Green claims need a framework of standards

Mar 30, 2020
Originally published on Business Post, 1 March 2020

Ten billion dollars is a staggering amount of money. It’s the amount that Amazon’s Jeff Bezos, one of the world’s most prominent business people, promised last week to contribute to fight climate change. It's rare that business imitates politics yet this is what seems to be happening in the growing debate over sustainability.

Bezos’s commitment is only an outlier by virtue of the scale of the money involved. A survey last year by environmental consultancy EcoAct found that 99 per cent of FTSE companies measured or reported on their carbon emissions. This kind of behavioural change seems not to be just confined to larger industry. It is being adopted by businesses of every size.

At a business panel discussion on sustainable finance held earlier this month in the Irish Embassy in London, a straw poll was taken of more than 100 attendees from all walks of business life. They were asked whether or not their organisations were taking any steps, however small, to protect the environment. Not a single person in the room admitted to their organisation being indifferent or not changing behaviour or policies.

Some of the changes identified were obvious, like reducing the use of single-use plastics. More significant approaches also featured, like changing the company's investment strategy in favour of greener industry. Some companies tended towards less obvious tactics, like sourcing supplies for the staff canteen nearer to home to reduce food air miles.

If the commitment evident in the business community towards sustainability could be transposed into the political sphere, the likes of the Green Party would have no difficulty whatever forming governments.

Yet for all the business commitment, the topic of sustainability itself remains vague and somewhat elusive. Part of the problem is how to define sustainability. When industry speaks of sustainable finance, the underlying assumption is often that it has to do with environmental conservation – the reduction of carbon emissions, the conservation of scarce natural resources, and a general reduction in the generation of pollutants.

Other important topics, like reducing the exploitation of labour in developing countries or ensuring diversity and equality of opportunity in the workforce closer to home, feature less. Surely they have as good a claim to being sustainable goals as not setting the planet on fire? Such goals feature less regularly in the debate despite having been identified by the UN as legitimate goals towards sustainability.

Lack of transparency

Given that omission, it's reasonable to ask whether the business drive towards sustainability is as much about marketing as environmental management. Greenwashing, the practice of businesses advertising their green credentials primarily to secure greater market share, is a widely known phenomenon. It smacks of a lack of transparency. Nevertheless, it makes forming an independent assessment of the green credentials of a business more difficult. The difficulty is more accentuated when investment decisions are being made on the back of sustainability claims.

Only slow progress is being made on resolving this problem of transparency. Individual agencies and regulators do set standards to help determine the green credentials of particular types of fuels, equipment and machinery and so on. But regulators and standard setters are still pretty much at sea when it comes to establishing widely accepted norms for reporting credible sustainability behaviours in the annual reports and accounts of companies.

There are at least eight different governmental organisations, quangos and professional associations with multinational reach which are currently attempting to formulate or contribute to acceptable industry wide standards. Nothing coherent has yet to emerge from these efforts. It is tricky to put hard numbers on any company's observance of environmental sustainability, human rights, diversity or workplace inclusiveness.

Without hard numbers, subjective judgements can raise as many questions as they resolve. The drive for ethical investment, only buying shares in businesses which in some way are believed to be doing the right thing, has impacted many industries such as tobacco and mining.

The drive towards corporate social responsibility has permeated all the way up to the American Business Roundtable, a leading US corporate think tank. Last year it posited that the purpose of a corporation should include delivering customer value, employee investment, fair dealings with suppliers and community support as well as the more traditional purpose of creating long term value for shareholders.

All this is very worthwhile, but any claims to progress on sustainability should be based on a robust framework of standards, and not merely subjective value judgements. Bezos says his contribution should be applied to “scientists, activists, NGOs — any effort that offers a real possibility to help preserve and protect the natural world”. Included in such efforts should be the development of objective and transparent sustainability reporting standards for business.

After all, what gets measured gets done.

Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland.