The case for ditching 5 underlying sustainability assumptions
The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.
In conversations all year, I keep hearing the argument that we’re in the middle of a “healthy correction” from the alleged ideologically driven excesses of 2018 to 2021. In response, the prevailing advice is to double down on the business case, while avoiding political backlash.
Although this is a convenient narrative, it’s not a very convincing one. During this peak of enthusiasm, the business case narrative also dominated, but tended to be framed as a broad, unstoppable, win-win trajectory that would benefit everyone. This was always unrealistic. A shift to acknowledging trade-offs would’ve occurred even without the political headwinds in the U.S. today.
Rather than just doubling down on ROI arguments (which themselves are nothing new), there’s a need for a bigger philosophical shift. I’m not only thinking of the risks from an anti-climate action U.S. administration or commitments, goals and aspirations that have become dangerous. I mean something more fundamental — the underlying assumptions and theory of change no longer hold, so we need a new approach.
5 assumptions that no longer hold
Here’s why the theory of change doesn’t work anymore:
- First, sustainability works because it anticipates future regulation. One of the prime risk management arguments for sustainability is that it helps companies get ahead of new regulations. But today, with regulations fragmented, uncertain and globally inconsistent, companies need to anticipate reversals.
- Second, global pledges aren’t the way to drive change. The latest failure to secure a global plastics treaty is just one sign that flagship voluntary agreements secured at the United Nations are no longer dependable or broadly credible. Corporations that take policy alignment seriously, such as Unilever, are increasingly pivoting their attention to the national level and understand that their government relations and sustainability leads need to work in close alignment.
- Third, the general public has much more idiosyncratic and mixed views on sustainability than is commonly argued. The underlying assumption of stakeholder capitalism is that everyone broadly wants the same sustainability commitments from corporations. But this view turned out to be too simplistic. Political reversals have made it clear that some members of the general public view these priorities as elitist and irrelevant. Managing the energy transition means acknowledging that some people are very concerned about losing jobs and livelihoods that rely on the fossil fuel economy, and it’s a bad idea to dismiss these fears outright. Pretty much everyone wants clean air and water — and to be able to provide for themselves and their families, so it’s important to prioritize basic fairness first.
- Next, reputational risk is not a linear accountability mechanism. Because sustainability has traditionally been framed as providing reputational upside, there’s been insufficient consideration of the fact that activists are as likely to target leading companies as laggards. Starbucks was targeted on labor rights, despite having the best pay and benefits in its sector, precisely because it’s a leader, not because it’s a worse performer than other companies in the sector. Target is facing disproportionate scrutiny over DEI reversals, even though its actions are far from exceptional, and its retail employees face considerable physical risk. Campaigns are more unpredictable and social media-driven than they used to be, and the NGO landscape is fragmenting. Flagship agreements with WWF or the Ellen MacArthur Foundation used to be how companies signaled commitment. These days, they’re far more likely to be derailed by social media driven campaigns from tiny, faceless organizations that appear to emerge from nowhere. In summary, reputational risk is a funhouse mirror, not a reliable gauge of the ambition or credibility of your efforts.
- Finally, transparency doesn’t lead to accountability. Decades of attention on making ESG reporting frameworks more rigorous have led to a lot of progress, but also sucked up disproportionate time and attention and not galvanized meaningful change. We spend far more time on esoteric debates about Scope 3 emissions and measuring impact than on meaningful change. The result: we lose people in the process.
A new focus
We’re already seeing new approaches emerge and new strategies starting to take shape to move past the assumptions laid out above.
One clear trend is a shift away from overpromising on an enormous range of intractable challenges. What replaces it is a new focus on legitimacy and leverage, with companies dialing down ambition in areas they cannot directly influence and doubling down on areas where they have control. For example, Pepsi has dialed down climate and plastics goals, where it has limited influence, and doubled down on regenerative agriculture, where it has more direct leverage. This seems like great news, so long as it’s accompanied by more thoughtful policy engagement.
It’s also increasingly accepted that market-based voluntary action is nowhere near enough. Although the mood is darker, there’s more engagement on the actual scale of the challenge, the need to think more carefully about financing models and time horizons, and acceptance that promises and commitments alone are unrealistic.
Of course, corporations are afraid to be opinionated and even in closed-door meetings, I’ve noted pervasive paranoia. This doesn’t look likely to galvanize the kind of collective action and voice we need that was easy enough for everyone up until 2021. I understand the reluctance by companies to make themselves a target, but there’s still strength in numbers and a need for courage and coordination.
There’s also a shift back to convergence between corporate affairs and sustainability. This was once a sign that the company treated sustainability as messaging alone, but now it’s an indicator that ESG reporting has shifted to the finance team and that a range of functions now include sustainability expertise. If sustainability considerations are integrated into procurement, operations and R&D, with the requisite experts, then there needs to be a shift in the role of the standalone sustainability function. Even more important: the narrative challenges facing corporations are so profound that true alignment between talk and action is non-negotiable.
The most ambitious and thoughtful companies I know are getting clearer, more focused and replacing complex jargon with plain language and a serious focus on implementation. This is just a start, but it’s much better than doing the same thing over and over again and expecting a different result.
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