State of Green Business
Welcome to the next generation of sustainable development
The year 2015 is shaping up as one of the most consequential years for environmental/sustainability policy in our lifetimes. In May, the Vatican published the Papal encyclical Laudato Si, a moral reference point for examining climate change, poverty and inequality and a critique of capitalism as currently practiced.
In August, the Obama Administration announced its final greenhouse gas controls for existing electricity generating power plants as part of a broader Clean Power Plan.
On September 25, the United Nations is scheduled to launch a comprehensive set of Sustainable Development Goals that significantly expands the number of global environment, development and social commitments beyond the Millennium Development Goals.
And, beginning on November 30 in Paris, the United Nations Conference of the Parties (COP 21) will hold its 21st session with the expectation of achieving a new agreement to limit future greenhouse gas emissions in both developed and developing nations.
Taken together, these initiatives are restructuring the expectations, policy frameworks and commitments for businesses and governments to implement sustainable development — not in some distant future, but beginning now.
Both business and government, and their partners in non-governmental organizations (NGOs) and multi-lateral institutions, are already engaged in many elements of the new sustainability agenda. This has occurred through investments in disease eradication, local collaborations to extend mobile telephony and build other infrastructure, job creation, and other philanthropic endeavors.
Businesses are also in the process of extending many of the tools and methods they created in developed countries (e.g., stakeholder assessment methodologies, supply chain management, energy and water efficiency measures) to emerging and lesser-developed markets.
Expected outcomes from the new generation of sustainable development differ from current efforts in at least several important ways:
1) Companies will be challenged to go beyond efforts to achieve efficiencies in energy and water consumption to develop more fundamental changes in business processes and product innovations to embody “net zero” and circular economy parameters,
2) This new generation includes a social responsibility agenda — centering on women’s empowerment, workforce diversity, access to capital and natural resources, income inequality and poverty reduction — which aims to achieve parity with the economic and environmental pillars of sustainability, and
3) New institutional innovations will be expanded to focus on system-level governance and take sustainability initiatives to market scale in ways that will increasingly eclipse more bureaucratic, time-consuming multi-lateral negotiations as a preferred approach to problem-solving.
At this stage, very few institutions — public, private or non-profit — have thought systematically about these interrelated aspects of the new sustainability agenda. The past decade of experimentation involving a variety of cross-institutional collaborations, however, has yielded increased information and confidence among leading companies and NGOs that they can shift the contours of capitalism towards sustainability.
From reducing footprints to innovating
Businesses across a variety of sectors — motivated by employee expectations, the search for operational efficiencies, awareness of sustainability-related risks, and external stakeholder pressures — have increasingly engaged in the sustainability conversation and published their commitments and performance results.
However, while companies invested years of effort and money to integrate sustainability parameters into “normal” business operations, the goal posts have moved.
This development has occurred for several reasons. For one, competitive pressures in key market segments (e.g., retail, consumer products) have begun to disrupt the business processes and products of important upstream value chain participants (think of the dilemma of chemical producers that face chemical de-selection pressures from customers and stakeholders in making ingredients for food products, cleaning agents and personal care products).
Another reason is that government policy, in selected instances, has begun to catch up with marketplace developments (the Obama Administration’s final greenhouse gas regulations for power plants have piggybacked on utilities already existing transition from coal to natural gas).
Thirdly, companies are finding business advantages in making more aggressive sustainability commitments (for example, Ingersoll Rand’s Climate Solutions Business has experienced greater market demand in part because of the company’s commitment to phase out harmful hydrofluorocarbons in its refrigeration and air conditioning businesses with substitutes by 2020).
And lastly, consumer awareness and values continue to evolve as the result of water scarcities, more frequent floods and storms, greater availability of information and the heightened sustainability awareness of young people.
