The companies that drive our economy increasingly want to embrace it, for the good of the planet and the future generations that will make it their home. But what’s at stake as corporations go green? What challenges will arise? And what do decision-makers need to keep in mind?
To set the terms of the debate, Luke Manning, head of sustainability at financial markets data and infrastructure firm Refinitiv, and André Chanavat, Refinitiv’s director of product management, offer four truths and one lie about .
Companies can talk sustainability all they want—but they need to make a profit.
Noble talk won’t cut it when it comes to making corporations act sustainably. Rather, Manning says, it’s intrinsic structural motivations that will do the trick: the system of carrots and sticks that a real-world economy offers.
Carrots and sticks—but especially carrots, in the form of revenues. Eventually, Manning says, the emerging low-carbon economy will pay off, making it more than worthwhile for companies. Pressure from governments and the people they represent will only strengthen the sustainability mandate around the world.
By the 2030s, Manning adds, a company’s sustainability initiatives will no longer stand adjacent to its profit-making activity. They’ll form “an integral part” of it.
“As we continue to evolve what we think of as good governance, good social behavior and good environmental behavior, a lot of these [initiatives] will become a corporate return,” he says.
Speaking of those carrots, data indicates that companies that take green policies seriously
“There’s clearly something there in terms of the quality of these companies, the working cultures that they have, the practices that they have, that mean they're performing well,” says Chanavat.
A company that dots its i’s and crosses its t’s when it comes to disposing of its waste responsibly is one that probably functions on a high level across the board. Then too, lots of things that boost sustainability—like using energy and materials efficiently—are great for the bottom line.
Another factor is that people increasingly demand that private enterprise be sensitive about the impact it has on the earth and on the communities it touches. The best workers increasingly want to work for companies that care about sustainability. That means that the greenest companies get the best workers.
“There’s a shift in what’s important” to millennial and Generation Z employees, Manning says. They want to “serve a greater good.”
“There’s a strong case for arguing that having a great emphasis on environmental considerations can give you a better edge,” he says.
One result of what Chanavat calls today’s “multi-stakeholder, multi-dimensional pressures on businesses” is that decision-makers are going out of their way to integrate ESG (environmental, social and governance) policies. These are mainstream now, Chanavat says.
“There’s not one major asset manager in the world who hasn’t got some sort of ESG mandate that they're following,” Chanavat adds. “We know that companies are complying with regulatory disclosure pressures more and more. We know that in the communities in which they serve and operate, politically there’s a lot of pressure to be good corporate citizens.”
One of the major drivers here is the transition to alternative energy. The shift will force powerful conglomerates to meet strict new use and emissions standards.
Such social and governmental pressure is “a massive driver,” Manning says. “The inescapable direction of sustainability is moving faster than organizations are.”
Organizations will be challenged to catch up. The best will.
, and lots of it, is crucial in the sustainability fight.
When a company publicizes its work, it builds trust with its employees and customers and serves as an example that other parties can learn from.
"Transparency shines so much on a corporation's behavior. It allows you to compare, contrast," says Manning. "Transparency is the starting point for every stride a company makes in sustainability."
Without good data, nothing good can happen. In the context of sustainability, the old saw about data—garbage in, garbage out—is truer than ever.
What’s the big lie that too many corporate leaders tell themselves about sustainability?
Manning says it’s this: believing everybody needs to agree on every issue before meaningful progress can be made.
The truth is, there’s no simple or easy solution to the sustainability crisis. Building a better planet is going to take a lot of hard work and involve disorienting change—not least for companies. There will be steps forward and steps backward, inspiring successes and significant failures.
“We can’t turn back time,” Manning says, “so there’s no point in playing the blame game or waiting for consensus. It will paralyze progress.”
“What we can do is build on the momentum that’s growing around sustainability,” he adds. “We need to focus on what’s in our control at the moment and use what we’ve learned so far to accelerate the pace of change. If we wait for everybody to agree on a single unified approach, we’ll be too late.”
“We’re forging new ground in areas like sustainable investment,” Chanavat says. “There will always be differing views at the beginning about areas like standards and benchmarks. But we can’t delay action until these become conventional wisdom. If we don’t act boldly and decisively now, we just won’t progress at the pace of change we need.”
Sustainability and profitability can coexist. They will have to. And it will be the smartest, most strategically acute companies that square the circle first.
Text by Luke Winkie