More than ever before, environment, social, and governance (ESG) considerations are increasingly at the forefront of all our decisions. As we continue to live through the ever-growing effects of climate change, the importance of having conversations about sustainability continues to grow. We have access to all sorts of information, particularly about all of the products we consume.
Businesses and organisations voluntarily or mandatorily publish sustainability reports, and governments worldwide are introducing various policies across sectors. All of these initiatives emphasise the importance of transparency as we build the proverbial plane that leads us to a “greener” future for all. Still, when we look at our progress to reduce greenhouse gas (GHG) emissions, although global emissions have shown signs of decrease, we are not on track to limit global warming to 1.5 degrees Celsius. According to this article published on the European Union (EU) Commission’s website, even the world’s largest economies, on their current trajectory, won’t achieve Paris Agreement goals.
So, if sustainability is trending and policies are increasingly pushing decision-making towards a greener pathway, why are we not further along? Are we actually (re)solving the sustainability problems, or are we simply improving the documentation process?
Fully immersed in the world of sustainability myself, I often wonder whether transparency is a magician’s misdirection, and whether I have taken more of a passive role, thereby perpetuating the business-as-usual (BAU) scenario.
Ambitious Sustainability Policies
The EU is actively creating a system that embeds sustainable thinking in business decisions. Since the late 20th century, and especially over the last 15 years, some of the most ambitious sustainability policies and frameworks have been introduced in the EU sustainability policy landscape. The most noteworthy of the climate policy rollouts was the launch of the EU Green Deal in 2019. Through this package, the EU has pioneered ESG topics so that they are not just a nice-to-have but a crucial part of economic decision-making for EU society and beyond.
Today, the EU embraces both market incentives and regulation to address the climate crisis. this approach reflects a valuable lesson learned during the Kyoto Protocol negotiations in 1997: regulation and market initiatives mutually reinforce one another. At the time, the United States (US) was advocating for market-based instruments, while the EU was opposed, arguing that regulation was the adequate pathway. Needless to say, the EU adopted elements of the US perspective and later introduced (2005) the EU Emissions Trading Scheme (ETS). Not only has this dual approach directly and indirectly targeted the problem of emissions, but it has also simultaneously increased awareness and transparency across the three dimensions of sustainability.
Knowledge is Powerful
Although at first glance, the influx and constant evolution of sustainability policy can seem somewhat chaotic and overwhelming, there are many benefits. For one, these policies have brought much attention to sustainability topics. Transforming sustainability from philanthropic marketing to responsibility and accountability.
In the past, sustainability, especially in business, was an opportunity for companies to be competitive, highlighting in their annual reports the philanthropic deeds performed during the fiscal year. Although competition is still a key driving force, policy and subsequent regulations have led to a shift in practices. These days, the best practice is to consider the influential impacts on and from nature and disclose this information publicly. Transparency has empowered individuals by redistributing access to information from only shareholders, investors, and companies to all stakeholders.
Through transparency, we can make informed decisions about topics that we didn’t feel connected to simply because the data is there, published in your favorite (EU or EU-related) company’s sustainability report. Safe to say, sustainability is becoming mainstream, so our goals will be achieved… right?
Roadblocks to Change
Not right. I would be remiss if I didn’t discuss the roadblocks that threaten tangible outcomes. First is the complexity of environmental governance. Too many changes in the policy development process, undoubtedly influenced by power dynamics, can lead to uncertainty and confusion for practitioners. Constant revisions and watering down of policies, for example, the European Union Deforestation Regulation (EUDR) and Corporate Sustainability Reporting Directive (CSRD), and its simplification through the OMNIBUS package have led to drastic changes in the scope of reporting companies and requirements; actions that inadvertently decelerate transformative change, and perpetuate the status quo.
Then there is the inevitable “data park”. Since the sustainability landscape is rapidly evolving, there is an influx of regulations and, to comply, companies are coordinating massive administrative overhauls across their entire value and supply chains. But just because there is more data or access to it, doesn’t mean that there are more results. All transparency does is uncover what is working and what needs to be improved. True transformation requires action, not just information.
Finally, the biggest systemic issue: the lack of profitability. Many sustainable alternatives are not “profitable,” leading to so many technologies never making it to the market. The result? Companies may be prioritising minimum compliance; sharing their progress on holistic ESG matters, but with delayed results and inequity across environmental topics. While it is easier to include human rights policies in your business and ensure that your workers are in a safe and healthy working environment, investment in alternative technologies is not so simple especially when you are uncertain whether they will be upscaled. And so, we are at a gridlock, with increasing information about the climate crisis but few results because at every turn there is a roadblock that keeps business as usual locked in.
What I’m learning as I go deeper into the “thick of it.”
Working and studying in the field of sustainability, I fear, I have experienced and, in some ways, contributed to these processes. But here is what I have learned: transparency is important but not enough. If we want to see actionable outcomes, these ambitious policy frameworks must be accompanied by systems, technologies, and initiatives that drive measurable results not only for social and governance topics but also for environmental challenges. If not, we bear the risk of being excellent at creating informative reports hundreds of pages long, while losing sight of the actual end goal: driving transformative change.
