Author: Ivo Mersiowsky

In brief:

• Risks posed by the climate crisis, water scarcity, biodiversity loss and plastics pollution threaten numerous aspects of business. Climate change alone is expected to cost companies US$1.3 trillion by 2026.
• To mitigate risk and seize opportunities, the C-Suite must prioritize sustainability and make it a key component of business strategy.
• Organizations that make real changes to become sustainable companies can reap real business benefits, such as attracting and engaging employees, generating cost savings and gaining market share.

Nobody can deny that business plays an essential role in modern society; it’s the lifeblood of the economy and a major driver of progress. But now, the business world has to rise to a new challenge: ensuring that humanity operates within planetary boundaries for our very survival. 

But why should businesses be taking the lead on this issue? What about governments and individual responsibility? The fact is, businesses are in the best position to effect real change. And ultimately, business is a beneficiary of that change. A safe and stable environment is a basic requirement for businesses to operate with a healthy workforce, robust markets, access to resources and reliable infrastructure. 

Limiting global warming to 1.5°C, addressing the 6th mass extinction and taking a host of other actions to head off the current environmental crisis are the new expectations of business leadership. We acknowledge though, it’s easier said than done. Sustainable transformation is a long-term commitment and businesses are engineered for shorter-term thinking: quarter-to-quarter, year-to-year. But bold action in the present is what’s needed now.

Accordingly, sustainability must become a key component of every business strategy, integrated into every function and every facet of business. Sustainability teams can’t be effective in a silo; they need access to all aspects of the business. Moreover, they must be heard to ensure that sustainability objectives inform business decisions throughout the entire organization. Opportunities cannot be taken if they aren’t identified. It all starts with business leaders making the decision to make sustainability a priority. This isn’t just the provenance of the CEO. The entire C-Suite has an opportunity — and a duty — to make environmental sustainability a cornerstone of their functions.

(It’s long past) Time for action

For far too long, many business leaders have either resisted or actively circumvented action on critical environmental issues, exacerbating biodiversity loss, water scarcity and the climate emergency. Even as some companies make strides in measuring their impacts, strategies leading to efforts and initiatives that address them in a meaningful way are few and far between. Awareness is one thing, but action based on that awareness matters more. 

Environmental changes, such as soil degradation, climate change and biodiversity loss, are causing calculable damages to business, generating real, material costs. They’re also impacting the mental and physical health of the workforce. The dire situation will fundamentally change consumer behaviors and create knock-on effects throughout the value chain. 

Climate change alone is expected to cost companies US$1.3 trillion by 2026 — a mere three years away. As much as the numbers reported in the news vary, they paint the same grim picture. Risks posed by the climate crisis, water scarcity, biodiversity loss and plastics pollution imperil numerous aspects of business. There are no shortages of examples, either. 

In the US Southwest, successive droughts have reduced the Colorado River’s flows by 20%. The river supplies water to 40 million people and is not only a vital resource for irrigation and power generation, it also fuels two major reservoirs. If the drought continues (and the science affirms a high probability that it will) access to water could become a competitive advantage (or disadvantage) for businesses — something that would have been unthinkable in the 20th century.

Europe is battling the opposite climate extreme: flooding in Western Europe broke rail links in 2021, disrupting the movement of goods. According to the European Commission’s Joint Research Centre, the cost of flood damage to the continent could reach €48 billion per year. 

It’s time to recognize the situation for what it is: an emergency. And talk about it that way with your teams. There’s no time for debate nor for assuming the defeatist posture that the problems are too great for any one business leader to address. Your business — and our collective future — depends on it.

The good news is business leaders have more control than they can possibly imagine. There’s a major opportunity for companies and brand owners to shape a new narrative — one where businesses are the heroes of the environmental crisis, rather than the villains. The road ahead will be long and there is a lot of work to be done, but there’s no reason to get discouraged or slow down. From Netflix to Beyond Meat, there are countless examples of innovative leaders who’ve either built or transformed whole industries through disruptive products and business models. 

Why should meeting the current environmental challenge be any different?

Rethinking business as usual

Regardless of industry, business has a tremendous capacity — and responsibility — to address our environmental dilemma. It is also a beneficiary in solving it. 

Use this crisis to do what businesses do best: create and develop opportunities. For example, during the pandemic, 94% of Fortune 1000 companies experienced some sort of supply chain disruption, which ultimately led some businesses to either revisit, reconfigure or reinvent their supply chains completely.

Win-win scenarios are out there for those who care to look. The prevailing narrative that ESG initiatives are more of an expense than an investment is an oversimplification. The truth, as the case so often goes, is in-between. Though companies may find more opportunities to realize an ROI on sustainable business practices than they bargained for, the unavoidable truth is that there are limits to what the planet can provide. We should be accepting that constraint and doing business accordingly.

History is teeming with examples where the most economical choice for business was detrimental to humanity and was subsequently abandoned. And every time, industries innovated and adapted. Many found opportunity within constraints and thrived. Operating within planetary boundaries is just one more example — and one more opportunity — to rise to a new challenge. 

Staying in business is the business of business. Sustainable transformation, however, demands we do things differently. That we make sustainability the way of business. But it’s going to take a Copernican shift in company consciousness to shake off decades, centuries even, of destructive business practices — and that shift starts from the top. 

Planning needs to go beyond the short term and stretch into the long (and even longer) term. Focused solely on quarterly targets? Consider instead how they’ll impact the next quarter century. Match your decision time horizon to how long you want your company to be in business. 

