This article is sponsored by Rubicon Global.
During the last decade, sustainability has edged its way from the fringes of the corporate world to the boardroom, establishing itself as a core business strategy. Despite this positive shift, many of the most important performance indicators are pointing in the wrong direction: emissions are on the rise; fugitive ocean plastics are so pervasive that they’re permanently bonding with coastal rock; and water scarcity is likely to affect two-thirds of the global population by 2025.
As we enter into what likely will be one of the most environmentally consequential decades in modern history, ending with the culmination of the United Nations 2030 Agenda for Sustainable Development (commonly referred to as the Sustainable Development Goals), I’d like to share a few thoughts both on the evolution of sustainability over the past decade as well as on how the business community can — and must — rapidly accelerate global progress towards circularity and decarbonization.
As an optimist, I am confident that the next 10 years will yield unprecedented innovation in the environmental and social spheres, and that we will avoid catastrophic impacts of climate change. I am also encouraged that business and public policy leaders are taking notice that actions that are good for the environment are also good for business and society.
The growing power of purpose
When Rubicon first became a Certified B Corporation in 2012, the B Corp movement was seen as a forward-thinking business ideology that considered a wider array of stakeholders. Although we may have been regarded as idealists, our interest in the certification and movement was entirely pragmatic: We wanted to place purpose at the center of our business strategy. We anticipated that we would attract the right investors and grow faster; have a happier, more productive workforce; and build a base of customers committed to ending waste. Eight years on, we continue to think that this decision has served us well.
As purposeful business continues to gain momentum, it will be crucial to ensure that, in practice, it takes shape as more than a marketing strategy or secondary business priority. A business community capable of meaningfully addressing global challenges is a business community that makes solving global challenges its raison d’être. It’s heartening, then, to see a growing body of research, such as The British Academy’s "Future of the Corporation," on the changing relationship between business and society. As we enter into the 2020s, I hope to see a growing dialogue between leaders in business, public policy, and the academic community.
We wanted to place purpose at the center of our business strategy.
Financing the future
In the sustainability community, the idea of aligning environmental, social and economic returns has long reigned. However, in my experience, until recently its reach outside our community of interest has been limited. Although terminology such as natural capital and ecosystem services may still exist primarily among sustainability professionals, there is growing awareness of the connections between environment, economy and society within the investment community and the public at large.
Over the past three years, we’ve witnessed several of the costliest hurricanes, wildfires and floods in history, including the devastating fires that still rage in Australia. In 2018, economic losses associated with extreme weather events — events arguably made worse by climate change — were estimated at nearly $100 billion. As climate change has migrated from theoretical discussions to lived experience, and its costs from future estimates to real operating losses, we are seeing the investment community respond.
Earlier this month in his annual letter to investors, BlackRock CEO Larry Fink declared climate change "a defining factor in companies’ long-term prospects," suggesting that we are "on the edge of a fundamental reshaping of finance." A robust body of research supports Fink’s appraisal of the situation. According to the CDP, 200 of the largest global companies have nearly $1 trillion at risk from climate impacts likely to occur in the next five years. In GreenBiz’s latest State of Green Business report, data from Trucost indicates that the natural capital costs of the top 1,200 global companies exceed their combined net income by 50 percent. Sustainable economic growth requires informed investors, who now must have access to nontraditional — but nonetheless highly material — environmental, social and governance metrics.
If you’re like me and read dozens of sustainability reports each year, you likely agree that there’s a lack of standardization, which makes comparing companies, even within the same industry, a challenge. For environmental, social and governance (ESG) issues to become prominent, reliable investment considerations will need to see increased standardization, integration and rigor in sustainability reporting.
200 of the largest global companies have nearly $1 trillion at risk from climate impacts that are likely to occur in the next five years.
Rise of circular economy
Every year, I like to revisit one of my favorite sustainability texts, Kenneth Boulding’s "The Economics of the Coming Spaceship Earth" (PDF), which he delivered at the Resources for the Future Forum on Environmental Quality in a Growing Economy in 1966. In it, Boulding proposes we imagine Earth as "a single spaceship, without unlimited reservoirs of anything, either for extraction or for pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material."
Fifty-four years later, as we stare climate change, resource scarcity (during 2019, we overshot the year’s Earth’s biocapacity by July 29) and runaway plastics in the face, Boulding’s essay seems prophetic. Like Boulding, I think it’s unlikely we will find solace from any of the aforementioned challenges until we are able to reimagine the relationship between the economy and the natural world. We must replace our current — predominantly linear — economy (which Boulding’s called the "cowboy economy") with a circular economy, built on the principle of regeneration and fueled by renewable energy, reuse models.
As someone working in this space, I see this transition already underway. At Rubicon, we work with dozens of private- and public-sector partners who are aggressively seeking to circularize their corporate or municipal operations. There is a lot of work yet to be done, but if the pace of innovation and level of commitment to building a sustainable future are any indication of future trends, I think the 2020s will be the decade of circularity.