We know the world we want. It’s spelled out in the Paris
Agreement
and Agenda 2030. Even
before
COP26,
world leaders were well-versed in the dire situation at hand; so, why is it so
hard to create a plan of action?
Those of us working to bring to life this concept of “business as a force for
good” often find ourselves running up against the same wall over and over: Our
current economic system is not designed to balance ‘people, planet, profit’ —
and often works against those trying to change it.
So, how do we change the system we’re in? The pragmatic answer is to work with
it. We must find a way to redefine value so that global corporate actors can
harness their power, influence and potential to build a better system.
The good news is, there’s a sea change happening — which you almost can’t see
unless you take a step back and start to connect the dots. This shift gives me
hope, and demonstrates that a new system may already be on our doorstep:
1. Net-zero commitments now cover two-thirds of the global economy
Communicating complex, unfamiliar sustainability claims on CPG packaging
Join us as Applegate and HowGood share insights into marketing lessons, consumer response and understanding, and marketplace data on the expression and communication of new categories of sustainability claims on CPG packaging - as well as tips for avoiding consumer and industry backlash and controversy - Wed, Oct. 16, at SB'24 San Diego.
Net-zero commitments now cover two thirds of the global
economy;
and while we can argue about whether these are ‘good enough,’ what is certain is
that this flurry has created a totally new playing field.
The rise in commitments will lead to more scrutiny, and in turn, more action —
shaping new business models that will ultimately drive drastic reductions in
emissions, especially Scope 3/supply chain emissions. The recent launch of
SBTi’s Net-Zero
Standard
is evidence of this, and will lead to a new paradigm in the way companies
measure performance.
2. Executive pay tied to progress on sustainability goals
Earlier this month, Mars CEO Grant Reid publicly
called
for a ‘transformational redesign of the business supply chain.’ In order to
achieve this, he said, a mix of approaches will be required; including ‘tying
executive compensation to GHG emission-reduction targets.’ Other consumer goods
companies including Ralph Lauren, Microsoft and Danone are already
doing this.
Linking executive remuneration to greenhouse gas targets is also becoming
common
practice
among fossil fuel companies. It’s tempting to view such moves cynically.
Executives in these companies earn millions of dollars a
year to keep fossil fuels
central to the global economy. What difference can one incentive make compared
to a whole compensation package?
If profit is really what these executives are after, then these ‘green’
incentives can help to ultimately transition fossil fuel majors to clean energy
producers. Moreover, tying executive pay to sustainability
targets
is not only the demonstration that those goals are core to a company’s strategy,
it also gives executives a compelling reason to become serious about monitoring
and reporting performance towards these goals.
3. New measurements to account for the ‘true cost’
In 2020, food giant Danone
created
a new metric to report on the cost of carbon emissions: a so-called
‘carbon-adjusted earnings-per-share,’ paving the way for a new measurement of
success across several dimensions — including climate action.
Under this new metric, the theoretical cost of the company’s greenhouse gas
emissions — estimated to be 27 million metric tons in 2019 — is deducted from
its earnings.
The company expects its carbon-adjusted EPS to increase at a faster rate than
its earnings per share, showing an improvement in its overall environmental
performance and a decoupling of economic growth from carbon emissions.
This move is supported by a range of academic institutions who acknowledge the
need to redefine companies’ performance success. The Harvard Business
School’s Impact Weighted Accounts project,
for example, states that ‘the legitimacy of a business depends on its ability
to create value for
society,’
and proposes an alternative way of assessing performance across multiple
dimensions.
4. Growing demand for third-party verification of environmental claims
Under pressure to deliver on their climate commitments, executives are looking
for solutions to measure environmental performance the same way that they
measure financial performance — increasing demand for third-party verification
of environmental
claims
as this can unlock trust, recognition and ultimately commercial value.
One of the key barriers to accelerate action, as evidenced by recent
University of Augsburg
research, is that
corporate emissions data from third-party providers is currently not good enough
to make sound investment decisions. Without good data, businesses can’t make
good decisions.
SustainCERT and organizations such as
Persefoni, for example, are rapidly ramping up efforts
to deploy systems that can provide trust and credible data, in line with
globally agreed reporting frameworks. To achieve scale at the necessary
pace,
digital technologies are there to track, allocate, report and transfer
environmental claims between actors. And with the increased use of third-party
verification, we will be able to trust the claims made by companies and see if
real progress is happening.
Gaining the courage to challenge the way our decisions are made
The roadmap and momentum are there; so, the big issue now is acceleration. While
the lengthy negotiations process at COP26 is frustrating, we might just be on
the cusp of a reinvention of what it means to drive a successful business.
We have the capacity to build a better future — and right now, some leaders are
driving a fundamental redefinition of value by adopting new
metrics. What we need now
is courage — to embrace this new economy emerging before our eyes; to use these
new metrics to guide decisions, shape new business models and drive the change
we need to see in the world.
It’s the only choice we have.
Marion Verles is CEO at SustainCERT,
provider of next-generation certification solutions. This week, SustainCERT —
along with The Gold Standard Foundation — launched the world’s first and only multi-stakeholder initiative to help
companies deliver on Scope 3 commitments and meet their science-based targets.
The Value Change Initiative has
evolved from a program launched by Gold Standard in 2018 with a core working
group led by Danone, MARS, WWF, WRI and CDP; and now includes over 60
organizations across eight sectors and more than 130 technical representatives
and partners.
With clarity and confidence in claims made by companies towards their Scope 3
targets, businesses and investors can understand where to scale their efforts.
Hear more about the Value Change Initiative from over 20 participating
organizations at a free online event, Making Net-Zero Value Chains
Possible —
Wednesday, Nov. 17 from 3-7pm CET (9am-1pm EST).
Get the latest insights, trends, and innovations to help position yourself at the forefront of sustainable business leadership—delivered straight to your inbox.
Marion Verles is CEO of SustainCERT, a global carbon impact verification organization developing digital verification solutions to bring credibility to corporate climate action.
Published Nov 16, 2021 1pm EST / 10am PST / 6pm GMT / 7pm CET