financial Disclosure (TCFD) are increasingly being adopted by financial institutions worldwide to include considerations previously unaccounted for, to assess the viability of investments in the long term. Financial institutions are also increasing their offer on green or climate financing through products like green bonds – 2017 saw the world’s first green bond of RM1 billion (USD25 million) in Malaysia, issued for a 50MW solar project in Kudat, Sabah. Since then, numerous green bonds have been issued to finance renewable energy or green building projects around the world.
...It is imperative that future generations of consumers and customers are taught to exercise the most powerful lever they have – their ability to select which companies to procure goods and services from.
Climate actions planned for the next few years are expected to unlock benefits worth USD26 trillion up to 2030 and create up to 65 million new low-carbon jobs (New Climate Economy Report, 2018). In the same report, it was highlighted that the next two to three years will be the critical window to ensure that long-term investments made in infrastructure and economy yield said climate and economic impacts. Clearly, businesses can be powerful drivers in helping to address climate change if they choose to operate sustainably.
As corporations respond to consumer demands to address sustainability issues for the viability of their businesses, it is imperative that future generations of consumers and customers are taught to exercise the most powerful lever they have – their ability to select which companies to procure goods and services from. Their decisions should be based on transparent, honest insight into companies’ practices, policies and performance in relevant areas. With more companies required to report on sustainability in addition to financial performance, pressure from material stakeholder groups for corporations to be increasingly responsible in their operations to the environment, society, and economy would be the strongest catalyst for climate action. As corporations and businesses embark on becoming more holistic in the quest to be sustainable, this group of powerful actors can in turn drive changes on the national level in ensuring performance is measured in multiple dimensions, rather than merely in either economic, environmental or social terms. The world is now simply too interconnected: all three broad groups need to be able to exist and survive in tandem.
The very nature of sustainability being a ‘wicked’ problem could be a panacea for consumers to drive required action to mitigate climate change across actor groups.
The very nature of sustainability being a ‘wicked’ problem could be a panacea for consumers to drive required action to mitigate climate change across actor groups. After all, they are all interconnected in our increasingly globalised world of information and trade.
REFERENCES
- Barkley Inc. (2018). The Power of Gen Z Influence – How the Pivotal Generation is Affecting Market Spend.
- BSR and Globescan (2018). The State of Sustainable Business Report – Results of the 10th Annual Survey of Sustainable Business Leaders.
- Carbon Trust (2018). Corporate sustainability – learning from leaders.
- Edelman (2017). Edelman Earned Brand 2017 Study (www. edelman.com/earned-brand).
- Global Commission on the Economy and Climate (2018). New Climate Economy Report – Unlocking the inclusive growth story of the 21st century: accelerating climate action in urgent times. New Climate Economy c/o World Resources Institute, Washington DC.
- Governance & Accountability Institute (2019). FLASH REPORT: 86% of S&P 500 Index® Companies Publish Sustainability / Responsibility Reports in 2018.
- Incropera, F.P. (2015). Climate Change: A Wicked Problem. Complexity and Uncertainty at the Intersection of Science, Economics, Politics, and Human Behavior. Cambridge University Press, UK.
- Lehtonen, A., Salonen, A. & Cantell, H. (2018). Climate Change Education: A New Approach for a World of Wicked Problems. Justin W. Cook (Ed.), Sustainability, Human Well-Being, and the Future of Education. Palgrave McMillan, 339-374, UK. Murray, T. (2019). The businesses that are — and are not — leading on climate change. Environmental Defense Fund, Paris. Schneider Electric (2019). 2019 Corporate Energy & Sustainability Progress Report. Serafeim, G. (2014). Turning a Profit While Doing Good: Aligning Sustainability with Corporate Performance. Brookings Institution, Washington DC. Stiglitz, J., J. Fitoussi and M. Durand (2018). Beyond GDP: Measuring What Counts for Economic and Social Performance. OECD Publishing, Paris. UN System of Environmental-Economic Accounting (2019). What is the SEEA? https://seea.un.org (accessed on 3 Dec 2019) World Data Centre for Greenhouse Gases (2019). World WMO Greenhouse Gas Bulletin (GHG Bulletin) – No. 15: The State of Greenhouse Gases in the Atmosphere Based on Global Observations through 2018.
YOONG HUEY YEE
Yoong Huey Yee is the Vice President of PEMANDU Associates, a multidisciplinary consulting firm in Malaysia that specialises in public sector and private corporation turnaround. In her role, Huey Yee is highly experienced in developing strategies and initiatives with public and private sector stakeholders, having led teams and assignments in London, Senegal, Djibouti and the Asia Pacific in a multi-cultural setting. Huey Yee graduated with an MSc Sustainable Cities from King’s College London on a Chevening Scholarship. She was also selected as the US State Department’s YSEALI Professional Fellow for Environmental Sustainability in Fall 2018 with a four-week placement in the city of Dubuque, Iowa.
JUNE 2020 | ISSUE 6
Sustainability in a Time of Crisis
