How Come Non-Scientists Lead Top Firms' Green Efforts?
Approximately 23% of Fortune 500 companies state their involvement with the Sustainable Development Goals (SDGs) framework. However, according to a peer-reviewed study, only 0.2% of these companies have established effective approaches and tools to assess their advancement towards relevant SDGs.
This indicates a disparity between the proclaimed environmental pledges of corporate executives and the actual situation within their companies, as well as their influence on society as a whole.
Businesses acknowledge the necessity of addressing their role in the economy, but they are hesitant to detach the provision of their goods and services from perpetual consumption and externalisation of expenses. They appear to lack the institutional capacity to act on this unpleasant reality.
Despite the considerable progress made in the global ESG movement, much of it has been disputed and exposed as greenwashing. If the business community truly desires to distance itself from the greenwashing label and contribute to the solution, then it must embrace a drastic transformation that demonstrates its ability to address the problems stemming from damaging business models, including climate change, pollution, and biodiversity loss.
This entails more than just hiring a few individuals capable of producing an ESG report or even appointing a "head of sustainability" who also supervises other corporate social responsibility (CSR) initiatives. Instead, companies require a long-term strategy to establish institutional expertise and hire specialists who possess knowledge of scientific and technical issues.
Most companies lack qualified personnel with expertise in reducing carbon footprints, developing mitigation plans for growth projections, or assessing their impact on stakeholders.
According to a 2021 study by researchers at the NYU Stern Center for Sustainable Business, only 29% of nearly 1,200 Fortune 100 board directors possess relevant ESG credentials, and even those credentials primarily focus on the social aspect, overlooking environmental expertise.
Meanwhile, more than half of the 250 largest companies in the Fortune Global 500 do not have leadership-level representation for sustainability, and a concerning two-thirds of NASDAQ 100 companies lack a dedicated member on their board or leadership team responsible for sustainability matters.
The absence of in-house expertise prompts companies to hire external consultants, who tend to maintain the status quo and enhance efficiency rather than promote significant changes to the business model.
No large multinational company would select a non-specialist to manage its treasury, cash flow, or legal compliance. Additionally, no one in these critical positions would serve dual roles.
It is not a matter of economics, investor relations, communications, or even risk assessment. Rather, it entails establishing a science-based system of inquiry that shapes business values and decision-making. This necessitates engaging experts who understand the subject matter and are competent in their field. Without a fundamental understanding of science, the right questions will not even be posed.
Regrettably, companies frequently make the mistake of outsourcing their sustainability transformations to external climate or sustainability experts, consultants, ESG report writers, or green financiers. These individuals are typically hired to demonstrate that business-as-usual solutions are feasible while still adhering to ESG reporting mandates or ambitious net-zero commitments. These so-called solutions are presented as business opportunities to persuade management to buy in, stifling genuine inquiry and innovation.
Throughout the last 30 years, the author has worked in sustainability with some of the largest global corporations and has observed the emergence of the first CSR projects and reports, reporting exercises from the Global Reporting Initiative (GRI), and the current transition to ESG and sustainability reporting.
In many companies, these endeavours consume more resources than actually taking action to minimise socio-environmental impacts or investing in employees who can surpass the status quo.
To stay competitive, meet stakeholder expectations, and fulfil their social responsibilities, businesses must adopt three strategies.
First, a significant portion of their workforce should have the opportunity to learn about key sustainability issues and engage in finding solutions. Rather than limiting sustainability training to a small group of experts or for compliance purposes, it should empower employees to act and innovate throughout the value chain. This critical mass of employees can influence daily decision-making and lead to a cultural shift towards sustainability.
Second, businesses should hire scientists and technical experts to lead their sustainability efforts. These individuals should possess the necessary skills to innovate and adapt the business model.
Finally, the head of sustainability should have the technical expertise, autonomy, and power to do their job, similar to the CFO or general counsel. It is critical that the role not be handed off to a senior manager without the necessary expertise or who serves in multiple roles.
Without an unwavering commitment to building widespread sustainability competency within the organisation, the idea of sustainability will remain just a talking point.
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Source: The Club of Rome