The world is changing, and it's good.
In the last 10 years, I have worked with a variety of organizations across many sectors. These companies have touted their environmental and sustainability practices. Corporate entities seem to be moving towards making the choice to conduct business in a less harmful way. This is good news.
The rise in popularity of sustainable life choices (vegetarianism, veganism, electric or hybrid cars) and economic models (the circular economy, the sharing economy) is fundamentally interesting and it points to a longer-term trend of simpler living. This, too, is good news.
And as these choices take hold, the investment world is changing in similar fashion. Corporations' sustainability initiatives are being evaluated as important variables alongside traditional financial metrics to determine corporate "investability." Divestment initiatives are taking place around the world. Studies have repeatedly shown that "good" business investments don't underperform other standard diversified portfolios. In fact, many studies show that "good" companies have an edge relative to the index.
Governments are taking notice of the evolution toward better lifestyles, better business and better governance — and not just out of necessity. As we all know, COP 21 took place in France early this month, and the world's leaders devised what we hope are the steps forward in addressing the climate challenge issues that face our world. The world is changing — and for the better. This is good news.
Never before has there been a more direct incentive for a corporation to perform ethically and sustainably. News from the United Nations earlier this year that we have begun to make a dent in the climate change issue is promising, but only if individuals and businesses keep up our end of the bargain with our lifestyle choices. If we can continue the pace, this, too, is good news.
Change is good, but it’s not easy
Companies can wrap up unethical practices behind claims of environmental and sustainable activities, but many consumers aren't informed enough to see through such claims. (Photo: Ian O'Hanlon/Shutterstock)
But problems are inevitable. A good example is that sustainability has lost its meaning. A number of businesses have begun touting their sustainability measures as a differentiator, but that differentiation is only true when a business takes it seriously.
There's a derogatory term — "greenwashing" — whereby organizations wrap generally unethical business practices with insufficient or superficial corporate social responsibility programs. Indeed, in many cases, businesses are jumping on the sustainability bandwagon for no other reason than the marketing opportunity. After all, most consumers are not informed, nor are they informing themselves, about supply chains and stakeholder relationships.
The bad news extends to the individual. Extreme critics of organizations demand instantaneous change, including the instantaneous ceasing of unsustainable business practices. While activism is deeply important and a major reason that institutional entities change course, expecting big automakers to suddenly stop making fuel-based engines and soft drink producers to suddenly stop making sugary fizzy drinks is a utopian ideal. It is irrational, unachievable, and lacks all pragmatism. Yet the activism must continue to push corporations and entities towards the ideal utopian world we want to live in.
The age of social media has removed the barriers between corporate activity and consumer feedback. Indeed, while the majority of consumers remain uninformed, the digital age has exposed many corporations, and trust in corporations' socially conscious initiatives are decreasing seemingly day-by-day as some new scandal or unflattering fact is revealed. Truly honest and well-intentioned companies, on the other hand, will thrive in this environment, as their activities will be well-documented and shared.
The unfortunate reality is that there will always be inauthentic or malicious actors attempting to exploit a trend for profit. However, there are a number of great concepts that are emerging on how the future of sustainability can be improved. Indeed, some are calling for a move away from the use of the word, as fewer people know what it really means.
What future leaders have to say
This summer in Calgary, Alberta, the Global Shapers Community gathered to discuss the way forward for a better world. The Global Shapers are the top young social, community and business leaders; they are leaders under the age of 30 who have been identified as the future leaders of our institutions. As a part of this conference, we discussed this very topic — the future of sustainability — and what (if anything) needed to be done to ensure that we build a more sustainable world.
Dean Sutton from Vancouver, British Columbia, said the term and the philosophy are due for an evolution. Just as recycling was once a novel concept, it has become ubiquitous in most parts of North America. He argues that sustainability is about process, and that the process of sustainability is overdue for an overhaul.
"Sustainable" needs to be redefined across the business playing field. Future leaders are not content with tree-planting initiatives and volunteer days cleaning up parks. "Perhaps the next evolution for sustainability is the ability to be globally aware of how our human pursuits have a longitudinal impact on the environment in which we live," says Connor Sheldon of Boise, Idaho. She supports use of the term "global awareness" meaning global in terms of geography, but also in terms of a product's life cycle.
The Future of Sustainability conversation was stewarded by the Coca-Cola Company, a global partner of the Global Shapers Community. The delegation of Global Shapers benefited from the chance to hear Coca-Cola's Chief Sustainability Officer Bea Perez speak about how the company is addressing sustainability, and the link between sustainability and business priorities, with a focus on the theme of Water, Women, and Well-being.
