Putting business thinking into sustainability

Cambridge Institute for Sustainability Leadership offers new hope for ambition

New thinking from the University of Cambridge Institute for Sustainability Leadership (CISL) argues that we need to flip the Environmental Social Governance (ESG) model on its head if global businesses are serious about tackling the climate and nature crises.

In Survival of the Fittest: From ESG to Competitive Sustainability interim CEO Lindsay Hooper and CISL Fellow Paul Gilding argue that we need to put business into sustainability rather than tacking ESG onto the business agenda as an add-on.

They also offer an uncomfortable truth to the global business world they advise: despite decades of commitments, legions of advisors, innovation and investment, we are still not on track to make the changes needed to keep global temperatures from rising to catastrophic tipping points and slow destruction of the natural world.

“Simply put, the problems are increasing faster than solutions are being deployed. We see record carbon emissions, biodiversity still in decline, and income and wealth inequalities worsening in many Western economies, leading to social polarisation.”
Lindsay Hooper and Paul Gilding in 'Survival of the Fittest: From ESG to Competitive Sustainability '

Their most recent discussion paper centres around the argument that we do not have time to rebuild institutions and economic systems before the global ecosystem spirals into chaos.

Instead, we must leverage the market’s potential to deliver change quickly and at scale by redesigning business incentives and penalties. This will require a step change from business.

An uncomfortable truth

Founded in 1994 by its Patron, HM King Charles III, CISL works with business, finance and government to accelerate action for a sustainable future. It operates a global network of leaders and innovators helping them understand sustainability challenges and how to address them.

It does this through a unique mix of education, research, innovation and policy engagement, working across its hubs in Cambridge, Cape Town and Brussels.

That puts the authors in an authoritative position to offer credible business and policy ideas to confront the rising challenges.

“Difficult questions arise, including: Is there something profoundly wrong with our collective approach? Why did we not see this failure earlier? Do we need to question the very idea of market-driven change?”
Lindsay Hooper, interim CEO of CISL

Hooper wrote in a September editorial for The Financial Times that ESG fails to address a fundamental tension between profitability and sustainability, making it mostly an extra layer on top of business models to manage risks and enhance reputations.

Lindsay Hooper, interim CEO, CISL

Lindsay Hooper, interim CEO, CISL

“As long as the market rewards short-term gains over long-term resilience, businesses will harm the planet, and markets will destroy the foundations on which they depend,” Hooper writes.

She praises some of companies getting it right – the Swedish steel, mining and utility businesses that formed the Hybrit initiative – working for a reinvention of their industry with solutions such as fossil-free steel.

But Hooper and Gilding also point to the sclerotic progress of the German car manufacturing industry, whose response to existential risks from international competition in the electric vehicle market includes efforts from some companies to prolong the life of the internal combustion engine.

Images of buildings with rooftop gardens

A simple solution?

The discussion paper says there is a simple two-pronged approach to a more pragmatic business approach that engages with market fundamentals to address the climate and nature crises.

It starts with changing the mindset. To stop seeing sustainability as a ‘nice to have’ alongside commercial performance, but about long-term competitive positioning.

“For those who choose to act, the question must no longer be how much sustainability related activity can we afford? And must instead be how do we accelerate, navigate and benefit from the transition, and secure our long-term business success?”

Secondly, both Hooper and Gilding say in their report that social and political support for the radical market change required to address global challenges will be critical and, encouragingly, that there is underlying public support for addressing sustainability.

“There is no political movement arguing for climate destruction, for more refugees, for food crises, for water scarcity or for more inequality."

On the contrary, survey after survey tells us that citizens are deeply concerned about climate and nature. Governments can and must act, and they can do so in ways that secures buy-in across political divides, they say.

Paul Gilding, CISL Fellow

Paul Gilding, CISL Fellow

The conditions are ripe for business to push for and governments to introduce consistent, long-term government commitments and credible delivery plans, for the right policies in the right place to unlock investment and sustainable innovation.

Of course, this raises important questions about the kinds of policy measures and government actions that are most effective, questions that Cambridge academics and CISL’s leaders groups are working on.

But this isn’t just about sitting back and waiting for governments. There is an important role for business here – to take control of the story from those seeking to defend the status quo for personal gain - and make the case that swift action on sustainability challenges will be good for economies, for jobs, for security, for health, Hooper and Gilding say in their report.

“To date, progressive businesses have advocated co-operatively, gently and cautiously. Many have opted to step back and keep quiet in the face of recent aggressive backlash. This must change. A more robust and interventionist approach by a critical mass of businesses is essential now.”