Finding the responsible shade while setting realistic environmental goals
By Chris Park
Just a few years ago, it seems, companies that made public commitments to social and environmental responsibility faced a great deal of skepticism from critics who questioned the value or sincerity of sustainable approaches to business.
Now, the tide has started to turn. More and more people are getting on the green bandwagon for any number of reasons. In business as well as social circles, I am seeing that it’s more acceptable and even admirable to be concerned about the environment. Investors and analysts are seeing the market favor green leaders and punish laggards, even in light of current economic challenges. Some of the world’s best-known companies – such as Apple, Toyota, United Technologies, Nucor Steel and many others – are openly admired for their forward-thinking environmental and social practices.
You’d think this shift would help make a CRO’s job easier. In some ways it does, if only because there appears to be less open skepticism and hostility when trying to persuade people that environmental responsibility is worth money and effort. But at the same time, the public’s increasing awareness, the growing and sometimes contradictory body of science about environmental issues, regulatory pressures and other factors are putting new pressure on CROs and other executives that did not exist when sustainability was an interesting but lower-priority issue.
Let’s start with the heightened scrutiny that a public commitment to environmental sustainability can bring to an organization.
Responding to widespread public sentiment, many companies are incorporating green goals into their business plans: to recycle, become carbon-neutral, curtail energy consumption or make their products more environmentally friendly.
Many have undertaken efforts to produce Global Reporting Initiative-format reports, submit information to the Carbon Disclosure Project, or address sustainability efforts in their annual report, marketing efforts or other media.
The first problem is the “greenwashing” challenge: Companies may be taken to task for making promises that look good on paper but that actually have little environmental impact. How can a company demonstrate that its activities are, in fact, more truly substantive than a sop to public opinion? And once a company announces these initiatives, it needs to think about whether it has the methods and information in place to prove the results to vigilant investors and customers.
If the company lags behind its timetable or doesn’t achieve the hoped-for results, it’s apt to draw sharp criticism.
It’s not just the public that’s watching. Legislators and regulators are also getting into the act. U.S. companies are encountering an increasing number of local, state and federal mandates around environmentally responsible practices, and many non-U.S. governments have enacted country-level legislation as well. (The U.K., for example, is in the midst of an effort to define standards around carbon labeling for products—itself a controversial subject for those few companies who’ve taken that step.)
What may be green in Kentucky may not pass for green in California—and neither may pass for green in countries like Germany, Denmark or the U.K. As a result, it’s getting harder to understand, let alone comply with, the overlapping laws and regulations about evolving green business practices.
How do you develop a fact-based, well thought-out strategy for sustainability and corporate responsibility when the underlying sands shift faster than a reasonable company can react?
Then, there’s the most fundamental issue of all: How do you know, exactly, what is green? As more research accumulates and people begin to think about the issue more broadly, it’s becoming increasingly clear that choices about green are rarely black and white.
There is no clear consensus on best versus adequate versus lagging practice. As a result, for any action, plan, program or investment that a company might make to improve social and environmental metrics, there’s likely to be more uncertainty than for just about any other more traditional business decision.
Take the debate over ethanol as an example of the complexities underlying decisions about green. Ethanol was once widely viewed as an ideal fuel to address energy security and emissions issues because of its lower carbon profile and its production from renewable resources.
While these advantages still hold, people have now recognized that ethanol production is harmful in certain ways.
The absence of a scalable and commercially sound cellulosic solution—as well as the issue of diverting food crops from the world’s hungry to fuel, among other things, thousands of cars and SUVs that some argue don’t need to be on the road in the first place—shines new light on the debate.
The point here isn’t that a company can’t be environmentally “responsible.” It’s that companies must think carefully about the tradeoffs involved and set realistic, achievable goals. They also need to communicate genuine concern about the environment to the investing and consuming public, take credit for gains, and be forthright and honest in disclosing shortcomings.
They need to follow through on promises to ‘green’ their businesses while managing the attendant costs and risks. All while staying on the right side of rapidly changing laws, wherever and however those laws apply.
That’s the CRO’s job today. It comes with the many challenges you’d expect in a senior executive role that addresses such a new, complex and controversial business imperative. There isn’t a long history of what past CROs have done; there isn’t even much information about how peers at other companies are addressing similar challenges.
All you have are your business savvy, your understanding of the economic and environmental issues, your duty to your employer and the investing and consuming public … and your passion for making a difference.
It’s the toughest job you’ll ever love.
A principal with Deloitte Consulting LLP, Chris Park leads the Sustainability, Corporate Responsibility and Climate Change practice in the U.S. and is a member of Deloitte’s Global Enterprise Sustainability Group. Park is the author of “Creating the ‘Wholly Sustainable Enterprise’.’”