The sustainability fallacy: How ambitious CSR and sustainability departments prevent progress
There are many important issues that need to be solved to create a sustainable future; a future where people and nature can thrive indefinitely. We have a long path ahead of us and finding our way can be a daunting task. How do we best approach this, as a society, as industries, and as individuals?
With its Sustainable Development Goals, The UN has summarized some of our most important challenges, focusing on improving lives for people and on not deteriorating Earth for the future. How to allocate responsibility for solving these issues with almost 200 sovereign states, millions of corporations, and approaching 10 billion people is not a trivial matter. Regulating governments play a crucial role, but we are not there yet for all issues we care about. When regulation is expected or gets implemented, corporations and their customers will need to adapt to the regulation. The focus of this piece is on where –for better or for worse– the responsibility lies now, in the food industry: on commercial corporations, their individual employees, and their consumers. Today the industry claims to take a wider responsibility than they reasonably can, and probably should, resulting in not enough actual improvements that matter.
The current state of sustainability
During the last century, corporations in most parts of the world have made the transition from completely disregarding any harm they have caused the environment and employees (their negative externalities) to institute CSR (Corporate Social Responsibility) and sustainability departments working to monitor and mitigate such harm. These departments are responsible for educating stakeholders on how they cause less harm than they used to and less than their competitors. Some corporations take their sustainability work seriously and others put in less effort.
Over time, the field of sustainability has matured, and several initiatives have been run to standardize the work and make it effective, comprehensive, manageable, and quantitative. Some of the standards focus on corporations and others on specific products. The EU initiative PEF (Product Environmental Footprint) with its 16 different sustainability issues, is one of the more ambitious standardization initiatives to harmonize assessment methods and communication of environmental impact categories, but there are several alternatives.
Sustainability and CSR managers as well as their teams at corporations that take sustainability seriously are incentivized to do as much as they can, which often results in large ambitions including many – or all – of the UN or PEF categories. To make sense of it all and communicate the work internally and externally, they need frameworks and methodologies to outline their performance into indicators; Indicators that go into labels on products or are communicated to management and employees internally. PEF and other harmonization standards are the results of these needs.
A larger scope that includes more sustainability categories is better, right?
Why is bundling categories a problem?
Bundling of important issues under the concept of sustainability risks preventing real action and makes it impossible for corporations to take the issues seriously: Effective solutions to sustainability challenges often get stopped because they don’t cover a whole range of other unrelated sustainability topics. Or decision-makers see combined scores of several challenges that do not provide any real insight or clear actionable information. Why is that?
1) The past is prevailing
There is a historical reason for bundling unrelated externalities under the umbrella term sustainability. This comes from a time not too distant when sustainability was an afterthought. It was something to add on at the end, when product development, budgets, go-to-market strategy, etc. were already devised. The CSR and sustainability teams had to help marketing tell a story of the company being responsible and living up to expectations. But these externalities (the sustainability issues) were never actually internalized, as in they had no influence on the core business.
The core of the problem is that the different sustainability challenges are not actually connected. In first order, they are what mathematically is called orthogonal: Any change along the axis of one category has no influence on any of the other categories. This is somewhat of an exaggeration, but closer to the truth than most sustainability literature would have you think. The gist of it is that a company can work on these issues one at a time without the need to think of them all at once; solving one problem first does not make it harder to solve the next one.
3) The issues are not taken seriously
Why do we ask the CSR or Sustainability teams to deliver on up to 16 objectives at once, with one framework or piece of software? These objectives don’t really have much to do with each other. The sad answer is that corporations do not take these objectives seriously. What they want their CSR and Sustainability teams to do is to talk about their sustainability work, write about it, and conduct cosmetic activities that do not really affect the core operations of the business. This is commonly seen when sustainability reports focus on objectives that aren’t relevant for the business in question. Or making large relative improvements on activities that are peripheral for the organization. Two extreme but common examples are a) an organization planting trees somewhere else, or b) donating money to an NGO, and then boasting about it.
Things that are crucial for running a business are not bundled. Finance, for example, is taken seriously and kept track of in detail, both for ensuring that tax laws are followed and that the company is running a financially sustainable business. It is not bundled with HR or product development. There are people in an organization responsible for staying within budget. There are other people responsible for reaching sales goals. Other people are responsible for HR, some people are responsible for procurement, some for product development. These functions all use different software and processes to achieve their goals and deliver on their objectives. Corporations only function when they manage to coordinate all these functions with each other. No CEO would ask the financial officer to also cover HR, product development, or sales (unless it is a tiny company of course).
4) They are not complementary
For business-critical areas, performance in one domain does not substitute for performance in another. Imagine the board room discussion if a company has gotten a complaint about some workplace hazards where two people died in production. In response to this, the CEO proposes an activity to reduce their climate footprint by 10% by switching power suppliers. It does nothing for the employees on the site but it improves another domain that is also important. The board would fire the CEO on the spot. This is a caricatured example that is made to look absurd, but the same logic applies to the sustainability challenges that we need to solve. Issues that have hard targets cannot compensate for each other. If we want people to not die in our workplace, it does not matter if we improve our climate change performance. We need to keep track of many things at once and to do that, we need to track them individually.
