“Sustainability”: why it is currently unsustainable
Whether you operate in the private or public sector; whether you work in a multi-national organisation or a tiny start-up – it is increasingly likely that you’ve come across “sustainability”.
It features frequently in social and business discourse – including within lists of CEO priorities or “corporate values” – with aspects of it shortly expected to become mandatory and is said to drive about a third of managed investments in the US.
“Sustainability” is a big deal, and – at least for the foreseeable future – it’s here to stay.
There’s only one “small” problem: it is unsustainable.
What is “sustainability”?
There are few that would deny that there are serious problems in today’s world – often on a global scale – and that it would be good to address them.
In so doing, there are then always ways of doing things that are more holistic and far-sighted, benefiting more people (including over time) than others, and everyone can – and maybe even “should” – contribute by acting in such ways as far as possible.
“Sustainability” is the term that has emerged to try and synthesise this combination of long-term vision, broad scope and general applicability, and the 1987 United Nations (UN) report on sustainability, Our Common Future, provided its foundational and widely-accepted definition:
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (Chapter 2, Clause 1)
What this should mean in practice has since become defined by, and around, two broad “poles”.
The first is the UN’s 17 Social Development Goals (SDGs), many of them with roots in 1987’s Our Common Future: they typically target global and general issues (such as poverty, climate and inequality; many are to be achieved by 2030), and are self-described as a “blueprint to achieve a better and more sustainable future for all”.
Second, and emerging alongside the SDGs, is Environmental, Social and corporate Governance (ESG), which is more focussed on the private sector, and consists of principles and practices that have been set out by numerous parties to define operation – and reporting on that operation – with respect to good practice and the “greater good” (the idea being that society and investors can then judge which enterprises are “good” with respect to environment, society and ethical behaviour).
The World Economic Forum (WEF) is probably the leading and dominant “player” here. It has worked with the “big four” consultancies – PwC, KPMG, Deloitte and Ernst & Young – to propose standard metrics based around its long-standing “stakeholder capitalism” agenda (which focuses on four “pillars”: people, planet, prosperity and principles of governance), and over 50 companies have already adopted them.
Meanwhile, ESG is also the basis of the European Union’s Corporate Sustainability Reporting Directive (CRSD), which is “compulsory reporting on environment, social affairs and governance” (emphases added), due to come into force in January 2024.
The SDGs and ESG therefore have different origins and focuses, and their proponents often emphasise the differences – to the extent that it has been said that “a battle royale is raging” between them – but there is considerable overlap in content (on issues such as diversity, climate), and ESG is frequently held up as a means to act in accordance with the SDGs and make progress towards achieving them, reflecting the WEF’s explicit commitment.
We will also see later how the approach taken with both is extremely similar.
Is “sustainability” really still just about “sustainability”?
Beyond providing a definition of “sustainability”, Our Common Future also provided six key application areas and an associated set of concise objectives, and this leanness makes clear just how much has been added since.
Some additions undoubtedly reflect world developments since 1987, but the 17 SDG Goals go well beyond the initial six key areas from that report – not just in developing those areas, but also in containing additional focuses, including work, education and justice – and reflect newer cultural priorities, with substantial focuses on gender equality, racial equality and other forms of diversity.
The WEF’s ESG Standards are likewise suffused with similar issues (e.g. the gender pay gap, racial diversity and analysis, minority board representation, and social value), as is the EU’s CSRD, which also goes further to require reporting on “business strategy and the resilience of the business model”, and demand information on “intellectual, human, and social and relationship capital”.
These things may well be important – both to “sustainability” and in general (although some seem more open to challenge than others) – but the key points are that “sustainability” is a moving target, it is reaching into ever more sensitive areas, and it is widening in scope.
It is then also legitimate to ask whether other ideologies are being grafted in – and other visions and agendas being served – in the competition for influence and “control”.
For example, the WEF claims that it stands behind “…the world’s plan for peace, prosperity, and a healthy planet” and its standards not only set out the WEF’s stall for being best-placed to unify and drive the agenda, but also claim to reflect what is “…considered to be the most important to society, the planet and the economy”.
Meanwhile, the EU instead claims that “…only EU intervention can ensure that rules on sustainability reporting are consistent with other EU laws…” – a counter-claim for supremacy – and a KPMG report reveals that the WEF’s standards fail to directly reference three of the SDGs (“Zero Hunger”, “Industry, Innovation and Infrastructure” or “Sustainable Cities and Communities”): are these less important?
