Some 23% of Fortune 500 corporations claim to engage with the Sustainable Development Goals framework. Yet, a peer-reviewed study found that a measly 0.2% have developed concrete methods and tools to evaluate their progress toward relevant SDGs.
This illustrates the disconnect between the stated environmental commitments of business leaders and the reality within their organizations and their impact on society at large.
Businesses claim to recognize the need to confront how they participate in the economy, yet they are unwilling to decouple the provision of their goods and services from relentless consumption and externalization of costs. They seem institutionally incapable of acting on this inconvenient truth.
Much of the progress in the global ESG movement has been repeatedly challenged–and even exposed as greenwashing. If the business community truly wants to sink the greenwashing moniker and be part of the solution, then it must embrace a radical transformation that proves it knows how to deal with the issues arising from destructive business models, from climate change to pollution and biodiversity loss.
That doesn’t mean hiring a handful of people who can write an ESG report or even a “head of sustainability” who also runs other corporate social responsibility (CSR) initiatives. Instead, companies need a long-term plan to build institutional competence and hire experts who understand scientific and technical issues.
Most companies do not have qualified people who possess the knowledge on how to reduce carbon footprints, develop mitigation scenarios against growth projections, or even map out their effects on stakeholders.
Only 29% of almost 1,200 Fortune 100 board directors had relevant ESG credentials, according to a 2021 study from researchers at the NYU Stern Center for Sustainable Business. Even then, these credentials are largely concentrated on the social pillar, neglecting environmental expertise.
Meanwhile, over half of the 250 largest companies on the Fortune Global 500 don’t even have leadership-level representation for sustainability, and an alarming two-thirds of NASDAQ 100 companies don’t have a dedicated member of their board or leadership team responsible for sustainability matters.
That lack of in-house capability means turning to external consultants—who try to preserve the status quo and improve efficiency, rather than pursue more fundamental changes to the business model.
No large multinational would pick a non-specialist to manage its treasury, cash flow, or legal compliance. Nor would anyone serving in these key positions serve double duties in another role.
It’s not a question of economics, investor relations, communications, or even risk assessment. It’s about building a science-based system of inquiry, which then drives business values and decision-making. That requires experts who know what they’re talking about and know what they’re doing. Without basic scientific competence, the right questions won’t even be asked.
Unfortunately, companies make the common mistake of outsourcing sustainability transformations to external climate or sustainability experts, consultants, ESG report writers, or green financers. Invariably, they are hired to show that business-as-usual solutions are possible, while still complying with ESG reporting mandates or ambitious–and even unrealistic–net zero commitments. These so-called solutions are positioned as business opportunities to get the buy-in of management, thereby stifling honest inquiry and innovation.
Having worked in sustainability for over 30 years with some of the largest global corporations, I have witnessed the birth of the first CSR projects and reports, reporting exercises from the Global Reporting Initiative (GRI), and now the transition to ESG and sustainability reporting.
In many companies, these efforts take up more resources than actually doing anything to minimize socio-environmental impacts or invest in employees who could surpass the status quo.
Businesses need to start doing three things if they want to stay ahead of the curve, meet the demands of consumers and regulators alike, and fulfill their role in the social contract.
First, A sizeable portion of their workforce should have the opportunity to learn about the key issues, become aware of how their company’s operations affect society, and be allowed to get engaged in finding solutions. Sustainability training should not be viewed solely from a compliance perspective or for a designated small group of sustainability experts but as an opportunity to build competency that empowers employees to act across the value chain and innovate. A minimum critical mass is needed to influence decision-making across the company on a day-to-day basis and lead to the transformation of culture and practices.
Second, they need to hire scientists and technical experts to lead their sustainability efforts–and make sure they can fully grapple with the business model and innovate.
Finally, much like a company’s chief financial officer or general counsel, the head of sustainability must actually have the technical expertise–as well as the autonomy and power–to do their job. The role is too important to be handed off to a senior manager with no experience or expertise, or to one serving in multiple roles.
Without the precondition of an unwavering commitment to widespread competence in the organization, the talk of sustainability sweeping the business world will remain just that–talk.
Chandran Nair is the founder and CEO of the Global Institute for Tomorrow.