Expectations for Corporate Sustainability to Save the World Are Overblown
Landrum, N. E., and Ohsowski, B. (2018) Identifying Worldviews on Corporate Sustainability: A Content Analysis of Corporate Sustainability Reports. Bus. Strat. Env., 27: 128–151. doi: 10.1002/bse.1989.
In recent years, many companies have called increasing attention to their environmental work – and sold more product as a result. As hope for governmental solutions to climate change wanes, civil society has turned to the private sector to provide solutions. But is a corporate-led environmental solution really going to aggressively tackle environmental problems?
A new study found that the great majority of currently reported corporate sustainability efforts are done with profit in mind – a weaker form of sustainability. Sustainability, as defined in this study, refers to the effort of businesses to create value while holding themselves accountable to minimize environmental and social impacts. While many businesses define sustainability in different ways, there has been some standardization of sustainability reporting guidelines, with most (85% in 2015) companies using the Global Reporting Initiative (GRI) standard. Currently 90-95% of large businesses release public reports on sustainability.
The research, done by professors at Loyola University Chicago, studied these public reports to find that most businesses are working on sustainability to grow their business or comply with regulations. The researchers, Nancy Landrum and Brian Ohsowski, classify these approaches to sustainability as “weak” and “very weak,” respectively. Landrum and Ohsowski used a five-stage developmental scale of sustainability which companies can progress through to achieve strong sustainability. Beyond compliance and profit-minded sustainability, companies can mature into “systemic” sustainability, “regenerative” sustainability, and then “coevolutionary” sustainability – the strongest form of sustainability.
To arrive at their finding that the majority of corporate sustainability efforts are weak, the study examined publicly available corporate sustainability reports. They classified each companies’ corporate sustainability work from weak to strong, based on the companies’ approach, ambition, vision, and collaboration with other actors. They based their classification on keyword frequency (how often a version of a word appeared) in the reports. For example, a very weak sustainability approach based on regulatory compliance would have a higher frequency of the words “compliance” or “regulation.”
Using keyword searches in sustainability reports is an interesting way to explore how these companies think about these issues, and how they may strengthen the frameworks underpinning their sustainability work. Subsequent studies may want to examine how sustainability worldviews correlate (or not) with a company’s environmental and social metrics – such as how much carbon dioxide (CO2) a company avoids releasing, or how many hours its employees volunteer.
To practice systemic sustainability, companies need to recognize that they can be agents of positive change for the environment beyond the wheelhouse of their specific business. To achieve regenerative sustainability, companies need to work to actively undo damage from the industrial age. To reach the final stage, very strong coevolutionary sustainability, companies need to emphasize working in balance and harmony with the environment. In an article in The Hill, study author Landrum notes that companies like REI and The North Face tout their environmentally-friendly production processes. However, Landrum explains that Patagonia, which goes beyond environmentally-friendly production to ask customers to buy less and repair what they have, is displaying a more advanced sustainability mindset than REI and The North Face.
The authors recognize that progress is difficult given the current status-quo in business, which generally recognizes the right of business to exploit nature for humanity’s benefit, regardless of the impacts to other species (and eventual negative consequences for humanity). The study suggests government regulation is the primary vehicle to drive businesses beyond weak sustainability. The authors cite a previous study by Aneel Karnani in 2011 which found that governmental regulation is the “ultimate way” to change businesses so they operate with public interest in mind.
In another article, Landrum goes beyond this study’s statements to advocate for the restructuring of businesses (and business education) so that profit is no longer their main purpose. She states, “Businesses must exist to improve the livelihood of communities and people… The social responsibility of business is to help save the planet for human life.” To make social responsibility a core business practice across the private sector (or even the main goal of business, as Landrum suggests), for-profit companies would need to expand their priorities from maximizing revenue to also serving society. Currently, there are some businesses that do recognize societal benefits as part of their core business practices. Many of these are “Benefit Corporations” or B-Corps, a different form of incorporating a business which is legal in 33 states within the U.S. These companies include societal values in their corporate governing documents.
As the United States Federal government diminishes U.S. environmental regulations, businesses will feel lighter regulatory pressure to act on sustainability. This makes it even more important for businesses to move beyond weak, compliance-based sustainability to stronger mindsets where they seek out sustainability because it is the right thing to do. Although corporations may not be there yet, the increasing interest in B-corps and their increasing enshrinement in state law in the United States is a very hopeful sign.