It was a transparent discussion about the areas where the company has been performing well and the areas where it has been performing poorly. The delegates were able to hear an iconic brand talk about the foray into a more sophisticated engagement about what we call sustainability. The Global Shapers expressed their congratulation and their criticisms and they challenged the company to continue its pursuit of ethical business. In opening up the company story to a curated group of opinionated and fearless future leaders, the company showed a willingness to engage stakeholders.
What the future could look like
If I had my way, the field of sustainability would be dead within 10 to 15 years. In my view, every person with a title that includes the terms "sustainability" or "social responsibility" should be actively working to become unemployed. This is my irrational utopia, of course, as the world needs dedicated efforts from large organizations to tackle the issues before integrating them elsewhere.
Departments that deal with these issues in isolation need to be absorbed by other departments. "Sustainability" (or whatever we end up calling it in the future) needs to be as much a focus in marketing as in product development, customer service and the executive suite. Entire organizations need to adopt sustainability as a priority, and sustainability metrics should be tied to performance.
A relatively new approach is an integrated approach. While the popular ideology was once the Triple Bottom Line, there is now a newer approach outlining six types of capital that should be considered in every business decision. Traditionally, our association with the word capital has been largely financial, and in the world of publicly traded companies, it has been seen as a word of paramount importance. The six capital model brings five other types of capital to the forefront — financial, manufactured, natural, social and relationship, intellectual and human — each sharing equal importance in the operations of the business.
The six types of capital encompass all stakeholders that touch a business — from personal to environment, from social to financial — and put a priority on a high level of stakeholder relations. Nurturing these five types of capital as part of a corporate value system help to ensure that sustainability is integrated into every facet of the business.
My favorite version of the future is the professional extinction of all social entrepreneurs, social innovators, sustainability professionals and not-for-profit organizations and NGOs. It's a world in which such specialized titles and organizations are unnecessary (but not ignored) and it represents the major evolution our business needs. What brought us to this point where we need a "social" entrepreneur, and an "environmentally-friendly" corporation? Why isn't this the default? When can we stop rewarding businesses for doing what most would argue is the bare minimum: sound ethical practices that don't exploit people or natural resources?
Three ways to utopia
That ideal future is probably too utopian, but these three measures could bring us closer to it.
First, the financial community needs to continue to see the value of investing in socially and environmentally conscious businesses. Financial capital will always drive business decisions. Divestment initiatives must continue, and the world's wealthiest must continue to make commitments to social development through their own actions. It puts the onus on the biggest businesses to publicly communicate performance in sustainability metrics, and in doing so, forcing businesses across the spectrum to adopt more responsible initiatives.
Second, we need a commitment to social impact reporting. Standardized metrics need to be established. Ideally, sustainability reporting using common metrics would be mandatory, much in the same way there is enforcement around common financial reporting. The social license to operate needs to become clearer in order to rebuild trust. It took years of Enron-esque type of business practices before the introduction of Sarbanes-Oxley. It is time to take that approach on sustainability and social impact reporting. There is no doubt that many corporate entities legitimately want to contribute to a social cause, all the while leveraging their good work for brand loyalty. There is no issue with this. Business must remain business. If the work being done by the corporation is good in nature, and if a demonstrable difference is being made in the issue being tackled, there should be a positive impact on the company’s financial return. Reporting helps create honesty and comparability, and it will allow businesses to optimize sustainability practices.
Finally, we need new language to support the two measures. Sustainability is a tired word. It has the effect of deceiving consumers who are inundated with choices. Numerous studies show that people want to feel good about their buying choices. I am not excusing uninformed consumerism, but I am placing a larger importance on the high-magnitude activities of the world’s largest organizations. Examples of better terminology include a term that is being used by oil and gas companies in Alberta in their dealings with the Aboriginal community: the social license to operate. In my utopia, this would be a section of the annual report, statements that go in-depth into the activities an organization undertakes to prove its worthiness to sell a good or service. "Return on Responsibility" is an effective way for investors and corporations to communicate the financial return on sustainability practices.
As Max Stein of Boise shared at the Global Shapers conference, "Sustainability is impact. It is beyond risk management and mitigation. The word embraces endurance, resilience, and iteration."
"The next evolution is mindfulness. It is not an alternative, but an imperative — a deeper dive in awareness and action."
Japman Bajaj is co-founder of Soshal Group Inc., curator of Calgary Global Shapers of the World Economic Forum, and co-chair of SHAPE North America 2015.