The WEF is then also explicit about the role of big business in setting the agenda and it is also perhaps little surprise, given their membership, that their standards push external assurance of ESG reporting as a priority.
Indeed, the involvement of the big four consultancies in the ESG material reflect a huge business opportunity for them, which is something we’ll return to later.
Lastly, whilst the EU claims its CSRD will benefit investors (and we’ll return later to how business itself doesn’t benefit directly), it also says that it is to prevent the “…[undermining of] the achievement of the objectives of the European Green Deal”, suggesting that the real driver is ultimately its own policy.
So, we have tangled agendas, big players competing for influence, confused priorities, and potentially ulterior motives, which alone ought to be enough to sound caution about engaging.
And yet it gets worse…
The role for business is unclear at best
On the one hand, business is acknowledged to be crucial – at least as a contributor or partner – with SMEs acknowledged to be the largest segment of industry, and bigger companies said to have a special responsibility.
On the other hand, and especially in the SDG context, many of the goals, and many of the associated materials – even if some businesses go as far as setting out their specific contributions here (e.g. Indra) – are at a level “above” what most businesses can directly aim at:
- For example, it is hard to see how most businesses could contribute to SDG goal 2.3: “By 2030, double the agricultural productivity and incomes of small-scale food producers, in particular women, indigenous peoples, family farmers, pastoralists and fishers…”.
- Likewise, the “indicators” associated with the SDGs typically refer to things like governmental policy and % of GDP, and are designed for nation states to gauge progress and take necessary corrective action.
Going further, business often seems to be viewed through the sustainability lens with something approaching suspicion.
It doesn’t express much confidence in business that companies are said to need to be “…more accountable for their impacts on people and the environment, thereby building trust between them and society” – the implication being that there isn’t trust already – and business is also said to often have little regard for the impacts on others.
Whilst such observations sometimes seem justified, the generalisations seem unwarranted, and this is especially so given that sustainability hasn’t been presented in any compelling way to business…
The benefits and reasons to engage for business are unclear
Claimed opportunities and benefits for business are more often than not “away from the negative”, such as staying on the right side of government policy, pre-empting the circulation of misinformation, being able to influence rather than be subject to the agenda, and so on.
Beyond this, even more “positive” reasons are also discussed in mostly general and indirect terms, be that reputational benefit (e.g. through philanthropy), social licence to operate, scope to innovate, attracting and retaining staff, risk reduction (e.g. in supply chain dynamics) or simply general economic and market improvements.
Indeed, the benefits presented are even said to be so indirect that there is no clear causal relationship claimed between sustainability-related activity and associated business benefit; rather that benefits are the result of “divine coincidence” or that the evidence for them is “anecdotal”.
Of course, some may not be motivated at all by what benefits them, and instead wish to pursue a more noble goal – curiosity, altruism or legacy, perhaps – but if this is the call to action, this isn’t made clear, and neither is the cost to business adequately factored in, which may well outweigh noble intent.
It is acknowledged that most companies do not have sufficient incentives, time or resources to engage, with many having only “limited” resources at their disposal, and it is therefore no surprise that some commentators are now sounding urgent notes of caution about the agenda – that it may be a “classic mistake”, needing a wake-up call, and even that it is a “scam”.
And yet, through some combination of hubris, self-interest and a sense that sustainably is self-evidently valuable and necessary, the agenda is nevertheless both asserted and compelled.
Sustainability agendas are simply asserted to be valuable and compelled
One of the most striking aspects of the SDG and ESG material is how sustainability is asserted to be gaining momentum, undeniably valuable and most certainly required (often in the same breath as showing that its value to business is questionable at best) – even ignored by businesses “at their peril”.
The claimed manifesto for sustainability is typically framed in terms of what “society” wants or even demands, but explanation or evidence to demonstrate these claims is either not provided, or banished to footnotes.
The EU claims to be acting for “individual citizens and savers”, and the WEF is even more strident, describing an “emerging consensus” that sustainability is crucial, where companies are said to “need” it to build a licence to operate. This is said to be due to “momentum in the market” and “expectations in society at large”, where “public understanding” of the purpose of business is shifting, and where society is “increasingly committed” to it.
Of course, it’s not that there is no value in sustainability – or even that any particular thing being proposed in the materials isn’t valuable – but rather that such assertions are being made in lieu of any compelling case being made, and that they sit extremely awkwardly alongside the acknowledged challenges for business.
