The Cambridge English Dictionary defines sustainability as: ”the quality of being able to continue over a long period of time”. Although commonly used to refer to environmental sustainability, it also encompasses economic and social sustainability.
For businesses, sustainability means measuring an organisation’s success according to more than immediate financial return. As well as a key performance indicator for business, sustainability is beginning to influence how countries assess success. New Zealand, for example, now publishes a wellbeing budget with five priorities: a sustainable and low-emissions economy; a thriving nation in the digital age; lifting Maori/Pacific wages; reducing child poverty; and supporting mental health. Bhutan has long been known for its emphasis on Gross National Happiness rather than Gross National Product.
Any long-term look ahead must confront the climate emergency and the need to reduce greenhouse gases to restrict global temperature rises. 2021 has followed preceding years with a succession of extreme climate events including record snowfall in Madrid and Texas, exceptional temperatures in Mediterranean countries, the Pacific North West and Russia, and flooding in New York, Germany, China and London. The World Meteorological Organisation has reported a five-fold increase in weather-related disasters over the last fifty years. António Gutteres, the UN Secretary General, described the UN’s Intergovernmental Panel on Climate Change (IPCC) 2021 report, on the urgency of combatting the effect of human activity on the climate, as “a code red for humanity”.
The Glasgow UN Climate Change Conference of the Parties (COP26) is resulting in commitments from governments, investors and businesses to take action including protecting forests, halting fossil-fuel developments overseas and aligning investments with net zero emissions.
The drive for sustainability and combatting the climate emergency will accelerate change across the world, driving technological development and influencing travel and transportation. The internal combustion engine is being replaced by battery-power and other fuels such as hydrogen power. The environmental impact is curtailing travel in the short term, but it may not be long before low-impact air and sea travel and sustainable land transport change behaviours once more. Technology will play an important role in both a shift to wind, tidal and hydro (and possibly nuclear, including nuclear fusion) and to more energy-efficient goods. Global renewable energy capacity doubled over the last decade and is increasing at an ever faster rate that promises to accelerate further.
Other steps to address the climate emergency will include changes to farming, with the UN’s IPCC report having highlighted livestock’s contribution to global warning. Around 9% of UK greenhouse gases come from agriculture. Technology including meat substitutes and improved farming methods, combined with less meat and dairy consumption, can cut farming’s harmful emissions, which will have a knock-on effect on agricultural jobs. Technology will potentially play an important role in capturing harmful carbon dioxide and methane emissions (currently only about one thousandth of CO2 emissions are captured). Increased green behaviour is likely to influence a gradual move from the throw-away consumption culture of recent years to a drive for longevity.
Climate change will cause businesses to adopt a long-term sustainable approach, requiring them to reassess the locations from which they operate, the goods they produce, the services they provide, and the steps they take to look after the health, safety and welfare of their people and communities.
Business is increasingly focused on Environmental, Social and Governance (ESG), which measures organisations according to certain criteria. Environmental - the E in ESG – focuses on an organisation’s environmental footprint. Pre-Covid, at the beginning of 2020, the World Economic Forum’s annual global risk report listed “infectious diseases” outside the top ten global shapers by likelihood and ninth by potential impact. The top five by likelihood were all environmental threats including extreme weather, biodiversity loss, climate action failure, natural disasters, and human-made environmental disasters. These threats will become more immediate and environmental concerns will increasingly influence government policy and employers’ priorities. Measuring a business against its ESG performance will routinely include its record on greenhouse gas emissions, waste and pollution, water and land use, and biodiversity exposure. We can expect to see executive performance and remuneration increasingly tied to ESG targets including environmental and climate change ones.
Social - the S in ESG - focuses on a company’s impact on its stakeholders, including customers and its broader community. A major part of a company’s social impact, however, is on its employees including: diversity and inclusion; workforce engagement; employee wellbeing; personal and professional development; health and safety; and human rights throughout its global business and supply chain. Social factors play an important role in defining an organisation’s culture which, in turn, plays an important role in attracting, retaining and motivating staff, and consequently its sustainability and long-term success.
Governance - the G in ESG – focuses on effective corporate governance. The damage to business from scandals, regularly featured in the media, often arise from inadequate corporate governance. A diverse and accountable management, subject to appropriate scrutiny, making transparent decisions and adhering to strong ethical principles is necessary for a sustainable business that is trusted by its stakeholders. This reduces risks to the business and its reputation, enables effective decisions, and maintains the trust of all stakeholders including investors, workers and consumers. Effective corporate governance also means having strong complaints processes including whistleblower policies and capable investigative processes. Employers will need to pay increased attention to this area (see emerging themes – regulation and enforcement) . The EU Parliament has proposed a draft directive governing human rights, environment and good governance covering both large companies and their supply chains.
A strong ESG proposition is also increasingly important for securing investment. Investors are incorporating ESG considerations in their investment decisions, recognising the positive impact it can have on productivity, growth and reduced risks and costs. The Listing Rules for premium-listed companies in the UK, for example, require disclosure of how the 2018 Corporate Governance Code principles have been applied. COP26 saw the UK government commit to extend mandatory climate disclosures to a wide range of businesses. The importance attached to these criteria is influencing the way success is evaluated when making executive remuneration decisions. Rating agencies are creating measures by which ESG success can be assessed.
Expectations of the role business has to play in wider society are shifting. In an era of what many term “stakeholder capitalism”, modern businesses and leaders are expected to act responsibly and create a sustainable social contract for work. As people see the values of the their employer as an extension of their own values and brand, organisations will need to promote strong ESG credentials to attract and retain the best people (see sustainability – environment concerns; social concerns; and corporate governance).
The drive for sustainability will affect the what, how, how much, where and when of work.