The Urgent Need for Business Sustainability Reform

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by KnowESG
KnowESG_The Urgent Need for Business Sustainability Reform
The current ESG model, based on voluntary actions, will not lead to real change. We need to urgently embrace 'competitive sustainability' for genuine impact.
  • Current ESG frameworks will not drive change; we need competitive sustainability.

  • Climate and biodiversity need to be seen as business imperatives, not just responsibilities.

The interim CEO of the University of Cambridge Institute for Sustainability Leadership, along with Paul Gilding, says we need businesses to rethink sustainability.

The message is clear: companies cannot thrive on a planet with multiple crises and overwhelming risks. Despite years of corporate commitment to sustainability, the environment is still deteriorating, carbon emissions are rising and fossil fuel companies are still growing. The existing ESG agenda has failed, we need to redesign the markets that shape business decisions.

Leading companies show what is possible and generate momentum for sustainability. By setting net-zero targets, reducing carbon footprints and fairer supply chains they demonstrate progress through transparency. But there is a risk that the broad ESG framework gives a false sense of security, that current efforts are enough and reduces the sense of urgency for deeper structural change.

We need to face a hard truth: the current ESG model, based on voluntary disclosures and actions, will not deliver meaningful change. A shift to “competitive sustainability” as outlined in a recent paper co-authored by Gilding is needed.

The problem is not the intention but the execution; ESG practices add complexity to existing business models rather than fundamentally changing the balance between profit and sustainability. As long as the market prioritises short-term profits over long-term sustainability businesses will continue to harm the environment.

We do not have time to wait to overhaul institutions and systems, businesses need to seize the market opportunities to make rapid, big changes by redefining the incentives and penalties. We need a collective business effort to push the governments to act and to have a mindset where sustainability is a competitive advantage.

Companies need to understand that the push for action on environmental issues comes from natural laws, not moral obligations. Climate change and biodiversity loss are immediate threats to traditional business. Instead of asking, “How much sustainability can we afford?” companies should be asking, “How can we accelerate the transition and benefit from it?”

There are examples of companies leading the way, like those in Sweden’s Hybrit initiative, which is revolutionising their industry with innovations like fossil-free steel. They are not preparing for a fossil-free future, they are creating it. Others, like the plastics sector, have been lagging by focusing on recyclability and neglecting to push for systemic change that reduces waste and recycling.

A change of mind is not enough. The market needs to evolve to eliminate the conflict between profit and sustainability. We need to create markets for climate-neutral, nature-positive and circular products, and governments need to create conditions that stop the harm. Otherwise, businesses that are committed to transitioning will be at a disadvantage to those that do not.

Companies are calling for this change. But single voices are not enough. Legislative change is often blocked by lobbying from established industries like the car industry’s defence of traditional engines or agricultural interests resisting environmental regulations.

The era of traditional ESG is over. In the next decade, businesses will not just be competing for market share but for their own survival. The benefits of this shift will be increased resilience, market leadership and the ability to thrive in a sustainable world.

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Source: Financial Times

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