Transforming a business may mean abandoning traditional but outdated schools of thought and long-standing practices that don’t serve new forward-looking visions. Companies cognizant of climate change (not to mention water scarcity, biodiversity loss and plastic pollution) understand what’s happening to our environment — and they want to know how best to adapt. 

By now, leaders have seen more than enough to kill the false narrative that profitability and sustainability are mutually exclusive. Companies can’t build a robust bottom line and rest on it when there are two more bottom lines to build up: people and planet. Fortunately, many C-Suite leaders (though not enough) have received the message and are finally taking steps in the right direction.

But are they all the right moves?

It’s not just what you say, it’s what you do

Companies should absolutely communicate, and even celebrate, their progress. Employees and customers alike want to know. But know that they also expect claims to be truthful and substantive. 

We’re past the point where making empty or weakly substantiated claims is an acceptable business practice. Short-term, greenwashed brand wins pose enormous reputational risk later as regulators, investors and consumers alike begin to challenge claims and question credibility. Instead, give them what they want: concrete action and demonstrable proof. 

Consumer sentiment is a key driver of a brand’s value and companies bear considerable risk of undermining that value by making false or flimsy claims. But whether most businesses intend to greenwash is another story. Scratch the surface of net-zero or carbon negative claims and a far more complex picture emerges of the steps companies took to reach that threshold. Business leaders need to resist treating climate claims as ticking the box: there’s more work to be done and far more wins to achieve. (And, by the way, carbon isn’t the only consideration on the path to environmental sustainability.) 

No matter where an organization is on its sustainability journey, it can reap real business benefits if real changes are made to the business. Sustainable companies are not only more attractive to consumers, but to current and prospective employees too. According to a recent survey by IBM’s Institute for Business Value, 68% of workers reported they were more inclined to accept a position with a company they considered to be sustainable.

Walk the talk on lobbying

Thanks in part to social media, today’s consumers can quickly spot hypocrisy and there’s mounting cynicism about brands. According to the Havas’ Meaningful Brands report, while 73% of consumers think brands should act now for the good of society and the planet, only 29% have faith that brands will fulfill their promises. 

As environmental regulations increasingly become a business reality, more global companies are taking a critical look at their company’s lobbying efforts, donations and political spending.

Environmental ambitions and efforts mean nothing if a company is supporting oil and gas lobbying groups, funding a climate change denier’s political campaign or blocking climate or other environmental legislation. The surest way to cause lasting brand damage and discredit your company’s sustainability program is to be on the wrong side of the dialogue and frankly, the wrong side of history. 

Companies should use their political capital and lobbying might to effect positive regulatory change that supports the transition to a more sustainable and just economy. Those that become part of the dialogue — and, more importantly, the solution — will not only have an opportunity to shape the operating standard and level the playing field, but also build trust and loyalty among consumers.

To get out of the hole, put down the shovel

Mitigating the environmental emergency requires business leaders who understand the gravity of the crisis, acknowledge it, and communicate frankly about it. 

Knowledge is power. Start by gaining a basic understanding of environmental issues and the reasons they matter to business. Know, too, that sustainability isn’t a destination, it’s an ongoing journey of continuous improvement that must start somewhere. But it’s important to point out that this is not a ‘fake it until you make it’ proposition: The circumstances demand precision.

The most logical place to start is to seek out expertise from both within and outside your organization. Take stock of your company’s ability to integrate sustainability as an actionable business objective. For example, a Chief Corporate Responsibility officer may not have the expertise or reach within the organization to drive the changes needed. More and more organizations are opting to appoint a Chief Sustainability Officer, but even this figure can’t be effective if they lack the remit, influence, or resources to truly move the needle toward sustainable transformation. The level and quality of support provided to the person leading the charge matters and has a profound impact on outcomes. Getting results will take upskilling and investment throughout the organization.

Throughout the journey, no matter where you and your teams are, resist the urge to follow business trends alone. Though it’s standard business practice to look to the competition, when it comes to addressing the planetary crisis, it’s science that sets the benchmarks.   

New knowledge is constantly being uncovered and new technology and capabilities are being developed. With these advancements come new opportunities for businesses to become more sustainable and to operate within planetary boundaries. The key is to act now and make a commitment to a better status quo. 

Because the truth of the matter is this: we can’t continue to do the same things we’ve always done and expect different results. Leaders need to take a fresh look at long-standing practices and ways of thinking and determine whether they are aligned or at odds with the ability of their company to, well, sustain itself into the future.

Where do we go from here?

Transformational leaders understand that every problem presents possibilities. Our environmental crisis, though dire, is no different. So, what if we look at this as an opportunity rather than an inconvenience? 

While centuries of damage and decades of inaction can’t be undone overnight, they can be addressed, mitigated and never again repeated. That’s the great challenge of our time: to lay the foundation for a future where people, planet and business thrive. To cut global emissions by at least half by 2030. Stem biodiversity loss. Rein in plastics and chemicals pollution. It’s well within our collective capacity to operate within planetary boundaries.

Many say we’re in the 4th Industrial Revolution, and technology is propelling us forward in ways we never could have imagined. There will be countless opportunities to innovate, reimagine and reinvent within your organization. As you do, keep your environmental impact as a front-and-center business objective. 

Looking back, we see the impact of bold, brave business leaders who reshaped or created entire industries, and changed the course of history. 

Transformation has happened before, and it has to happen again. Now, it’s your turn.