Five Things to Know About Corporate Sustainability
This week, Weber Shandwick released “Meeting the Moment on Climate Change,” with context on global environmental challenges and a roadmap for corporate decisionmakers on how to accelerate sustainability efforts to mitigate the impact of the climate crisis.
This is a huge topic, so we have broken it down into five things you should know:
1. Companies are making ambitious commitments on climate change
Throughout 2021, the business community will experience continued pressure to accelerate sustainability commitments to address the climate crisis and support the 2030 global sustainable development agenda as outlined by the United Nations. As countries make pledges to transition to “net-zero” greenhouse gas (GHG) emissions by mid-century, citizens and community leaders are increasingly looking to the private sector to drive innovation, enable large-scale change and accelerate the pace of progress.
Within this global context, many companies have stepped up their commitments to reduce their emissions — and in some cases have committed to reversing their legacy environmental footprint. The environmental disclosure firm CDP found that the number of major companies who disclosed their environmental impact and aggressively committed to reducing it increased 45 percent in 2020 over the previous year. Companies rated highly for climate disclosure also gained 5.3 percent more in the stock market than peers over the past seven years.
Some notable examples of ambitious commitments include Amazon* announcing a $2 billion Climate Pledge Fund to invest in companies working to decarbonize the economy; Microsoft* announcing it will be carbon negative by 2030; and Google* announcing it will eliminate its carbon legacy and operate on carbon-free energy by 2030. Many of these efforts are being categorized as “moonshot” initiatives to drive innovation and leap-frog solutions throughout the next decade.
Bottom line: Understand the landscape when thinking of making your own climate announcements. Know the conversation is increasingly focused on transformative efforts to achieve net-zero emissions.
2. The private sector is taking the lead on climate
While government and multilateral coordination is critical to build the collective will to act and implement sustainability solutions at scale, the private sector has an important role to play. Businesses can help develop innovations, implement meaningful changes across their supply chains, encourage employees and customers to adopt more sustainable behaviors and influence policy outcomes.
Citizens and communities are increasingly looking to the private sector to take the lead is setting the sustainable development policy action. In turn, companies are collectively pressuring governments to adopt more ambitious policies to accelerate progress over the next decade. As one example, the Business Roundtable announced in September 2020 a set of new principles and policies to address climate change. They included the recommendation to adopt a national market-based emissions reduction policy in the U.S. to reduce greenhouse gas emissions. Similar moves have been made in the European Union around a new “green reality,” in Latin America and Africa around green energy pledges, and in China, where the government aims to be carbon neutral by 2060.
Bottom line: While the interplay between the private sector and policymakers looks different around the world, it is clear that governments are relying on the private sector to lead on solutions. Map and engage relevant public policy stakeholders and decisionmakers.
3. Companies are making big investments to address plastics pollution
The impact of single-use plastics has become a bellwether environmental issue over the past few years. New research released this summer, produced by scientists and industry experts for The Pew Charitable Trusts and SYSTEMIQ, estimates that plastic pollution flowing into our oceans will triple by 2040 if businesses and governments fail to act now to reverse this trend. This research also found that current government and corporate commitments will only reduce the amount of plastic flowing into the ocean by seven percent by 2040. Given these sobering statistics, many experts believe that regulation and subsidies for reusable alternatives are required to motivate a true paradigm shift.
To combat plastics pollution, consumer packaged goods (CPG) companies are evolving their packaging to reduce waste, improve recyclability, and promote renewable material use. While recycling has long been a focus of sustainable packaging initiatives, this approach relies on consumer behavior to ensure the product is recycled properly and requires significant municipal investments in recycling capabilities.
More recently, companies and sustainability stakeholders have increased their focus on the potential of recycled input materials (especially plastics) to reduce the use of virgin materials and keep materials in use longer. For example, Nestlé* has committed to make 100 percent of its packaging recyclable or reusable by 2025 and to reduce its use of virgin plastics by one-third in the same period. The company also announced an additional investment to increase food-grade recycled plastics in the U.S. Overall, the company has committed to spend $2.1 billion globally on sustainable packaging and recycled-plastics solutions.
Bottom line: Consumer and sustainability stakeholders have their eye on plastics. Review your efforts to get ahead of increased scrutiny and look for ways reducing plastic can drive innovation in your supply chain or product development.
4. Companies are prioritizing a circular economy model to rebuild post-pandemic
The COVID-19 pandemic has revealed many risks and gaps in supply chains, especially in the healthcare, medical device and food production and distribution sectors. The economic lockdowns have also made people rethink their consumption habits, revealing just how much human activity impacts the environment. As companies, governments and localities prioritize post-pandemic recovery efforts, more and more leaders are looking at circular economy solutions to leapfrog to a better system of consumption and waste. In fact, in June 2020, more than 50 global leaders pledged to build back better with the circular economy and signed onto a statement published in late 2020 by the Ellen MacArthur Foundation in the Financial Times.
The concept of a truly circular economy replaces the current take-make-waste extractive industrial model with a regenerative, circular approach that is “designing out” waste and pollution and extending the life of materials and products. It promotes a new perspective on finite resources underpinned by a transition to renewable energy sources to build economic, natural, and social capital.
Bottom line: Companies are increasingly aligning their supply chains to a circular economy model to better track and understand all the intended and unintended consequences of their sourcing, production and distribution activities. Share your point of view on circular economy and hold up progress and innovation in this increasingly important space.
5. More companies are focusing on the “S for Social” in ESG
Environment, Social and Governance factors — or ESG — are the ways to measure the sustainability and societal impact of an investment in a company. While companies have developed environmental footprint goals and measure progress against them, the social impacts of a company have not received the same level of scrutiny or measurement. There is also a clear interplay between environmental and social impact. For example, managing your supply chain in not just about procuring goods and services, but also fair wages, fair trade and avoiding human rights violations like forced or child labor.
The focus on the “S” in ESG is increasing due to the pandemic. According to recent research by the MIT Center for Transportation & Logistics and the Council of Supply Chain Management Professionals, many companies have learned hard lessons about the cost of undervaluing the role of “front-line” workers, such as meat packers and delivery drivers. As the MIT researchers conclude: “One outcome could be a greater focus on worker health and safety, as well as on benefits and pay.”
While social impacts are not as easy to quantify as carbon emissions or water impacts, they are vitally important to tracking progress on economic, gender and racial equity, and other humanitarian factors in the global sustainable development agenda. In the very near term, companies will be investing in employee and customer health and safety, in addition to diversity, equity and inclusion (DEI) programs. In the longer-term, companies will look for and embrace better measures for human rights, labor standards, digital access, and security, as well as the broader implications of climate change on human livelihoods and health. The World Economic Forum is leading an effort to identify a set of universal, material ESG metrics and recommended disclosures that could be reflected in the mainstream annual reports of companies on a consistent basis across industry sectors and countries, including a focus on better metrics for social factors. Read more about this effort here.
Bottom line: There is greater urgency to accelerate global progress for climate change and pressure on companies to demonstrate sustainable solutions that scale across their value chains and within the communities where they operate. Expect increased scrutiny of your company’s impact. Focus on opportunities to lead and meet increased calls for disclosures and impact metrics.
This is part of a series of advisories on Stakeholder Capitalism themes. Check out the previous advisory “Living the Promise of Stakeholder Capitalism” for insights on the wider context and opportunities for leaders. Subscribe to our newsletter The Social Impact Insider, and get timely insights for purpose-driven leaders and a round up the latest news delivered to your inbox each week.
