The year of unsustainability

We will see whether business and governments are serious about sustainability, says Daniel Franklin

Steve Carroll

For business, the buzzword of 2008 was “sustainability”. Never properly defined, it meant different things to different people, which of course added to its charm. In part it was a new way of packaging the clumsy old “corporate social responsibility” (CSR). And it added a virtuous green dimension: sustainable business would help to save the planet. So companies appointed chief sustainability officers and printed (or, to avoid felling more rainforest, electronically distributed) sustainability reports full of photographs of green fields and blossom.

But that was then. In 2009 sustainability will take on a new meaning in boardrooms: staying in business. As recession bites and growth slows, bankruptcies will soar. To sustain profits, companies will slash costs and cut jobs, while consumers will be even less prepared to pay extra for organic food or air-travel offsets.

In these harsher circumstances many companies will tone down their loud green initiatives and instead quietly emphasise value for money. The budgets for worthy projects in the developing world, let alone for supporting opera houses, will be trimmed or cut altogether as their champions find the spending impossible to defend amid the lay-offs. Even the easy wins in the sustainability business—saving both money and the planet by cutting energy usage—will be less rewarding with lower oil prices.

The good, the bad and the ugly

Some of this will be salutary. In the face of the fashion for CSR, companies have tended to make two mistakes. First, they have been too defensive about the benefits they bring to society by the simple fact of being in business. They provide employment, as well as the goods and services that their customers want—and the threat of job losses and even bankruptcies will serve as a powerful reminder of this basic reality.

Second, many companies pretend that their sustainability strategy runs deeper than it really does. It has become almost obligatory for executives to claim that CSR is “connected to the core” of corporate strategy, or that it has become “part of the DNA”. In truth, even ardent advocates of sustainability struggle to identify more than a handful of examples. More often the activities that go under the sustainability banner are a hotch-potch of pet projects at best tenuously related to the core business. The coming shake-out will help to remove some of this froth.

Yet it would be wrong for companies to conclude that they can forget about trying to be good. The forces that have pushed companies to fret about sustainability—the scrutiny from the internet, multiplying lobby groups, popular concern about global warming, the threat of lawsuits for misbehaviour on human rights—are not about to disappear. Nor will the desire of potential recruits to work for companies with “values” suddenly vanish. In the competition for the best business-school graduates and other high-flyers, especially once the economy starts to recover, companies that show that they were not mere fairweather friends of sustainability will be at an advantage.

And if companies are not seen to take their social responsibility seriously, governments will intervene to change the rules by which they operate. Some will force companies to sell greener products (for example, by banning the sale of incandescent light bulbs). Others will legislate on executive pay, or oblige banks to lend money in ways the state deems desirable. After rescuing the financial system, many Western governments will imagine that they are the best judges of how to run businesses responsibly.

Yet in 2009 governments face their own test on “sustainability”. A summit in Copenhagen at the end of the year is supposed to hammer out a post-Kyoto agreement to cut greenhouse gases. Already pressure is growing to avoid the growth-inhibiting restrictions needed to meet ambitious carbon-cutting targets. Failure to reach a deal will mean, in effect, that the world gives up seriously seeking to stop global warming (see our special section on the environment). Instead, attention would turn to ways the world might adapt to climate change rather than prevent it.

Governments and businesses alike have talked up their commitments to sustainability in recent years. In 2009 both will have to show whether they really meant it.

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