The global recession was a good thing for sustainability
The obituary had already been written. Following the crash of 2008, predictions whirled that the downturn would sound the death knell for ‘corporate social responsibility’: a global study by Booz & Company in 2008 warned “green” and “other corporate responsibility initiatives” would be put on ice due to the recession; in 2010, another study by KPMG and BITC proclaimed corporate responsibility budgets had already been slashed by a third of UK firms.
But far from derailing responsible business practice, the recession has accelerated it.
Pressure to cut costs has promoted greater operational efficiencies and unlocked new, smarter, circular thinking on resource scarcity. The fall out of “casino capitalism” has taught us the value of having values and prompted businesses to rethink their higher purpose through a societal lens. Even industries, such as luxury goods, where business models and social mores implied insularity from ‘baser’ real world problems, have been forced for the first time in a decade to engage in and act on scrutiny of their supply chains.
All of this has helped to raise the bar for corporate sustainability. Having plateaued between 2003 and 2007, the average company score on theDow Jones Sustainability Index markedly increased following the crash.
Much of this has been achieved not despite economic upheaval, but precisely because of it. Only complete failure of the system could have set in train such a deep and wide-reaching reassessment of its founding principles.
So with recent headlines claiming the UK economy has now “turned a corner” – that “Britain is now growing faster than any other major economy”; that the UK is even on course to become Europe’s top economy by 2030 – what happens now our broken system appears to be on the mend?
Growth, while creating stability and putting people in work, does nothing to eradicate the challenging physical realities we face, and if anything will serve to make them worse: increasing competition for finite resources and accelerating carbon emissions that will compound the effects of climate change.
But growth does potentially alter the way the agenda is framed and the action it inspires. The manifest failure of the current economic system has been an essential premise in shaping the argument for a more equitable and sustainable alternative. Renewing the apparent validity of that old “failed” system will only make the business case for sustainability tougher and therefore more critical to establish.
Strengthening this case is important because, despite some progress, the sustainable business project is at a fragile stage of development. As Accenture’s recent study for the Global Compact (PDF) suggests, business leaders believe they have taken their companies as far as they can while acknowledging we are far from where we need to be.
The chief barrier remains the difficulty of attributing financial value to sustainability. In 2007, just 18% reported a failure to trace such a link; in 2010, this rose to 30%, and in 2013 more than a third—37%—reported that the lack of a clear link to business value is a critical impediment to further progress. Only 5% of the world’s largest companies currently include information on the financial value at stake through environmental and social risk, according to a new report by KPMG.
Against a shifting backdrop, business must develop a new narrative for corporate sustainability that is congruent with economic growth and financial performance – but which also shows why and where this storyline is at best, incomplete.
One clear example of the latter is youth unemployment – one of Europe’s most serious economic and social challenges. In the UK and across the continent, research by IPPR shows young people areexperiencing a “jobless recovery” as unemployment rises among them while economies improve and older people succeed in finding work.
Now is the time to “think connected” on sustainable business, looking beyond financial performance alone to develop a framework for generating, quantifying and communicating what PwC has termed “good growth”. This is a more complete, inclusive, and long-term perspective on the social and shareholder value businesses create in the context of the global, social, economic and environmental mega-forces that will enable or inhibit it.
But, in widening our lens, we should not lose sight of the most important question the recession has taught businesses to consider: where these potentially myriad indicators intersect and why it matters that they do. Stripping back complexities to define the core purpose of a company, what it exists to do and why consumers, shareholders and society should care that it exists at all.