Sufficient Ambition: Are Current Sustainability Efforts Enough to Break Through Predatory Delay?
By Ralph Thurm & Bill Baue
This ia part 2 of a series highlighting the ‘burning questions’ of Boards and Sustainability Professionals why we need Reporting 3.0 and what it aims to deliver with its Blueprints on Reporting, Accounting, Data and Integral Business Model Design.
What’s the issue?
Things are looking up in terms of achieving sustainability, right? The last several years have seen the launch of the United Nations Sustainable Development Goals (SDGs), the signing of the Paris Agreement on Climate, and the release of Recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). These are hopeful signs, but do they really assert sufficient ambition — particularly for market actors such as companies and investors?
The short answer is: No, not by a long shot.
Don’t get us wrong — the SDGs, Paris Agreement, and TCFD Recommendations are all vital stepping stones in the right direction. But none of these initiatives will actually result in the level of change necessary to transform our economy and society to sustainability, much less its flourishing, prosperous potential. The danger here is that corporate and investor embrace of these initiatives could actually amount to what the earlier mentioned Alex Steffen calls predatory delay: “the blocking or slowing of needed change, in order to make money off unsustainable, unjust systems in the meantime.” Or, looking at it from a hard-nosed business perspective: committing to incrementalist solutions creates opportunity costs, as transformative solutions are ultimately needed, so choosing not to focus on them leaves these necessary opportunities unaddressed.
- Country / Company Data Gap: both the SDGs and the Paris Agreement represent global goals whose achievement is tracked at the national level — via National Sustainable Development Strategies (NSDS) for the SDGs and Nationally Determined Contributions (NDCs) for Paris. Unfortunately, many countries lack NSDSs, and existing country NDCs fall short of meeting Paris goals. But perhaps more importantly, company and investor action plays the pivotal role in achieving both sets of goals, yet the country and company data architectures are mismatched, making it impossible to discern corporate contributions to progress on the SDGs.
- Additionality Gap: Most company activity on the SDGs simply aligns existing efforts to a subset of the Global Goals, but doesn’t set additional ambition nor extend across all the SDGs. Companies therefore miss out on the innovation and investment potential of SDG achievement.
- Risk Reduction v Climate Action: The objective of the TCFD is not to instigate climate action, but rather to identify financial risk associated with climate change. It is therefore unrealistic to expect TCFD to help solve climate change.
- Scenario Analysis v Transition Plans: Furthermore, the TCFD calls for scenario analysis, asking companies to assess risks of various potentialities; however, when ExxonMobil reports on its scenario analyses and finds no risk to its business model from climate change, reasonable people must question the validity of this approach. Reporting 3.0 Advocation Partner Preventable Surprises calls for taking the next step beyond scenario analysis by producing transition plans to <2°C business models with specific goals and timelines, as e.g. AEP has done in its transition plan report.
What can you do about it?
The SDGs, Paris Agreement, and TCFD recommendations provide most value when viewed as intermediary steps toward more significant transformation to thriveable economies. Here are some ways they add value:
- From Net Zero to Gross Positive Impact: View the SDGs and the Paris Agreement as net zero negative impact thresholds, with the potential to contribute regenerative / net positive (or even gross positive) impact.
- From Curing Symptoms to Resolving Root Causes: Reducing carbon emissions can represent a band-aid solution, whereas eliminating fossil fuel reliance from the business model represents a more root cause solution. And recognize that climate change itself is a symptom of a system that systemically overshoots its resource base, disrupting the balance of natural cycles (such as the carbon cycle.)
- Assert Purpose: Companies can leapfrog past incremental solutions by identifying their core purposes, and then committing to that purpose. What would your contribution to a better world be if all SDGs were successfully implemented by 2030? Is your license to grow based on that contribution?
What will you have achieved?
While TCFD seeks to reduce financial risk, it ironically solidifies (or even potentially exacerbates) systemic risk and existential risk by falling short of resolving the instigating problem of climate change. Likewise for the SDGs and the Paris Agreement. The key to more comprehensive solutions is to transform the paradigms that create the problems to begin with.
What question will we discuss next time?
What is the ‘ultimate end’ that we need to achieve to calibrate our strategies? How would a Green, Inclusive and Open Economy help? Why do we actually need this transformation? See part 3 of our series here.
Please add your feedback, the authors Ralph Thurm and Bill Baue of Reporting 3.0 will look at all responses. And don’t forget to ‘wave’ if the above resonated with you ;-).
[Context of this series: The sum of these articles form the basis of an Implementation Guide that summarizes the total value of Reporting 3.0 in implementing a future-ready sustainability strategy and disclosure approach, in line with the idea of a Green, Inclusive and Open Economy. By posting these articles here Reporting 3.0 seeks feedback in the writing process of the final document, to be released as Blueprint 5 at the 5th International Reporting 3.0 Conference in Amsterdam, The Netherlands, on June 12/13, hosted by KPMG, see www.2018.reporting.org]