Corporate sustainability work used to be a lonely profession. The goals seemed far off, and often it was difficult getting the rest of the organization to join the journey. But suddenly, a host of interested parties—governments, customers, shareholders, and competitors—are pulling companies down the path of responsible business practices.
In other words, do not give the political blowback against sustainability goals any more weight than it deserves. Global companies are pushing ahead with their sustainability agendas.
That was one of our main conclusions from a recent roundtable of corporate sustainability leaders, hosted by Quartz in London and sponsored by EY Parthenon. The event was conducted under the Chatham House rule, which means we cannot publicly reveal the speakers’ identities or affiliations. What we learned, however, is fair game. Here are our takeaways.
Will the path to corporate sustainability be purpose- or compliance-led? Yes.
That was the uncomplicated answer to the question we asked at the outset. The participants, from global companies spanning telecom, real estate, finance, consumer packaged goods, and the industrial sector, were in complete agreement that it would take both regulation and corporate initiative to meet the goals of the 2016 Paris climate agreement, among other sustainability targets.
The slightly more complicated answer? Companies will need to do a top-to-bottom overhaul of how they make and sell products, while governments will need to create rules that not only require corporate box-ticking but actually shape markets to generate the desired outcomes.
Norway’s fulsome approach to promoting electric vehicles was one of the examples discussed. It started in 1990 with tax exemptions for EVs, and over time added perks such as free public parking, access to bus lanes, and discounts on car ferries and road tolls. By 2022, 80% of passenger cars sold in Norway were electric.
Boards are becoming more accommodating
When companies announce ambitious goals like reaching net-zero emissions by 2030, whether they hit the target or not, it focuses the organization and forces a change in mindset. (If that sounds fluffy, consider the mindset change that Microsoft CEO Satya Nadella credits for the software giant’s resurgence in recent years. Mindsets make a difference.)
A participant from a global industrial concern said that since its announcement of net-zero goals for Scope 1 and Scope 2 emissions, the company’s board quickly seemed to understand it could no longer wait for technologies that are still on the horizon—it needed to start making changes immediately.
A sustainability chief from the telecom industry noted that in 2017, getting approval for measures that would bring her company in line with principles for a maximum 1.5 degree global temperature rise required three trips to the board. Today, the approvals come much faster. What changed, she said, was customer pressure: When prospective clients send out a request for proposal (RFP), often 30% of it involves queries about the company’s sustainability credentials.
The relative returns on sustainability are real
In real estate, for example, buildings that switch from gas to heat pumps typically cost less to run while offering greater security and resilience. And increasingly, those are the only kinds of buildings that quality tenants want. At the other end of real estate spectrum, it’s mainly a race to the bottom now on cost as well as quality, which in the long term is a recipe for an influx of stranded assets.
Geopolitics matter
What’s feasible for companies from a sustainability standpoint can change very quickly. Conflicts between countries can easily choke off supply chains, for example, so plans must be flexible.
Iconic projects can change the market
When Cambridge University decided to stop mowing the famous lawn outside King’s College in order to turn it into a wildflower meadow, it marked the first time since 1772 that the plot of land went unmanicured. Perhaps that helped encourage the university two years later to cover its iconic chapel in scaffolding and lay plans for an installation of solar panels.
In the corporate world, prepare for similar first-mover sustainability measures to hit the market and potentially push competitors to match those actions. For example, redundant packaging for high-end spirits—in which a bottle might sit inside a gift box—may soon be on its way out.
Sustainable alternatives are not without their drawbacks
EV batteries rely on heavy metals mined in ways that can be problematic for the environment or human rights (and the cars do nothing to solve for the pollution that comes from automobile tires). Solar panels can reduce carbon emissions but their manufacture, concentrated heavily in China, raises human rights issues as well.
In other words, corporate sustainability work has a long future ahead of it.