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Activists look set to maintain the pressure on global business to move more quickly towards real sustainability
Genuine progress on sustainability in 2014 will depend on whether D × V × F is greater than R. That is, according to the formula popularised in the 1960s by Massachusetts Institute of Technology professor Richard Beckhard, change will happen if dissatisfaction with the status quo (D) combines with a sufficiently inspiring vision (V) and first steps towards that vision (F), so that resistance (R) is overcome.
There is certainly plenty of dissatisfaction. In sustainability terms, says Scott Poynton, founder and executive director of TFT, a forest and forest communities specialist NGO, “we’re still in a pretty bad situation, getting worse”. In boardrooms, there is “a lot of nice talk but not enough action”.
Dissatisfaction will be manifested in 2014 by activists and campaigners – exactly the kind of groups that in frustration at slow progress walked out of the 2013 Conference of the Parties to the UN Framework Convention on Climate Change, held in Warsaw in November. Poynton says NGOs are “becoming more active”, aided increasingly by the free and instant information-sharing medium that is the internet, and by creative marketing that is often several steps ahead of what corporate communication departments can do.
But dissatisfaction is also spreading beyond campaign groups to a wider spectrum of society. An example of this is the fossil-fuel divestment movement that gained momentum in 2013 and can be expected to continue to do so in 2014.
The campaign is centred on 350.org, founded by US journalist and environmentalist Bill McKibben, and named in reference to the 350 parts per million that has been calculated as the safe level of carbon dioxide in the atmosphere (the current level is 396ppm). Investors should not back fossil-fuel companies, 350.org says, because “it’s wrong to profit from wrecking the climate”.
The divestment campaign has 200 public companies in its sights, which it says hold the majority of the world’s proven fossil-fuel reserves, and which it calls “the real culprits – the ones who are rigging the system”. Top targets are multinationals such as Lukoil, ExxonMobil, BP, BHP Billiton and Anglo American.
The campaign has been effective in particular among colleges and universities. Students at the University of Cambridge and Yale have voted for divestment, for example. Some cities, such as Seattle and San Francisco, have also started to respond to the campaign, as have religious institutions. More significantly, Norway’s sovereign wealth fund, the world’s largest, is pondering whether to drop coal mining stocks, including a $2bn holding in BHP Billiton (though not those of power utilities that burn coal).
Although 350.org can be expected to grow, its impact will be more symbolic than economic. An October 2013 report on divestment and stranded assets from the University of Oxford’s Smith school of enterprise and the environment concluded that fossil-fuel companies are so large that divestment would have a “rather limited direct impact” on company valuations. However, companies, especially coal companies, which are relatively small, might be vulnerable to a “process of stigmatisation” that is likely to increase the “uncertainty surrounding the future of the fossil fuel industry”.
A degree of dissatisfaction is also likely to be felt in 2014 in corporate boardrooms as executives grapple with the growing threats to their businesses posed by resource constraints and supply chain vulnerabilities, including natural and man-made disasters. Many executives will also continue to be frustrated in 2014 that politicians are failing to set a clear framework for sustainability.
Issues such as water availability will become more pressing. Kathee Rebernak, founder and chief executive of sustainability consultancy Framework LLC, says: “Global water shortages will certainly make a difference in terms of prompting water purification, efficiency, and recycling technologies and laws.”
She advises companies to “begin measuring their water usage in terms of local, contextual impacts to stay ahead of legislation imposing limits on a regional water-stress basis”.
TFT’s Scott Poynton argues that companies must “finally get that the risk to their business is in their supply chain”. Companies must ask basic questions about the impact that their products have, he says, because consumers are taking the view that “products have a story embedded in them and sometimes it’s not a nice story”.
Companies must go beyond footprinting and certification schemes, because these are engendering cynicism, Poynton says. He points to incidents ranging from the Rana Plaza disaster to 2013’s horsemeat scandal as highlighting the supply chain risks that still exist despite endless corporate responsibility “committees and workshops”.
“I’ve seen a lot of motherhood statements,” Poynton says. “I hope we will see much stronger action on the ground.”
He warns companies to avoid in 2014 the “self-delusion and greenwashing” that can arise from over-reliance on commitment statements and certification, for example of sustainable palm oil. He also cautions against the cult of the sustainability leader, and against diversion of corporate energies into endless planning. “We don’t need people on a pedestal, we need change,” he says.
As the basis for their sustainability initiatives, companies should carry out rigorous research. Poynton cites Nestlé as a company that is “going for it”. It is, for example, “busy doing revolutionary stuff in palm oil against an industry that doesn’t want to change”.