Indeed, there is a striking contrast between the assertions of sustainability momentum and the much more muted language used when providing a rationale for how sustainability benefits those principally expected to make it happen – businesses.
The WEF only refers to “the belief” that sustainability is crucial to business, and how businesses pursuing it are the “most likely” to create value – language reflected in analysis of CEOs’ claimed priorities – whilst a group dedicated to promoting ESG can only claim that “some” companies have seen improved performance through ESG.
And yet despite the apparent ambiguity around the sustainability agenda’s value to business, it is nevertheless more than implied that it should be mandatory, take precedence over everything else (including other stakeholder priorities) and even that governments should create adverse consequences if it doesn’t.
Now, of course, there are situations where it is entirely appropriate to curb profit – e.g. eliminating slave labour – but this sweeping sense of “necessity”, and even “compulsion”, is hard to reconcile with how the value of sustainability has simply been asserted and not demonstrated.
No wonder there is frequently bottom-line reluctance to engage – according to PwC, only 19% of global investors were willing to take >1% of a hit on returns in pursuing ESG – and concerns only multiply when remembering that those driving this “push” are interchangeably – even primarily – doing so in terms of the overlapping and competing visions and frameworks they have developed, and are now seeking to impose; not necessarily “sustainability” as the only goal.
Worse still is how the agendas are making ever wider claims over the operations and interests of more and more businesses, and doubling-down on ever more stringent enforcement, with the EU’s CSRD being a perfect illustration.
Not only – as we have seen – is it reaching into businesses’ strategies, business models and intellectual property, but it also represents a four-fold growth in the numbers of companies that will be obligated to disclose information (49,000 companies instead of 11,700).
Alongside this, all data is to be produced in a specified “tagged” format, to a taxonomy that will be produced by the EU, and audited for compliance, all to facilitate collation into a single database (the “European single access point envisaged”).
It is true that most SMEs are exempted for now, but the EU claims that SMEs “remain open” to the idea of “proportionate, voluntary standards for them”, and pushes the idea that this will be in their interests, helping them to attract investment (and contribute to the “European Green Deal”, which is presumably its own reward).
Not only might the cynic note that the CSRD represents the enforcement of standards that were previously “voluntary”, but it is of course inevitable that the larger companies subject to the new regulation will push the requirements down their supply chains.
Most businesses seem to have little idea that these things are bearing-down upon them, and what makes it even worse is that this is a continuation and extension of a standards-based approach that the EU itself says has “…not sufficiently improved the quality of information companies disclose”.
They are simply doubling-down, despite acknowledged failure to date, and this is a pattern that permeates every sustainability agenda.
How to engage with the sustainability agendas is unclear
Still, should a business nevertheless decide to set aside these issues, swallow the potential costs and engage with “sustainability” – perhaps even through a genuine desire to make a real difference or “do the right thing” – the issues only multiply again.
Would-be participants have to decide not just which agenda will be most effective, but also which is most likely to “win” the power struggle and whether the motives behind it are ones they can support.
And, in the meantime, with multiple legislative and regulatory initiatives in the sustainability space, there is a very real risk of businesses being caught in the crossfire, compelled to comply with overlapping requirements.
Moreover, the ways explored for business to directly contribute are out of the reach of most, with only “doing business better” being generally-applicable.
(Yes, many businesses will also have supply chains they can consider in terms of sustainability, and some will be able to contribute innovative new solutions, but political lobbying, investment, philanthropy, and direct action in developing countries are far beyond the reach of most businesses.)
It is therefore perhaps surprising that what is proposed is mostly a step removed-from, typically ahead of, and therefore on top of, actually achieving progress towards sustainability, focusing on what is said to be required to be in a position to do so (process), but not what that actually is (outcome).
The SDG Impact Standards, developed to help realise the SDGs, are said to “help” adherents operate more sustainably and “contribute positively” to the SDGs, but at no point are any of the SDGs themselves really mentioned, and certainly not in terms of actions that can be taken towards them.
Similarly, the WEF explains that its ESG metrics have an “important bearing” on the capacity of a business to achieve sustainable value, but that value and how to realise it are not described.
No wonder an “About the SDG Impact Standards” document flags that “…there is a lack of clear guidance on how organizations can translate intent to action” (p2).
