US corporations need to step up their game if they are to play a leading role in confronting today's sustainability challenges.
Image via Reuters
A little bit of sanity has returned to the US. With the presidency safely back in his grasp, Barack Obama finally felt able to mention what has been the elephant in the room during the entire election campaign: climate change.
And how important a single sentence can be. As Obama said in his acceptance speech: “We want our children to live in an America that isn’t burdened by debt, that isn’t weakened up by inequality, that isn’t threatened by the destructive power of a warming planet.”
Environmentalists jumped on his words and will be holding him to account. The Sierra Club and 350.org, in an open letter, wrote: “In the wake of hurricane Sandy, as the warmest year in American history draws to a close, as the disastrous drought lingers on in the midwest, everyone is looking for ways to make a real difference in the fight to slow climate change.”
So what contribution can US business make to combating global warming and other key associated sustainability challenges? What is beyond doubt is that corporates need to step up their game. The perceived wisdom on both sides of the Atlantic is that while there are a handful of American businesses that could be considered world leaders in the area of sustainability, such as Nike, GE and Patagonia, in general companies are between two and five years behind the UK, depending on whom you talk to.
It’s important to understand why and a lot has to do with history and culture. First of all there is a long tradition of corporate philanthropy in the US. But while generous donations to good causes might have sufficed in another age, it would be a big mistake to continue to confuse charity with corporate responsibility.
Speak in private to many sustainability managers, even in companies that are considered more progressive, and they tell you that sustainability is still at the periphery, and that boards have still not seen the need to embed it into their core decision making.
Investment in innovation can create new markets
More than that, most US companies are still in the early stages of asking for the business case for sustainability, rather than understanding that business needs to transform in order to meet the challenges of climate change, social unrest, resource scarcity, ecosystem degradation and the loss of biodiversity.
Most conversations are still based around saving money via a short investment payback through energy and resource efficiency, rather than following the examples of GE and Procter & Gamble in recognising how investment in innovation can create new markets while also addressing societal needs.
It is also the case that there has been little regulatory or consumer pressure for companies to act. The power of corporate lobbying to stifle change is America is well known. Who do you think helped fund the £2bn plus election campaign – the most expensive in history – and what favours will be asked in return?
Also looming large is the role of the financial sector. The regulatory necessity to report quarterly earnings continues to drive short term performance and there is little interest among investors in cheering on those companies that are taking sustainability seriously.
In fact, quite the opposite. PepsiCo chief executive Indra Nooyi has come under enormous pressure from Wall Street for allowing PepsiCo’s North American soft drink business to languish while she focused on healthier products.
Procter & Gamble has an ambitious sustainability strategy but is under pressure from activist investor William Ackman, who has been busily building a stake in P&G and is interested in cost cutting.
Let’s not forget the role of the media, which needs to become far more challenging of the role of big business in society and help mainstream sustainability thinking, rather than slavering to traditional corporate interests.
The idea of conscious consumption also presents difficulties in a country in which shopping represents the individual’s right to express themselves. God help those who seek to interfere with peoples’ lifestyles. Just look at the backlash when the New York mayor introduced laws banning the sale of supersize sodas and other sugary drinks being sold in restaurants and other eateries as a way to reduce obesity and related health problems.
Of course, the news is by no means all negative. Sustainability is a journey and while US firms may be behind their European counterparts, at least they are on the first rungs of the ladder. That almost invariably leads to next steps because as companies start asking questions and looking at the evidence, the need for further action becomes inevitable and pressing.
The terrible drought in the summer and hurricane Sandy have woken up both business and the general public to the fact that their climate is changing and that action needs to be taken.
It would also be a mistake to focus only on big business. There is a strong and growing grass roots sustainability movement and the expansion of B Corp shows there are large numbers of smaller enterprises that recognise their purpose in the world is more than just about making as much money as possible and as quickly as possible.
Having spent a few days at the SXSW Eco conference in Austin, Texas, it is also clear there is an energetic activist community, particularly around issues such as food.
One of the great strengths of American society is that it has a powerful can-do attitude and that once it really understands the need to change, it can act with speed and at scale.
So let us hope that the business community looks beyond its false over-optimism, digests the brutal truth about the challenges global society faces, and joins together to face up to the threat that Obama finally found the courage to voice at such a critical moment.