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Speaking Sustainably

Why the way we’ve been doing corporate sustainability doesn’t work

Public perception of corporate responsibility is changing. What you need to know.

Crystal Ball

Most big companies have set goals for incremental improvements — 25 percent of this by 2025, 30 percent reduction in that by 2030. It won’t be enough to actually solve climate change — and it won’t be enough to satisfy rapidly shifting consumer expectations.

Here’s why: As my friend Holli Alexander at Eastman wisely noted, Mother Nature has sent us to our rooms and stripped us of so many privileges that we thought we couldn’t live without but that she needs us to live without — driving, flying, even meat-eating. And indeed, reports out now show that our CO2 emissions since the beginning of this year have dropped by 17 percent compared to last year.

But reports also say that it’s not enough. The prediction is that by the end of this year we will have reduced emissions between 4.4 to 8 percent, but we need to reduce emissions by 7.6 percent every year between now and 2030 to keep temperatures from rising by 1.5 degrees Celsius and avoid the worst impacts of climate change.

Said another way: We’d have to stay in the kind of devastating lockdown we’re in right now, with skyrocketing unemployment, to actually save the planet.

That, obviously, is untenable. Which is why corporate sustainability needs to change.

Companies — and obviously governments — need to radically reimagine the future and their very real role in both preserving the planet and society. And they are linked, by the way; it’s not a forced choice. If we choose to simply get people back to work and not deal with climate, eventually climate change will devastate society as we know it. And, besides, what COVID-19 has pulled the curtain back on is just how fragile and unsustainable our society really is for most people.

Companies need to radically reimagine the future and their very real role in both preserving the planet and society.
We recently published some insights that begin to peel the layers back on market expectations. We’re seeing what used to be fringe ideas about radical change and about blowing up our current system creeping into the mainstream.

In short, what we’re seeing in the narrative we’re tracking in social media is something like this: "We’ve all been forced to make changes we didn’t think possible. And amid unbelievable hardship we’re doing it. But we are simply individuals playing out the cards we’ve been dealt. Big companies have such a larger impact on people and the planet, and they should step up. They should make a little less profit and pay their executives a little less and use that extra money to help people and the planet."

I found some graphs that make that point (and, yes, there are likely also graphs that make the opposite point). The story in the numbers is that from roughly 1950 to 1980, average corporate profits were a little over 6 percent, and CEOs were paid about 30 times more than the average production worker. Also during that time, real income growth for ALL Americans was about 80 percent.

In other words, companies were profitable, just not as profitable as they are today. CEOs made a lot of money, just not as much as they do today. But we invested in people and society and didn’t have the yawning, resentment-producing gap between the top 10 percent and the remaining 90 percent that we have today.

Coming out of COVID-19, we have an opportunity to invest in people (access to job training, education, health care), infrastructure and climate solutions in a way that, yes, might bring profit and executive pay levels down to levels from a different time, but we’d solve so many of our social ills and create a country that’s truly "in it together."

This kind of shift would align with what consumers expect from companies, allowing those companies to build brand favorability and thrive in the future. The sticking point, it seems, is Wall Street — how can we get it to shift its expectations so that executive teams can make the bold decisions that need to be made?

This is a marketing and messaging problem that can be solved. With the right approach, I think Wall Street can embrace the idea that political upheaval, societal unrest and climate change are bad for business and create an uncertainty that it doesn’t want to deal with. I also think if the CEOs behind the Business Roundtable’s redefinition of the Purpose of a Corporation are serious about stakeholder capitalism and jump in together, companies can begin to invest serious dollars in fixing society’s biggest challenges.

That means we’ll likely see profits decrease a bit. But we’ll create a world of opportunity for our children and grandchildren — and that opportunity can and will lead to thriving companies and a stable environment.

We CAN hold the line at 1.5 to 2 degrees. We CAN solve society’s biggest problems. But it will take courage and unity from the world’s CEOs to spin their innovation and profit machines in this direction, and it will take everyone working in corporate sustainability to push hard in this direction and stop settling for incremental improvements that won’t get us where we need to go.

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