Virtually without exception, the agendas then each propose an all-or-nothing approach: whilst it is sometimes said that implementation will look different for different businesses, the frameworks ultimately aim to cover all businesses, to cover the entirety of each business, and to be used in totality:
The WEF says that “The metrics are deliberately universal and industry-agnostic, to create the comparability across sectors and geographies that currently eludes ESG reporting.” (p44) and that everyone should report on all of them: “It is acknowledged that not all companies will find it easy to report immediately against all the recommended metrics… [but] we recommend a “disclose or explain” approach and encourage companies to explain in their reports the specific information omitted…” (p14).
Combine this with the confusion, acknowledged costs and sense of necessity – even compulsion – we have already seen, and it is no wonder that “sustainability” is intimidating to most.
But what do these frameworks involve? How big are they? What is their style?
The sustainability agendas are cumbersome, wasteful and self-serving
Despite the competition we have seen between different sustainability agendas, one thing they all have in common is just how broad, detailed and formal they are.
Within the SDG domain, this begins with how the 17 SDGs are broken down into 169 more detailed targets, which are then associated with 231 “indicators” to gauge progress towards these targets.
The Securities and Exchange Commission (SEC) is also wading into the domain to add climate-related disclosures to registration statements and annual reports – with a 490 page PDF summarising the current state of play – and this is happening despite the objections it notes on several fronts (including that it this is both redundant and costly). There is no sign of streamlining here.
With respect to ESG, the EU states that its CSRD will cost billions (pp10-11); meanwhile, the WEF proposes 21 core metrics and a further 34 expanded ones, which are set to become the basis of “a comprehensive global baseline of sustainability-related disclosure standards” that the ISSB says it aims to deliver.
Whilst these metrics are claimed by KPMG to be an “easy entry point” and “concise”, this claim is undermined by each metric having extensive commentary and the proliferation of references to external standards and documents.
The claim of is further undermined – along with the one that the metrics are applicable to all business – when seeing that the metrics include Paris Agreement-aligned greenhouse gas emission targets, the amount of phosphorus fertiliser consumed, the congruence of company lobbying with its stated ESG targets, monetary losses from fraud convictions, ESG as a factor in acquisitions and investments made, and megalitres of water consumed.
These are hardly core metrics in every sector, and hardly core metrics for most SMEs regardless of industry, but – as we have seen – all businesses are to nevertheless “disclose or explain” their response to each.
It is bad enough that this arguably favours the larger companies that have the resources to be better able to do so, and that – perhaps not entirely coincidentally – are openly said by the WEF (p18) to have had their input prioritised, but there is also no nuance or scope for finding which parts of any given agenda are context-appropriate and useful, and no apparent awareness of trade-offs.
This is firstly true at a macro level, where recent events in Ukraine have shown that a rethink is needed, including how a rigid focus on Net Zero is potentially unsustainable alongside addressing other basic human needs (due to the embargo on Russian goods presenting the possible need to reverse or pause some green initiatives, at least temporarily).
It is secondly the case in terms of an individual organisation’s overall sustainability “profile”: for example, an organisation that might be on the cusp of delivering a huge sustainability benefit may be hindered in doing so by the “need” to tick all the relevant boxes, forcing it down to a shared lowest common denominator, but reducing its overall impact.
All of this creates huge scope for expense and waste – surely the opposite of “sustainable” – which only multiplies when considering that businesses are likely to be subject to multiple agendas.
And yet, in some ways, this is still only the tip of the iceberg, because not only does all this come at a time when business is already being squeezed – with profits declining and cost-cutting planned – but there is also a huge consulting and certification industry now springing-up, heaping on the potential for yet more cost and waste….
The WEF metrics abound with references to training, and the WEF says (p18) that ESG information “should be assured”; the European Parliament has stated (p2) that CSRD information should be “subject to a mandatory audit”; we also learn from the SDG Impact materials that an external assurance framework and SDG Impact Seal are being developed, and also that regular assurance is recommended by an independent accredited assurer.
As mentioned earlier, with the “Big Four” consultants acknowledged WEF partners – and with consultant, certifier and standard-setting feedback weighted heavily within the SDG world – this is at best an uncomfortable conflict of interests.
At worst, it is an abusive manipulation of “sustainability” for cynical, self-serving ends: no wonder the WEF says (p44) that “[t]he ecosystem is buzzing with activity”.
The sustainability agendas are nothing new, and fatally flawed
Some of the more bitter sustainability pills – the size of the agendas, the associated consultant feeding frenzy or the apparent conflicts of interest – might be easier to swallow if there was some novelty in the approaches set out.
