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January 23, 2020
Why Corporate Sustainability Must Change
By Patrick Flynn, Vice President Sustainability, Salesforce
In this article, you’ll learn:
How business stakeholders are pressuring companies to prioritize sustainability.
The benefits of embedding a corporate sustainability strategy company-wide.
How new technologies, partnerships, and robust environmental data give companies a chance to do well and do good, while making the biggest impact.
2019 was another year in which natural disasters occurred with unnatural (or at least unprecedented) force and frequency. The British charity Christian Aid reports that climate change amplified 15 extreme weather disasters, from the wildfires in California to Typhoon Hagibis in Japan, resulting in ecosystems sacrificed and billions of dollars lost. Through the end of 2019 and into 2020, Australia is in the midst of its worst fire season ever— having taken the lives of at least 24 people and an estimated 1 billion animals, while torching 15.6 million acres and destroying 1,400 homes.
Natural disasters like these have wreaked havoc over the past decade, but what stands out about this moment in time is the stark contrast in how society has responded. Clear and daunting science, devastating fires and storms have ignited powerful marches and activism — an unprecedented 7.6 million people took to the streets to strike for climate action last year, and Time Person of the Year was youth climate activist Greta Thunberg. For the first time ever, climate crisis filled the top five places of the World Economic Forum’s risks report.
Climate change is front and center in a way it’s never been, which gives me hope.
And, a new form of capitalism will be one of the most powerful levers to fight it. Blackrock CEO Larry Fink warned in his most recent letter to CEOs that there will be a significant reallocation of capital — and sooner than we think.
With public pressure for climate action at an all-time high, and the breadth, scale and speed with which transformation must happen, it is imperative that companies prioritize climate change mitigation and fast when building their corporate sustainability strategy.
What is corporate sustainability?
Corporate sustainability has evolved. Previously, corporate sustainability was an approach to business that prioritized a neutral or positive environmental impact, where businesses focused on getting their house in order, while trying to leave the planet better than when they found it. This aligns with the definition of sustainability put forward by the UN: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
But given the emergency of the climate crisis, corporates must go beyond the methodical, one-foot-in-front-of-the-other approach: corporate sustainability leadership is now reserved only for those that pull every possible lever to meet the urgent needs of the planet.
“We all have a role to play, based on our unique skills, resources, and core competencies — I challenge you; what can you do with what you have in your toolbox to deliver impact that planet earth might actually notice?” Suzanne DiBianca, Chief Impact Officer at Salesforce said onstage at Climate Week 2019.
At Salesforce, we’re thinking big. From our suppliers and our customers, to our technology and our brand, what are our biggest levers of influence, and how can we make them change agents in the greatest and most high-stakes challenge ever — the climate emergency.
Here’s what companies need to know about their role in climate action and the future of corporate sustainability.
Why is corporate sustainability important?
Stakeholder expectations are changing
For years, the primary role of business was seen as generating long-term value for shareholders, but this is no longer the case. In August, one of America's largest business groups, the Business Roundtable, updated its Statement of Purpose, dropping its “shareholder primacy” creed that has driven U.S. capitalism for decades, urging companies to consider the environment and workers’ well being alongside their pursuit of profits. Customers, employees, suppliers, communities, and shareholders are all mentioned as key stakeholders and considerations in a company’s strategy in the updated statement.
Investors too are looking beyond tangible assets to determine a company’s success. The Sustainability Accounting Standards Board (SASB) finds intangibles such as intellectual capital, brand loyalty, and customer loyalty today comprise the majority of corporate valuations, a complete reversal from the 1970’s, when many of today’s corporate leaders were in business school. Environmental, social and governance (ESG) performance enhance and protect intangible value.
“Today's customers, our investors, our employees, all our stakeholders, and especially our millennial and gen z employees, want to be associated with companies that take the lead on sustainability and the spirit of innovation that has transformed our world,” says co-CEO of Salesforce, Marc Benioff.
Investors seek trusted and transparent environmental data
The investor community has been pressuring companies to increase transparency and action on environmental, social, and governance initiatives. Joel Makower, Chairman & Co-Founder at GreenBiz echoes this sentiment. “Investors, particularly institutional investors, are flipping the old storyline from ‘What is the impact of business on the environment? to ‘What is the impact of the environment on business?’” In other words, how will a company’s facilities, operations, supply chains, customers, and employees fare in a world of increasing extreme weather events? In asking these questions, investors are pushing companies to report on, and consider these risks.
But, investors need higher quality data to make strategic decisions. Typically a company’s environmental data is gathered and held by a small number of employees and the process is typically the responsibility of one of a junior environmental employee, or even the side project of someone with a different day job. Imagine if financial data was gathered this way! Trusted environmental data is needed for stakeholders inside and outside the company to make strategic decisions.
