In survey several years ago, CEOs were asked whether they would make an investment that would meet their internal return-on-investment targets and make their business stronger, profitable and sustainable. One hitch: It would also make the company slightly miss its next quarterly earnings estimate.
Eighty percent said no.
That, according to former Vice President Al Gore, is "functionally insane."
"It's not only insane where the values that we share are concerned, it's functionally insane where the well-being of that business is concerned," Gore said today. "It's the wrong decision for the investors, for the shareholders, and for all the stakeholders."
It all boils down to short-termism, he said this morning in a keynote speech kicking off the annual BSR Conference in San Francisco. Short-term thinking not only runs counter to a healthy and sustainable marketplace, he said, it also prevents serious, much-needed action on climate change.
"We now have about $7 trillion' worth of sub-prime carbon assets in the global economy," he said. "Their value, like the sub-prime mortgages, is based on an assumption that is highly questionable. The assumption is that it is perfectly O.K. to dump 90 million tons of heat-trapping pollution into the thin shell of the atmosphere surrounding our planet every 24 hours as if the atmosphere is an open sewer."
The parallel between the sub-prime mortgage mess and the climate change crisis can be described by the mentality of "IBGYBG," Gore said: "I'll be gone, you'll be gone."
He called for policy changes, a tax on carbon, loyalty shares that reward long-term equity-holders and a tax on financial transactions, which may curb the high-frequency stock trades that drive short-term financial thinking.
Businesses must also take a lead role in driving the market toward sustainability, Gore said. Their numbers may be growing, he said, but not without some familiar challenges.
"It's still difficult for many companies committed to this agenda to find investors who understand how important it is," he said. "The impatient short-term nature of the investor marketplace is still a very serious obstacle."
He named several factors underpinning the business case for sustainability: enhancement of brand; recruiting, retaining and engaging employees, and "introducing savings by the elimination of waste from sources that are invisible until you look clearly through the sustainability lens." Customers, too, want to do business with companies that are part of the solution, not part of the problem.
The sustainability agenda, he said, is far more important now than it has ever been.
"We have a choice to make now," he told the audience in closing his speech. "You are a key part of the solution. I congratulate you on what you are doing. We have everything we need to succeed, with the possible exception of political will and the will of the executive suite of some businesses, but always remember that the will to act is itself a renewable resource."
Al Gore image via Shutterstock.