5) They are in an internal competition
Within the food industry, there is a tendency – more than in many other industries – to disregard the fact that some issues are more urgent or consequential than others. The most risk-free position for a sustainability manager personally at a food corporation is to talk about as many sustainability issues as possible at the same time; to always bring in another topic to each conversation. There is a culture where they risk being criticized for not caring about biodiversity if they talk about climate change, or not caring about animal welfare when talking about efficient land use. These are false dichotomies and paralyze any real action. This culture can exist because these sustainability managers do not have any real consequential KPIs that the CEO and the board care about.
How do we solve this and get down to business?
Stop talking about sustainability entirely; internally and externally. Talk about the issues, i.e., sustainability categories, that need to be solved, one at a time. For sustainability issues to be dealt with seriously, they need to permeate the business in the same way as other important aspects, such as finance or sales.
1) Identify the highest business risk
Some sustainability issues are crucial for your corporation and others are not. As an example, society has decided to solve climate change; if you want your company to still operate two decades from now you will need a climate strategy to get rid of your emissions.
In all sincerity, climate change is not just an example – it is the highest business risk. The world as a whole has decided to solve climate change; nearly all governments have said as much and many are introducing stricter and stricter policies to achieve this goal. The energy sector has been – and still is – spending huge resources to decarbonize. The transport industry is moving away from fossil fuels and mostly towards electrification. All serious companies within these domains have climate change policies; policies for how they are going to move towards a zero-emissions future.
Yet, when a food company talks about their plans for climate change, there are almost always people criticizing them for not talking about biodiversity, water usage, eutrophication, animal welfare, or any other of a long range of topics. Yes, these other issues are important, but society has decided to solve climate change. If companies in the food industry do not have a plan for how they are going to get to a low-emissions future, they are unlikely to be around twenty years from now. A company that is no longer around will not be able to do anything useful in any domain. Being on the moral high ground is of little value in such a situation.
There is an important addition, besides rationally assessing the relevance of the risks for the company: On a global level, the single most important threat to biodiversity, water stress, poverty, and many other sustainability issues, is climate change. We (society) are not solving climate change for the fun of it, it is because a warming climate ruins the other things we care about. But this is the topic for another piece.
2) Get accurate data for each
At the company level, most sustainability categories have nothing to do with each other, but some will influence each other in the same way as they will influence budgets, product development, and other relevant activities. Whenever there are trade-offs or conflicts of interest, they will need to be dealt with. But without prioritizing the sustainability issues and independently assessing those that are relevant, there is nothing but assumptions and gut feeling to guide you for where the conflicts are. Important decisions need to be based on high-quality data.
Bundling of climate change with other issues will only make it harder for decision-makers to see how the corporation and its products perform and will delay necessary action. If there are other issues that are equally important to your company, then work on those too, but in a different project. If an issue is business-critical, there is no level of performance in another domain that will compensate for it, regardless of how ambitious or morally defensible.
3) Appoint it to experts
which sustainability issues are important to them and they want to improve on, because they care about the issues, or more frequently because not doing so would cause significant business risk. These companies do not bundle the issues they work on, neither internally nor externally. They put competent people in charge of these topics and let them choose their software and frameworks to most effectively and efficiently achieve their quantitative goals. They let these groups become internal experts on each issue within the company.
These experts are part of management teams and influence actual core business decisions where real compromises and tradeoffs are made. In such companies, there are discussions about increasing budgets to change the core business and to reach the specific sustainability targets – for the issue(s) they focus on. At some point, it may be reasonable to have up to 16 such groups of experts within a company but trying to have that ambition from the start is unlikely to get any serious project off the ground.
4) Dismantle internal competition
A focus on climate change does not make it harder to solve other sustainability issues. Criticizing companies that take action on climate change, because your darling issue is not talked about, will only make things move slower for both. If we allow for companies to develop their plan for getting to 2050 with sound businesses and emission levels consistent with our climate targets, they will be ready and have the mental bandwidth to tackle the next issue on the agenda.
5) Choose the right words
Simply put, the words Sustainable and Environmental are not effective. They are loaded with too many connotations and are often used synonymously with a general ‘things that are good’. They are too all-encompassing and fluffy; they include everything and thus carry no information. People value different things and may well be talking about different things while using the same terminology.
Just like the activities for solving our challenges need to be specific, we need a specific vocabulary when talking about them. There are settings where we need to discuss all of society’s sustainability challenges, but those settings are few, far fewer than most people think. Yet there are many settings where we need to talk about the specifics of climate change, antibiotics resistance, water usage, etc., so let us stick to the words that carry concrete meaning.
Stop bundling and save your business – Start acting on climate change
Less is more in sustainability; we will only solve sustainability issues by focusing on them independently. The ones that matter need to permeate core business decisions and we need to be blunt about which issues are truly relevant for a corporation. Climate change stands out as a sustainability issue to start with for most corporations. Society has decided on the target: Climate change needs to be solved and we can expect policies to enforce this. Get on the train or perish.