Customers want to purchase from values-driven organizations
Customers, too, have been increasingly vocal with their attitudes (and have increasingly put their money where their mouth is), pushing companies to look beyond profit to foster positive social change. A study by Salesforce Research found that 93% of consumers say companies have a responsibility to look beyond profit and make a positive impact on the world — up from 80% in 2016. More and more, consumers are actively seeking to buy from environmentally-sustainable companies, and we see this well-understood B2C trend quickly entering B2B relationships too.
As Helene Li, Co-Founder of GoImpact states, “We see more corporations yielding to the pressure from consumers’ demand on responsible business and sustainable processes of operations.” Purchases are no longer transactional; to connect with and deepen relationships with your customers, companies must be transparent about where their products come from, how they’re produced, and why they’re creating the products in the first place. Shoe brand, Allbirds, set out to create the world’s most sustainable shoe, and rallied a loyal consumer base in the process.
Employees want to work for values-driven organizations
That same individual making a values-based purchasing decision is also making values-based employment decisions. To be successful, corporations must instill and live by strong values to attract and retain today’s top talent. A November study by Salesforce Research found that 76% of Dreamforce attendees expect sustainable business practices from their company.
This pressure from business stakeholders makes the case that there’s not only a moral, but business imperative to act.
What are the benefits of corporate sustainability?
Embedding a corporate sustainability strategy ensures the success and longevity of a business.
Employee retention. Today’s workforce, especially millennial employees, want to work for a values-driven organization that offers opportunities for employees to tap into their passions and make an impact. Business professionals who say their company positively impacts the community are 3.0x more likely to feel proud to work there.
Improved operational efficiencies. Significant cost reductions can result from improving operational efficiency through better management of natural resources like water and energy, as well as minimizing waste. One study estimated that companies experience an average internal rate of return of 27% to 80% on their low carbon investments.
- Full accounting of risk. Sustainability increasingly is tied to a variety of risk factors for companies: financial risk, reputational risk, business continuity risk, and the risk that a company’s social license to operate may be jeopardized. “Companies and industries that are not moving towards zero-carbon emissions will be punished by investors, and go bankrupt,” the governor of the Bank of England, and now UN Special Envoy for Climate Action and Finance, Mark Carney warns.
- Strategic decision making. Wherever there are risks there are opportunities. “Companies are creating real strategic advantage by adopting sustainability measures their competitors can’t easily match,” says George Serafeim in a recent Harvard Business Review story. Companies that prioritize sustainability have the advantage of seeing ahead, seizing opportunities and avoiding hazards better than those who look shorter tem and in a more siloed fashion.
What are some effective corporate sustainability strategies?
1. Align your sustainability decision making with your company’s mindset
Businesses should ensure that their sustainability goals align with long-term growth strategies, and financial and operational priorities. As Chief Impact Officer at Salesforce, Suzanne DiBianca states, “if senior leadership doesn’t prioritize the company’s environmental agenda, then individual business units won’t either. The result may be fragmented, decentralized, and not necessarily aligned with top-level goals.” If your company makes decisions based on values, explain sustainability’s value-alignment. If your company makes decisions on sharp economic data, make the business case.
There are many good examples of what this looks like in practice. Take Unilever’s Sustainable Living Plan which has the ambition to decouple growth and output as well as reduce its resource footprint by focusing on waste reduction, resource efficiency, sustainability innovation, and ecological sourcing (like in organic palm oil). Unilever has also been tracking the sales of sustainable products and found that they’re growing faster than their conventional ones.
At Dreamforce, Courtney Holm, Global IT Program Manager, Sustainable Business Innovation at Unilever speaks on how this integrated strategy pays off, “Putting sustainability at the heart of our business model helps us to stay relevant to customers and consumers, but it also helps to strengthen the relationships with key stakeholders and partners with the hope that we can all work together toward a more sustainable future.”
2. Engage your stakeholders, particularly your employee base
Tapping into your employees to champion environmental values is one strategy we’ve found incredibly successful here at Salesforce. We make it easy for employees to be a part of our initiatives, by offering in-office events and out of the office volunteer opportunities to make everyone empowered to make an impact. We believe these moments create ripple effects — where employees take what they’ve learned inside the office, share with coworkers, and then take back to their homes and communities. Who knows: the person approving your newest sustainability initiative may end up being someone you cleaned a park with or who has heard of your positive reputation and the impact you're having from colleagues.
3. Leverage your company’s super power
Fighting climate change with your company’s unique skillset is the best way to move fast enough for the planet. As Sam Arons, Director of Sustainability at Lyft, discussed at Dreamforce, it’s about “finding your company’s ‘superpower’ and thinking creatively about how you can put that into action to help address some of these very important issues, like climate change.” Lyft’s superpower is rides, so they’ve thought creatively about how they can use rides to enhance and promote environmental responsibility and currently offer carbon-neutral rides. One day, they hope to provide rides that are all-electric.