Emerging business models and technologies are also beginning to reshape expectations of producers and customers. From Tesla Motors to Uber Technologies in the transportation sector to new energy service options decoupled from the centralized utility grid in the energy sector, we can expect the variety of such experiments to proliferate across a number of business sectors.
Interviews conducted by the World Environment Center and the Corporate Eco Forum with Chief Marketing Officers at such companies as Hewlett Packard and Unilever also provided early insights on how potentially disruptive and innovative digitization might be upon commercial relationships and customer interactions. While sustainability is not necessarily the driving force behind these specific developments, is has become an increasing part of the rethink of business models and strategy.
New sustainability goals and societal priorities
While none of the above developments should motivate a CEO to push the panic button and scrap the existing business strategy, they do provide a clear set of signals that market-based, public policy and broader societal goal posts are changing in ways that, over time, will have tangible impacts on the investment climate and business portfolios.
Out of this vortex has emerged a new set of 17 Sustainable Development Goals (SDGs) that originated at the United Nations. At first glance the SDGs represent a typical UN initiative — the result of years of speeches and a complicated process whose end product contains too many goals and even more numerous metrics.
While this critique is valid, the important point for global companies to absorb is that the SDGs will represent a significant reference point for the global conversation around business investment and sustainability for years to come. This conversation will include the tenets of the SDGs: the need to reduce and/or eliminate inequality, poverty and hunger; ensure healthy lives; empower women and achieve gender equality; advance inclusive and quality education; provide access to natural resources and energy; build more sustainable and resilient communities; combat climate change and protect ecosystems; and strengthen cross-institutional partnerships.
How should global companies begin to think about the SDGs? As a beginning, companies should recognize that many of these goals will have the most resonance in many of the emerging markets where they hope to expand. The SDGs will have legitimacy within civil society and will define the expectations for company performance and behavior among potential consumers and employees in a number of growing markets.
Second, the UN goals create the opportunity to further a company’s narrative about the added benefits that advancing these goals will achieve for its new customers. Third, the SDGs can be harmonized with already existing risk management systems and materiality evaluations companies undertake in order to build their own sustainable business road maps in the future.
One company that is already thinking in these terms is Kellogg which has compared the SDGs with its own business portfolio on such goals as ending hunger, achieving food security, improving nutrition, promoting sustainable agriculture, achieving gender equality and empowering women and girls. Kellogg, as explained by its Vice President and Chief Sustainability Officer Diane Holdorf, is looking to harmonize its evolving business strategy with SDG expectations to identify synergies and opportunities.
There has already been much discussion about the Papal Encyclical and its likely impact near-term and over longer periods. On my own initial reading of Laudato Si, I concluded that the Papal pronouncement would be measured less through any direct impact on the climate change negotiations being conducted through the Conference of the Parties (COP) process and more on the potential to catalyze a transition in the thinking of Catholics and those of other faiths as they contemplate the relationship between their own core values and those embodied in sustainability.
How and whether that transformation occurs remains to be seen, but Pope Francis through his Encyclical has certainly added a new and different voice to the sustainability conversation that is unique in its originality and authenticity. In his specific comments on inequality, poverty and climate change as products of our contemporary economic system, Pope Francis has significantly expanded the boundaries of the sustainability dialogue to explicitly question some of the major operating assumptions of capitalism.
The resonance of the Pope’s message has the strong potential to catalyze both spiritual and secular stakeholders to advance new criteria for implementing capitalism in the future. If it does, it is unlikely that global companies can be idle bystanders in a debate that could, over time, directly impact their future business investments and operations.
From multi-lateral to mini-lateral
In an important essay published by the Financial Times on February 15, 2013, international relations analyst Moisés Naim wrote that the “gap between the growing need for joint international action and the declining ability of nations to act together may be the world’s most dangerous deficit.”
