Could sustainability professionals use this opportunity to refine and reframe our practices?
The election of President Trump and the rise of right-wing populism in other countries have put ESG and sustainability efforts in a precarious position around the globe. At the same time, the accelerating climate crisis — evidenced by Los Angeles wildfires and the extreme southern U.S. winter weather — makes climate action more urgent than ever.
Additionally, the U.S. withdrawal from the Paris Agreement and rollbacks of environmental regulations threaten corporate climate commitments, complicating compliance and clouding the case for long-term sustainability investments.
However, in this chaos, sustainability practitioners have the opportunity to adjust our approach to — and the language we use — regarding sustainable business practices. We should take this opportunity to refine, and in some cases reframe, how these practices contribute to long-term stability and value creation for companies of all sizes. As we look ahead, here are some tips and tactics for sustainability professionals and companies alike as we plan for an unpredictable and potentially chaotic four years.
Tactics for sustainability professionals:
- Prepare for challenges and prioritize: That said, we need to prepare for a sustained four-year attack on ESG and sustainability as a whole. During this critical moment, we must pick our priorities and take the time to engage the C-suite to fully align sustainability with corporate values and corporate value creation. The recent case of Costco clearly doubling down on its DEI efforts is a case in point. Costco shareholders, clearly understanding the value this brings to its business, resisted performative political pressure to eliminate its program, to widespread acclaim. But we also need to be clinical and candid: not all ESG topics are relevant to a given business or its ability to create value. If your business doesn’t significantly contribute to climate change or biodiversity loss, and these issues don’t pose a direct or meaningful risk to your organization, we should feel confident in deprioritizing them. In doing so, we can show that well-planned and executed ESG programs clearly contribute to value creation and that smart leadership means sometimes holding off on the “nice-to-haves.”
- Local and global regulations are on the move: While legislative appetites in the U.S. (and possibly EU) for regulatory requirements for disclosure may fluctuate over the short term, there has been steady pressure building over recent years towards a regulatory landscape that prioritizes more transparency and disclosure regarding a variety of ESG-relevant issues. For example, over 8,000 U.S. companies with global operations must comply with the Corporate Sustainability Reporting Directive (CSRD). Closer to home, California continues to implementing its climate data and risk disclosure regulations. While the specific regulatory requirements companies must comply with might evolve in the years ahead, the principle of double materiality and the corresponding disclosure of financially relevant impacts, risks and opportunities should be clearly communicated as part of any company’s risk and fiduciary management efforts. It’s simply good business practice (to learn more on this topic, check out the “Getting Up to Speed on CSRD” panel at GreenBiz 25).
- Be concrete and embrace the data: There’s a plethora of data, both quantitative and qualitative, that underscores the value that good ESG strategies and programs bring to companies. For example, since 2015, McKinsey has published a series of comprehensive studies on the impact diversity has on corporate performance. And the data unequivocally shows that “companies with diverse leadership teams continue to be associated with higher financial returns,” statistically outperforming their peer groups. We should compile and catalog these kinds of data points. They will help us immunize our efforts against political posturing and convince even the most skeptical C-suites that, when done right, ESG initiatives can bring tangible and material value to their companies.
- Be calm and carry on: Whether you work for a consultancy or within a corporate sustainability group for a large global company, it’s important to acknowledge that current stressors are unique and affect everyone. The business value of our work is clear — we just need to recalibrate how we talk about it. At the same time, it’s important to remain calm, breathe deeply and understand the pendulum swings back and forth. Administrations and elected officials will change, but the value of our work remains constant.
For forward-thinking companies, this turbulent and uncertain period presents an opportunity to reinforce their brand and show their commitment to doing what’s right for their shareholders, employees and the world. That said, to cut through the noise, companies must demonstrate how their sustainability programs create value over the long term. A truly sustainable business is one that will be around for a very long time. So, as practitioners and business leaders, we must sharpen our arguments now, which will only strengthen our position when the political winds shift once again — as they most certainly will.
Get in touch. We are happy to tell you more about it.
