Climate strikes led by students confirm that citizens over the world have lost confidence in governments to solve the challenges of sustainability. Private sector can be part of the solution only if genuinely committed to lead with purpose and disrupt for resilience.
Government are (unfortunately!) not Credible to Lead and Solve the Challenges of Sustainability
We’re not on track to meet Sustainable Development Goals 2030 targets. No country to date can seriously claim to be on track to meet Paris Agreement commitments on climate. Should countries meet the Paris Agreement commitments by 2030, we would still be on a trajectory exceeding the 1.5 degree pathway substantially.
Truth is we are in the middle of massive global disruptions coming with the combination of 1/ acceleration of climate and other environmental impacts in a context where governments have overall never put environmental issues at the forefront of their programs, 2/ digital transformations increasing inequalities in a context where a large variety of contradictory policies have overall not proven to seriously decrease inequalities, and 3/ growing level of education of citizens who basically are also increasingly more demanding and critical with their governments!
Governments seem to have failed so far for reasons rooted in a combination of 1/ insufficient capacity to understand the world in 2019 – Digital transformations are shaping new business models moving faster than tax reforms for instance, 2/ scale of issues calling for large consensual intergovernmental solutions – which need to be multi-facetted to take into account a large variety of perspectives and interests and are basically moving slowly 3/ acceleration of environmental and social issues generating generations of frustrated citizens willing to explore alternative options to generate solutions and impact much faster
That’s overall just terrible and sad. That doesn’t mean at all there is no hope.
“Help Yourself and Heaven will Help You”
Cities, entrepreneurs, activists, academia… millions of stakeholders are certainly not sitting on their two hands waiting for governments. Absence of trust in the way governments are shaping meaningful solutions translates into growing expectations for stakeholders – from stakeholders – to do their share.
As part of this global dynamic underway, business is part of the problem as much as part of the solution. Pressure is calling for clarification.
- Business creates jobs and wealth. Business has excellent capacity to influence governments. On several environmental and social issues, there is a risk for business to miss disruptions and radical changes expected by markets if overall primarily lobbying governments to move slowly on reforms and maintain positions. There have been intense discussions like this related to carbon across the past 15 years for instance.
- Business creates solutions addressing market needs. Market expectation is moving fast. For instance, acceptability for highly carbonized solutions is likely to change quickly. Pressure on business is about innovation and satisfaction of clients increasingly seeking for solutions aligned with environmental and social issues. Business can also encourage governments to move faster and smarter to generate a level playing field incentivizing sustainability friendly innovation and their adoptions by markets
All in all, businesses need to align innovation and the way products and services generate genuine sustainable services with the way the very same businesses are selecting their business partners and the way the very same businesses are also lobbying government for changes encouraging more sustainability performance. Pressure on business is coming with this internal alignment needed all along the chain to accelerate delivery of sustainability solutions to citizens at large scale.
There is Strong Business Case Today to Build Sustainability Resilience for Business Success
Acceptability of highly carbonized solutions is decreasing rapidly. Just think of the growing ESG movement across investors already in place. Or the growing school strike movement showing how next generation of citizens is likely going to have even lower acceptability than current citizens able to vote and buy. No matter the business segment, if a competitor is able to provide pertinent low carbon affordable solutions to clients, let’s wonder why clients would continue to buy highly carbonized solutions in context where acceptability of carbon is decreasing very fast. From a broader sustainability spectrum, the very same rational can apply easily to plastics and biodiversity depletion, or water. There are many factors making business resilience, out of which sustainability is no doubt going to play a growing role for competitiveness in the decade to come.
Sustainability Resilience is Expected to be Disruptive to pay off
Some experts and activists argue that sustainability is all too often limited to a narrow subset of green practice improvement involving little cost, little risk and little disruption to business as usual. That’s an interesting argument. We have played with a lot of green and social certifications. We’ve concluded ourselves they were good tools to disseminate more professional practices across industries and markets.
We’ve also concluded these certification schemes were overall not driving innovation in a context where continuous improvement conceptually fails overall to generate disruption and radical innovation. You don’t substitute plastic packaging with continuous improvement for instance: certifications drive greener practices lowering material and costs whilst maintening client satisfaction. What if clients want an alternative solution and no more plastic packaging at all? Well you need to move away from continuous improvement and invest more in innovation as well as social acceptance of alternative solutions.
In context where digital transformation, social challenges and environmental disruptions are shaping radically different markets, we strongly believe sustainability is entering a new era where priority will need to be given to radical innovation AND social acceptance of these new products and services.
How to Lead with Purpose and Disrupt for Resilience?
We’ve worked with most key agencies rating companies on their sustainability and ESG (environmental, social and governance) performance. It’s overall none too difficult to track environmental performance – although making good business decisions out of it remains an area for improvement. The main challenges rely on two areas.
- First, tracking social performance remains more qualitative and difficult at large scale.
- Second, the pertinent analytics is actually coming from the connection of multiple ESG data. For instance, it’s proven by several research programs that investments in good water management practices is overall good for climate performance. Investments made to decarbonize assets can have a very negative impact on water management. Connecting the dots is critical to define good broad sustainability performance.
Digitalization can of course help to provide much greater level of data to use and explore to understand broad sustainability performance, for example at the nexus between climate and water. Or connecting the dots between local infrastructures and child labor. Or connect mass level of social audits conducted in some instances for 20 years to define greater predictability of occurence of social risks… On the one hand, there is no doubt digitalization will help to systematize data collection and sustainability performance monitoring at large scale.
On the other hand, systematization will generate its own risks. A very same sustainability performance across different contexts may not lead to same business decisions. Water again is an interesting illustrative example: good water practices wherever in Mali or Mexico certainly is much more important overall than in Canada or Sweden where scarcity is much more relative. Sustainability remains fundamentally a qualitative approach calling for nuances and asking some brains and expertise to confirm what data may have to say.
So, how to lead with purpose and disrupt for resilience?
- No matter the size of your business, keep the big picture top of mind. Climate, water, biodiversity depletions are big things. Every business is going to be impacted. What about yours? How your business with high carbon price will like by 2030 for instance?
- Collect weak (and stronger) signals from customers. They are paving the way of what is increasingly going to become NOT acceptable in the way your business operates in the years to come. Plastic packaging, straws, disposable items are illustrative examples of how multiple industries are working today and will have to provide radical changes to please customers in the short term
- Innovate and disrupt. Easy to say. Harder to implement. Just dare and engage customers and business partners to explore alternative solutions. That can actually be exciting to think about different ways to do your job. That can become an emergency if you start to think about this too late. Innovation and emergency generally don’t get along very well together…
Author of several books and resources on business, sustainability and responsibility. Working with top decision makers pursuing transformational changes for their organizations, leaders and industries. Working with executives improving resilience and competitiveness of their company and products given their climate and human right business agendas. Connect with Farid Baddache on Twitter at @Fbaddache.