Numerous examples document this assertion ranging from pirates hijacking ships off the coast of Somalia, overfishing of critical species, the tortuous path followed by the European Union to fashion a viable long-term solution to the Greek economic crisis, and the debacle of Syrian refugees pouring across the
Levant into the Balkans to destinations not altogether known at this writing. Even the burgeoning optimism for a substantive climate change agreement in Paris has led many of its proponents to temper their expectations.
As former New York City Mayor Michael Bloomberg wrote in the June 29 Wall Street Journal, “The Paris conference has the potential to be a great success, but only if measured by how much it speeds up progress, rather than whether we pass a finish line that is not yet within reach.”
Such multi-lateral failures and limitations can be juxtaposed against an increasing level of confidence among a growing number of global companies, NGOs and policy analysts who have designed and implemented initiatives involving a more targeted set of objectives and strategies during the past decade. These specific “mini-lateral coalitions” (as Moisés Naim calls them) consist of a limited number of key companies, countries or customers that possess the ability to scale sustainability initiatives across their particular business sectors.
For example, companies such as Marks & Spencer and Unilever, acting through the Consumer Goods Forum, have successfully worked with their business peers to launch ambitious commitments to phase out hydrofluorocarbons in refrigeration units, prevent food waste and protect rainforests.
In addition to such sector wide collaboration, there is a growing interest and commitment among companies in different businesses to leverage their investments for sustainable business and societal advantage.
Actions such as the NRG Energy and Unilever partnership to provide solutions for onsite and offsite renewable generation to achieve 100% clean energy for all of Unilever’s US sites by 2020 are also intended to be scalable and transferable to other industries. Similarly, General Motors’ partnerships with dozens of US utilities are aimed at designing the foundations for a cross country network of electrified vehicle infrastructure to accelerate consumer acceptance of electric vehicles.
Major government investments, such as those made by the Advanced Research Projects Agency-Energy (ARPA-E), are designed to develop and transform energy technologies in a manner similar to the role that the Defense Advanced Research Projects Agency (DARPA) has performed in catalyzing the Internet and major telecommunications investments that ultimately became widely commercialized by the private sector.
The proliferation of these and other mini-lateral initiatives across companies, NGOs and governments is at an early stage of reshaping the strategic purpose of major global companies. When The Dow Chemical Company announced on April 15 its 2025 Sustainability Goals it was, in fact, redefining its purpose as a corporation and its role in society.
The majority of its seven goals — delivering breakthrough innovations, advancing a circular economy, valuing nature, and re-inventing chemical technology to increase consumer confidence — cannot be achieved through its traditional role as a commodity chemicals manufacturer.
Instead, Dow has concluded that its future lies in the creation of new products and services through partnership coalitions with businesses, NGOs, government agencies and other knowledge centers to enable it to significantly expand the traditional boundaries of what constitutes a chemical company. By doing so, it is redefining business performance and societal expectations for itself and for the entire chemicals’ sector.
The dynamics unleashed by mini-lateralism (at the company or societal levels) are also likely to stimulate collaborative partnerships to discern both the impacts and opportunities associated with global as well as regional megatrends. This, in turn, will inaugurate an examination of how best to optimize the roles of business, government and other stakeholders, the associated skills they need to develop in both developed and emerging markets, and new governance processes to ensure appropriate transparency and accountability.
In some instances, results from specific mini-lateral coalitions will ultimately need to be reconciled with more traditional multi-lateral processes. The higher expectations for a climate accord at COP21 stems, in no small part, from the galvanizing effect that the November 2014 US-China announcement of their respective post-2020 commitments had upon negotiators from other nations.
The next generation of sustainable development that has now arrived will undoubtedly be, in the immortal words of Bette Davis in the 1950 movie All About Eve, “a bumpy night” that interchanges both risk and reward.
Those organizations that minimize their risks and commit to continuous learning to build flexible new systems of collaborative innovation linked to solving global scale societal problems are more likely to satisfy shareholder and stakeholder expectations. By doing so, they also increase the probability of their own viability for a future that’s already knocking at their doors.