However, this is sadly not the case.
The WEF, of all people, say in a video explaining “The Great Reset”, that “top-down approaches won’t get us anywhere”, but ultimately everything falls back to the familiar top-down approach we have already seen more than implied by the nature of the agendas and associated recommended certification and assurance.
The UN is not only, by its very nature, the ultimate top-down organisation on the planet, but from the outset its primary SDG focus has been on government and policy (Our Common Future defaults to this throughout) – reflecting in part, no doubt, the mistrust of business we have already seen.
The WEF, meanwhile, is an elite (even secretive) forum, featuring the CEOs of most of the world’s biggest companies, openly seeking to define the agenda for all of business…!
It is therefore unsurprising that each methodology follows a similar pattern, reflecting outdated “scientific management” practices: CEOs and senior leadership are to announce that sustainability is embedded in their business strategy, goals are then to be set, and incentive structures, processes and systems to be built to drive this “down”.
So, whilst the things needed for sustainability to be truly embedded – leadership, innovation, a congruent culture, etc – are emergent properties that need to be nurtured and baked-in, every sustainability agenda instead talks about bolting them on, through “creating”, “driving” or “implementing” them.
For example, section 18.104.22.168 of the SDG Impact Standards talks about “implementing appropriate culture”, as if this is something that you can just “do”…!
Finally, and as noted above, it’s an all-or-nothing approach, which is to be compelled and incentivised by governments.
It truly would be hard to think of a less organic process; when we remember it is also burdensome, imposed and enforced, it would be harder to imagine a less inviting or compelling one.
All this reflects a near-complete failure to understand value
Ultimately, all the issues with the sustainability agenda in its current form stem from an almost complete lack of understanding of what value is and how to realise it.
Primarily, value is treated as objective, or at least quantifiable, when it is (rightly) becoming increasingly accepted that value (or “impact” as it is usually described in a sustainability context) is subjective.
By “subjective”, we mean that value is context-dependent, perceived and experienced on the “consumption” side – rather than fixed and “created” on the “production” side – and driven by idiosyncratic underlying held values (ethics, character traits, motivations, etc).
This has three key implications.
The first is that it is limited at best – catastrophic at worst – to try and measure value in traditional ways, or on the “production” side, and yet the sustainability materials abound with exactly this: the WEF metrics, for example, contain the phrase “valued impact” 17 times, where each is described in financial terms.
The second is that value (or impact) is emergent, unpredictable and complex – it changes, it has interdependencies, and so on – and whilst the materials do sometimes talk about monitoring for “unexpected outcomes”, we have already seen how the various frameworks are all fixed to an extreme level of detail, requiring complete application and leaving almost no room for adaptation.
The third is that value cannot be compelled – it has to be made compelling to those intended to benefit and to those involved in realising that benefit – and yet we have seen how the approach taken is largely one of regulation, compulsion, certification and monitoring.
Conclusion, and where next?
We have seen now seen the fatal flaws of “sustainability” as currently expressed:
- The legitimate, even noble, concept of “sustainability” has become tangled-up and seamlessly “hijacked” by other agendas and motives.
- Despite acknowledging their dependence on businesses, sustainability agendas fail to engage businesses; rather, the value of what they propose and mandate is simply asserted.
- It is very difficult to engage, due to competing and monolithic agendas.
- All the agendas are cumbersome and wasteful, with the principal beneficiaries likely to be those pushing them – especially big business, consultants, standard-setters and certifiers.
- Despite the scope and nature of the challenges requiring new approaches, everything being done is completely traditional and top-down.
- This ultimately reflects a complete misunderstanding of value.
Thankfully, for those that really do want to “do the right thing”, there is a way out of this mess to achieve authentic sustainability; not the compelled or artificially manipulated “sustainability” we have seen.
Its foundation is the pursuit of value – and its corollary, the elimination of waste – through cultures which harness complexity.
This approach systematically addresses all of the issues of the current sustainability agenda, informing and empowering from the bottom-up to drive sustainability as an emergent property; not attempting to compel it top-down.
It mirrors the emergence of the issues in hand, enabling like-minded individuals and organisations to coalesce around those issues and their solutions – overcoming the myopia, self-interest and cynicism that threaten to derail sustainability, whilst taking advantage of the information and connectivity revolution of today’s information technology.