At the third annual Sustainable Brands #NewMetrics Conference at the University of Pennsylvania in September, the need for next-generation sustainability goals — which measure progress toward real-world goal-lines such as carbon budgets, water tables, and living wages — emerged as a key theme. To dig deeper, #NewMetrics channel co-curator Bill Baue discussed this question of “endzone” goals with prominent voices in the field, including Allen White, of the Global Initiative for Sustainability Ratings; Andrew Winston, author of the forthcoming book, The Big Pivot; SustainAbility CEO Mark Lee, and others.
Here, we launch the #SustyGoals series with Bob Willard, author of The New Sustainability Advantage, who is spearheading the effort to articulate the Gold-standard Benchmark for sustainable business, in conjunction with The Natural Step Canada. This project is developing a framework to enable answering the question, “What would a sustainable business look like if you saw one?” One key path toward achieving sustainability is goal-setting against real-world, science-based thresholds, such as the 9 Planetary Boundaries on the ecological front, as well as social foundations such as those articulated by Oxfam in its idea of “Doughnut Economics.” The intention of the Gold-standard Benchmark is to create a systemic intervention that helps reorient the way that organizations consider their business performance — relative to the desired future state of sustainability, rather than relative to past 'unsustainable' performance.
Bill Baue: The Gold-standard Benchmark calls for companies to set sustainability goals that take into account the "goal line" of science-based, context-based KPIs that measure corporate performance against the carrying capacity of real-world social and natural resources. First off, why is this so important?
Bob Willard: It’s important for three reasons. The first one is personal. At our current course and speed on environmental and social trends, the future is looking bleak for my three young grandsons. Companies need to share my sense of urgency for their sustainability efforts. Once they see the gap between their current level of sustainability performance and where the science-based benchmark goals say they need to be in order to be deemed as truly sustainable firms, I am hopeful that they will put a higher priority on their sustainability initiatives.
Second, current rankings of companies on their sustainability progress is lulling companies into a false sense of security. Corporate leaders think they are doing fine because we have not provided them with a rigorous science-based performance benchmark against which to compare themselves. Once they see how far they are lagging behind the clear goal line for where they need to be, they can unleash the innovation of their important stakeholders to help future-proof themselves against global sustainability megaforces, in large part by redesigning their business models to better avoid associated risks and capture associated opportunities.
Third, there are too many indicators in play. Companies are being rated and ranked against — and being asked to report on — hundreds of different indicators. We need to get our act together and identify a critical subset of indicators that are material to important stakeholders, including the environment, society, and shareholders. The 20-30 material indicators, with their associated science-based performance goals, will provide that “gold-standard” benchmark. So the Gold-standard Benchmark is important because it will help create a sense of urgency, unleash a tsunami of innovation, and identify a critical subset of material ESG indicators.
Bill Baue: On the first two fronts, how are you going about embedding "grandkid urgency" into your benchmark goals —both for companies and for raters? And on the third front, how do you reach a common ground understanding of the truly "key" KPIs — and how do you meld this sense of materiality with the scientific context of real-world goal lines?
Bob Willard: I expect that the sense of urgency will be a by-product of the education and awareness that occurs as companies wake up to how far away they are from the sustainability goal lines for the 20-30 indicators in the benchmark. I expect that many business leaders have no idea how seriously close we are to ecosystems thresholds. At first, they will question the thresholds and the necessary rigorous goals that they drive. However, being very smart people, as they revisit some basic science about how the world works, they will accept that the goals are necessary and that we need to accelerate our collective efforts to attain them. That’s how they will come to share my “grandkid urgency.”
Executives will also recognize that some goals are “mission impossible” for their current business model. Then, they will have a business decision to make: Will they continue down their current unsustainable downward spiral, or will they innovate their way onto the high road and position themselves to capture their sustainability advantage? I’m betting that some will opt to redesign their business models, reinvent their products and services, and future-proof themselves to capitalize on the global sustainability megaforces on the horizon.
On the materiality issue, “material” issues traditionally represent information necessary for a reasonable investor to make informed decisions. These days, sustainability factors that are material to other important stakeholders are, by definition, also material to company success. Company success is material to investors. So, if science tells us that companies are overshooting their fair share impacts on ecological limits and undershooting on maintaining social foundations, that's material to important stakeholders such as employees, communities, customers and the environment – as well as investors. When investors realize this materiality domino effect, they will become a powerful driver of C-suite attention to sustainability. What interests investors fascinates C-suites. That’s how materiality concerns help raise the bar.
Bill Baue: Traditional thinking assumes a financial hit from meeting ambitious, science-based goals, but your work — as well as the 3% Solution from WWF & CDP — finds hidden profit linked to bold sustainability initiatives. How does this counterintuitive logic work?
Bob Willard: After I finished my first book in 2002 about the compelling business case for sustainability strategies, a question was screaming in my head: “If the business case is this good, why isn’t every company embracing sustainability strategies?” To research the answer to that question, I undertook a doctorate at the University of Toronto, completing my PhD in 2005. My 410-page dissertation answered my question. Here’s the one-word version of that answer: mindset.
Most executives’ mindsets about sustainability/ESG initiatives are set when they move for the Pre-Compliance Stage to the Compliance Stage on their sustainability journeys. The bureaucratic hassle and expense associated with end-of-pipe solutions to meet environmental regulations pre-condition them to assume that any further environmental initiatives would just be more hassle and more expense. It is almost inconceivable to them that going to the next Beyond Compliance Stage would be a good thing. However, as they wake up to how much they can save on their energy, water, materials and waste bills with smart sustainability strategies, they start to see the upside, despite how counterintuitive it seems to them.
To reap the full benefits, they need to move to the Integrated Strategy Stage. At this fourth stage, the firm has transformed its business model into a sustainable design aligned with closed-loop, circular economy principles. It re-brands itself as a company committed to sustainability. It injects sustainability principles into its values and company’s DNA. And it embeds sustainability approaches into key business strategies. Instead of seeing “green” costs and risks, it sees business investments and opportunities. At this stage, the company makes cleaner products, embraces life-cycle stewardship, unleashes employees’ innovation and productivity, and enjoys even larger competitive advantages from its sustainability initiatives.
My book is called The Sustainability Advantage, not The Sustainability Sacrifice, for a reason. Our primary role as sustainability champions is to change executive mindsets so that the benefits are self-evident, not counterintuitive.