Pope, Capitalism, Climate Change
As the Pope addresses Congress about climate change and social justice, the question is not if Congressional Republicans will support legislation to mitigate climate change (they won’t) but rather how the business community should internalize and act upon the Pope’s criticisms of profit-driven capitalism, which he sees at the root of serious issues in the social-environmental nexus. This is an important conversation especially for Environmental Leader readers, as we are part of the socially responsible backbone of the corporate world. Is the Pope underrecognizing the impacts of CSR efforts? Or are sustainability professionals only making symbolic, ephemeral gains attacking the symptoms of a deeper problem?
The two sides of the “good/bad capitalism” debate depend on whether capitalism can be trusted to pursue a triple bottom line, with a vast majority of companies having fruitful relationships with employees, communities and the environment. In other words, your views on capitalism depend on whether you think the capitalism-driven economy of the future is powered by a Volkswagen or a Tesla engine.
The Volkswagen future is pessimistic, noting VW’s emerging emissions scandal as the rule, not the exception. In this future, it’s not all blatant malfeasance: many companies make aspirational social and environmental targets, but when leaders change or bad financial results emerge, “non-essential” targets are ignored to focus on the bottom line. Companies that are actually moving the needle on climate change are outnumbered by those that continue to greenwash. Most either set non-aspirational targets that fail to move the needle on real issues or brand themselves as sustainable without taking meaningful action (with some actively opposing meaningful action through their industry associations or in political donations). The exploitative nature of capitalism and the ability to conceal bad practices converge to stymie meaningful action to benefit society and biodiversity. When allegations of wrongdoing arise, settlements are reached and the world moves on, similar to the apparel industry’s repeated subcontractor labor law infractions. If the Volkswagen model is what’s to come, it’s understandable why many call for drastic change.
But this antagonistic relationship between capitalism and society/environment is not the future of capitalism, posits the Tesla future. Triple-bottom-line-driven organizations become more common and will supplant the Volkswagens. Companies that flourish in this future are ones that find ways to strategically decouple value provision from environmental degradation and social stratification. CSR claims can be trusted, and end-users are able to discern between companies based on their actual progress toward being triple-bottom-line observing businesses, rather than having to wade through complicated targets and baselines. Clarity, transparency and comparability enable revenue and capital flows toward the highest CSR performers, causing other companies to tie CSR efforts more closely to value and make needed changes.
Most will agree that a Tesla future is desirable. Consumers prefer companies that provide regular sustainability reports, employees feel more engaged when involved in purpose-driven initiatives, and companies that score higher on CDP’s scale are more profitable.
Assuming today’s business landscape is a mix, with upwards of 45 percent of companies recently reported to be thwarting climate action, how do we move toward the Tesla future and make concrete the fruitful relationship between business and the world? It’s a loaded question, and one that certainly has multiple correct answers. Here’s my riff at a two-part possible solution:
Part one is about measuring corporate performance and being evaluated against a sustainable business benchmark. This means there needs to be a standard serving as a sustainability “finish line” defining what good looks like. Such a standard could emerge as a series of definite targets (like 100 percent renewable energy, 100 percent employees and interns earning living wages, etc.) that businesses are benchmarked against. One interesting benchmark called Future Fit is attempting to do this now. Everyone — from competitors to customers to the general public — needs to be able to freely access and easily understand where a given business lands on the spectrum of environmental/social responsibility. I, for one, would love to see company scores against this benchmark attached to their websites and products on shelves.
Part two is about business strategy, which defines who wins in tomorrow’s world. Moving to a Tesla future requires a shift within corporate strategy itself, in which companies will need to reconsider their strategies to win in largely dematerialized, purpose-plus-value driven business landscape. The current paradigm of strategy creation, arguably one reason why incumbent businesses are facing significant challenges from clean tech and other disruptive emerging companies, is insufficient because it extrapolates from historical trends rather than working backwards from the future. Tesla-type businesses build strategy positing an endstate — for Tesla, this is a largely renewable-powered economy — and then figure out how to build products and services that lead to that endstate. Moving toward a Tesla-type future requires more businesses to emerge (and many to be upended) using endstate-driven strategy. Instead of “how do we adjust our products and services to make them more sustainable?” the question that needs to be asked is “how will the value behind our products/services be provided in a sustainable future?”
Rob Snyder is head of strategy at Anthros Consulting, a firm that uses scenarios to help business, NGO and government leaders build agile strategy when facing disruption and uncertainty. Prior to Anthros Consulting, Rob worked as a strategy consultant for McKinsey & Company. His interests lie at the intersection of sustainability and business strategy. Rob can be reached at firstname.lastname@example.org.
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