I chose to wait a couple days after the new administration’s Day One actions to write this. The dust needed to settle a bit, along with initial reactions of panic and fear by ESG/sustainability professionals. Although I tend not to put faith in predictions of any sort (especially college football games), here is one I’m comfortable making: ESG/sustainability isn’t going away – but it will change.
Consider this:
- even absent federal regulations, companies still face sustainability-related legal obligations in contract terms, PO conditions, debt covenants, insurance policy terms, financing obligations, commitments to shareholders, supplier codes of conduct, carbon offset projects/obligations, etc
- state and EU mandates on sustainability matters still exist
- sustainability-related legal risks are more developed now than in the past, creating new paths for liability and lawsuits
- ESG ratings still exist and are used in a number of ways
- sustainability-related shareholder activism will continue which companies will have to address
- more companies link their sustainability programs to credible business fundamentals rather than specious claims of stock value
- companies that made capital investments in sustainability initiatives are unlikely to abandon those until the investments are recouped
- it survived near total self-destruction by sustainability professionals in the 1990s
- it survived the President’s first term in office
This may be uncomfortable to hear, but we should actually welcome the coming evolution. Why? Because it pushes us to focus more than ever on business value – eliminating unnecessary distinctions between sustainability/ESG value and business fundamentals.
Sure, there may be fewer mentions of “ESG”, “sustainability”, “corporate social responsibility” and related terms in corporate communications and financial disclosures. But that isn’t inherently negative. Back in 2018, I wrote a book called “Killing Sustainability” that I also updated in 2022. In the Introduction, I said this:
“From the book’s title, anyone would be justified in thinking that I am against corporate sustainability, social responsibility, environmental, health and safety initiatives. The reality is exactly the opposite: I don’t want to end sustainability at all – I want it to grow and thrive as part of the global economic engine. But change is necessary from current thinking… What does it mean to kill sustainability? It means to take a hard look at the past thinking on sustainability/corporate social responsibility and kill the behaviors that create unnecessary obstacles to achieving goals.”
We may be able to “kill sustainability” but it won’t be dead. I hope you are with me – ready to navigate this time of uncertainty balanced by optimism.
Members can learn more about finding and communicating the business value of sustainability here.
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