The Sustainability Buzz

Zombies in Sustainabilityland

Zombies in Sustainability-LandDuring the dark winter days, we at iSpring look forward to the release of a couple of reports that evaluate last year’s progress around business sustainability.  We realize this is a little geeky, but it’s kind of our thing, you know?  Since our immediate view is somewhat limited to the clients we see throughout the year, it’s great to get a larger perspective on what’s happening on the national and global scale.  While everyone’s hibernating (especially this winter), it’s a good time to take stock, regroup, and plan what to focus on in the coming year.

Two of our favorite reports are the State of Green Business report (produced by GreenBiz and TruCost) and the annual sustainability research report produced by MIT Sloan Management Review and The Boston Consulting Group.  Because this winter’s been a little busier than usual for us, we’ve just gotten around to sitting down with both of these reports and digesting them.

And frankly, the outlook is a little grim.

The two biggest reasons for concern are that, at a corporate level, sustainability thought and awareness aren’t translating into action, and where they do, it’s not enough to offset the increasing global demand for resources.  As the MIT report puts it, there are a whole lot of talkers who aren’t walking the talk yet.  And of the ones who are walking, some of them more closely resemble the walking dead, plodding mindlessly forward on a path with no clear destination.

This year’s State of Green Business shows how performance on many of the more easily measurable indicators (mostly related to resource consumption and natural capital) has stagnated in recent years.  Between 2008 and 2012, greenhouse gas (GHG) emissions for large, publicly-traded companies in the U.S. and abroad have remained flat.  In the U.S. and globally, water use is up 1.5% and 5%, respectively.  Air pollution is on the rise, too.

Global green power production is limping along at about 20% of total power production, which seems inadequate when you consider that the International Energy Agency has said that the world needs about 48% renewable energy production by 2035 if it’s going to meet the international climate change goal of 450 parts per million of carbon dioxide concentration.  (And some climate scientists have said that even this number is way too high.)

Water, long considered “the next oil,” has jumped to the top of companies’ radars in terms of its shortage creating real corporate risks.  Yet water risk disclosure is not growing in step with the level of concern expressed about shortages.

One bright spot is the category of solid waste—at least in the United States.  On an absolute basis, recycling continues to grow, incineration levels are dropping, but landfilling remains flat.  However, on a waste intensity basis (the amount of waste per million dollars of revenue), landfilling has decreased from 6.2 metric tons per million dollars in 2009 to 5.2 metric tons in 2012.  The global story is less rosy—with landfill waste intensity increasing from 6.7 to 8.6 metric tons in the same period.

So what’s going on?  Why does it appear that business is marching mindlessly forward like zombies to an unsustainable future?  Have we reached “peak sustainability?”

As the MIT report notes, there’s a disconnect between concern and action.  More than half (58%) of all companies describe all sustainability-related issues (economic, environmental and social) as being significant to their organizations.  Yet of that 58%, only 40% report that they are fully or largely addressing these issues.  This group is more likely to have a sustainability strategy, business case support, performance measurement tools and innovation baked into their business model.

In fact, in our favorite category—performance measurement—70% of those that are translating thought into action measure progress, compared with 31% of the organizations that are stuck in the “talk” phase.

Some of the stagnation could also reflect that companies that started with low-hanging fruit have discovered that they’ve tackled all of those projects and, not having defined a sustainability strategy, don’t know where to go next.  Having no business case to support sustainability could further compound this, making it harder to justify sustainability-related expenditures to those controlling the purse strings.

The good news is that tools are coming online to help quantify aspects of sustainability that were previously difficult to quantify.  Companies like Google, Wells Fargo and Xcel Energy are already utilizing shadow pricing to set an internal price on their carbon pollution.  This number can then be used to justify the value of projects that reduce that pollution.  Additionally, a number of global business groups like the World Bank and the World Business Council for Sustainable Development are developing accounting methodologies to capture the external environmental and social costs of doing business.

As these quantification methods become more commonplace, it should help drive thought into action for those companies who are stuck because they don’t see the business value of sustainability or the risk inherent in continuing to operate unsustainably.  Not surprisingly, the reinsurance and banking industries, which have been built on assessing and mitigating risk on intangible issues, have taken the lead in addressing the thornier sustainability-related issues, like human rights and climate change.

So unlike the walking dead, there may be hope for these sustainability zombies yet.  After all, there’s a growing cadre of companies that are demonstrating that not just thought, but action, is possible and profitable.  Right now, their numbers may still be too few to move the needle upwards in a meaningful way, but there’s reason to believe that more of the talkers (and zombies) will graduate to walkers as they begin to quantify the real cost of being unsustainable.  And if they don’t, there’s a very real possibility that they’ll be left in the dust by their competitors, walking with a purpose.

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