Not unhappy enough
Dissatisfaction might be widespread, but there is unlikely to be enough to prompt genuine change in 2014. Wayne Visser, director of sustainability consultancy Kaleidoscope Futures, argues that the dissatisfaction arising from the economic and financial crisis is “wearing off”, with movements such as Occupy Wall Street “losing momentum rather than gaining”.
“The pressure is easing,” Visser says, citing reduced focus on issues such as bankers’ bonuses. “It’s kind of getting back to business as usual.” It is a similar story with the key issue of climate change, which for many people does not seem imminent enough to provoke action at scale.
Nevertheless, a second requirement for Beckhard’s formula for change is to a certain extent being fulfilled: concrete first steps in a number of areas. “I’m optimistic that probably things are not going to go backwards. A lot of the things that have begun will begin to build momentum,” Visser says.
Concrete steps include developments in the sharing economy, as demonstrated by phenomena such as the self-styled “world’s largest community hospitality company”, Airbnb, and car-sharing initiatives.
Airbnb enables members to advertise their spare rooms to people seeking holiday accommodation. It has taken off to the extent that more than five million people used it in 2013 to find somewhere to stay. Airbnb effectively fulfils the sustainability objective of putting spare capacity to work at a low cost, but it is not problem-free. It is increasingly unclear, for example, if the hosts advertising on Airbnb really are private individuals with a spare room, or are, in effect, unlicensed hoteliers. Potential legal obstacles for such business models can be expected to arise in 2014.
Other concrete steps will continue to be taken in 2014 by small companies and start-ups that embed sustainability in their business models from the outset: companies dealing with issues such as the circular economy and eco-innovation.
Concrete progress will also be achieved in terms of sustainability reporting, thanks to the maturing of frameworks during 2013. Leeora Black, managing director of the Australian Centre for Corporate Social Responsibility, says that to deal with supply chain issues, for example, companies can lean on the 2013 G4 update from the Global Reporting Initiative. “We are reaching a tipping point for sustainable procurement practices,” she says, adding that “incorporation of human rights due diligence and policy settings into business will continue”.
Robert Eccles, professor of management practice at Harvard Business School, says that during 2014 there will be “increasing adoption of integrated reporting by companies.” However, “it will take more than 12 months to see this given reporting calendars”. Eccles adds: “I’d also look to see more true ESG [environmental, social and governance] integration and a longer-term perspective from investors, but this will take some time as well.”
V for vision
One crucial element is arguably missing from Beckhard’s formula, however – meaning that in 2014 no transformational sustainability breakthroughs should be expected.
The missing ingredient is vision. During 2014, the lack of political leadership that was seen in 2013 is likely to continue. As a consequence, the setting of a clear course towards sustainability will continue to be postponed, leaving companies to make their own decisions and to pursue their own initiatives – or not.
The European Union, for example, is scheduled to publish in January 2014 a package of proposals on climate and energy objectives for 2030. This could fundamentally affect European companies by determining how much they have to reduce emissions and what their energy options are. The package is likely to get bogged down in discussions for months, if not years.
The proposals will be a follow-up to a set of European targets finalised in 2009, which resulted in the EU taking on a 20% emissions reduction target for 2020 compared to 1990, and a target for 20% of energy to come from renewables. In those days, says David Baldock, executive director of the Institute for European Environmental Policy, there was among politicians a “strong consensus to get it done”, driven by countries such as France, Germany and the UK. This time, “we see a lack of leadership in the EU on this front”.
The EU’s lack of consensus on climate and energy – core issues for sustainability – will be replicated in 2014 in other economies, and in different industries. The argument about sustainability is no longer “straightforward industry versus environmentalists”, Baldock says, but is now rather between more-progressive and less-progressive companies, countries and individuals.
It will take more than a year to resolve differences, meaning that in 2014, our formula involving D, V and F will most likely come to S – for stalemate.
What’s in store? Key dates in 2014
February 7-23: Winter Olympics, Sochi, Russia
April-July: General election, South Africa (date to be decided)
May 22-25: European parliament elections
May 31: Date by which general election in India must be completed
June 4-5: G8 summit in Sochi, Russia
June 12 to July 13: Football World Cup, Brazil
July 9: Presidential election, Indonesia
September 14: General election, Sweden
September 18: Independence referendum, Scotland
September 23: United Nations secretary general Ban Ki-moon’s world leaders’ climate summit, New York
October 5: General election, Brazil
November 4: Mid-term elections, United States
December 1-12: UNFCCC climate summit (COP20), Lima, PeruActivists corporate leaders CSR in 2014 Environment global business sustainability
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