For Salesforce, it was leveraging our people and our technology to scale up our internal carbon accounting solution to a full-scale climate action product, Sustainability Cloud, that our partners and customers could use in their efforts against climate change. When it came time to scale up and commercialize the product, we didn’t need to hire new employees with new skills the company hadn’t seen before. Instead, we tapped into our employee base — experts in delivering tools to make our customers successful and passionate about sustainability.
4. Participate in partnerships to amplify impact
Every individual, institution, government, community, and corporation has an essential role to play in advancing climate change solutions. Businesses particularly can glean ideas and gain support for their journey by teaming up with other initiatives that share similar goals, like the Renewable Energy Buyers Alliance, the Step Up Declaration, We Mean Business, The Corporate Colocation and Cloud Buyers’ Principles, Task Force on Climate-Related Disclosures (TCFD), Sustainability Accounting Standards Board (SASB), and We Are Still In.
Cross-sector partnerships are also vital to curbing climate change at scale. Environmental action requires the participation of the private sector along with governments, universities and civil society organizations, but organizations need to obtain a better understanding of each other to build powerful cross-sector partnerships, according to James Ellsmoor, Forbes Contributor and Director of the Island Innovation and the Virtual Island Summit. “Building coalitions is the best way to enact meaningful change,” says Ellsmoor. Salesforce works with NGO, U.S. Green Building Council (USGBC) to help accelerate corporate progress in carbon-related sustainable built environment goals, like measuring embodied carbon and creating net-zero buildings.
What does the future of corporate sustainability look like?
Corporate sustainability is charging into the realm of innovation. Sustainability practitioners in the corporate space are challenging the status quo — flipping traditional business models on their heads and thinking differently to find the competitive advantage in a more sustainable solution. Here are some of the trends expected to take shape over the next couple years:
Nature-Based Solutions. Agriculture, land use and oceans have been historically overlooked by businesses as they’ve prioritized materials, electricity, and transportation in their corporate sustainability strategies. However, these focus areas take the brunt of the effects of climate change and simultaneously represent a promising opportunity for corporations to bring forward solutions. The World Economic Forum announced at Davos their new 1t.org initiative, designed to support the trillion tree community and create a platform to bring together stakeholders who, collectively, have the capabilities to organize reforestation at a huge scale and empower entrepreneurs and NGOs on the ground. In support of the 1t.org mission, Salesforce has set a goal to support and mobilize the conservation and restoration of 100 million trees over the next decade. “We’re facing a planetary climate crisis and trees are one of the most effective ways to sequester carbon and stop the worst effects of climate change," says Benioff.
Rise of Environment, Social and Governance (ESG) data. The demand for investor-grade environmental data as well as a streamlined, universally-accepted disclosure methodology is increasing. As ESG factors become more widely-accepted as considerations for a company’s success, corporates will need to deliver high quality data to validate their claims and investors will demand better data to define and execute their ESG-informed investment strategy.
Frameworks, not rankings. There are over 100 sustainability rankings and ratings systems in the world, each with its own methodology and insufficient synergies between them. Robert Rigobon referenced in his MIT study the devastating discrepancy between different ESG rating systems, finding it very likely that a company in the top five percent for one rating system, would appear in the bottom 20 percent of another. As investors increasingly turn to sustainability factors as a driver in investment value, underlying, trusted metrics, not bespoke rankings, will become the new norm so that analysts can develop their own points of view from the raw data.
Deep collaboration and orchestration. The role of corporate sustainability leaders will be to inspire movements and systemic change in their ecosystems. It will be about connecting employees who see the crisis around them to the work that you’re doing, and orchestrating the marketplace of sustainability work that needs to be done. SDG 17, “Partnership for the Goals,” and especially partnerships for climate action, in some ways is the most important SDG of them all.
There’s a lot at stake. Without an integrated corporate sustainability strategy, companies can lose their customers, their license to operate, and over time, — the most fundamental risk of all — the environment we all share.
The good news is that we already have the necessary ideas, systems, and solutions. The challenge is to accelerate the knowledge and growth of what is possible, leveraging innovation and technology to drive climate action. The greatest challenge is the clock, and delivering impact at global scale fast enough.
This is why we need you! You are not late. You are not on the outside. You are not underprepared. Just the opposite. You are just in time. You are a stakeholder. And to quote Paul Hawken, “You are brilliant and the Earth is hiring.” Go ahead and step into the adventure and bring your company with you.
The call for companies is clear: be bold and ambitious, while demonstrating integrity in your sustainability goals. Elevate climate change in your approach to corporate sustainability because your stakeholders and the planet demand it.
Salesforce Executives are in Davos, Switzerland for the annual World Economic Forum conference, leading conversations on how business can be the greatest platform for change. Check out the latest here.