Inconvenient truths about sustainability
In the past twenty or so years of corporate governance for public and private companies, sustainability and Environmental, Social, and Governance (ESG) activities have become essential components of responsible business practices. However, as the data clearly shows the climate is not ‘sustaining’, it is imperative to reassess the efficacy and focus of ESG and Sustainability initiatives. This blog believes that language and activities must evolve beyond mere mitigation and embrace resilience as the linchpin of a forward-looking strategy, informed by recent updates to European ESG regulations and US government rules around reporting, efficacy, and transparency.
Europe has been at the forefront of regulatory efforts to enhance corporate accountability and transparency regarding sustainability practices (as well as consumer data, unrelated but the philosophies match). In March 2023, the European Union unveiled its Sustainable Corporate Governance Initiative, a landmark proposal aimed at incentivizing companies to prioritize environmental and social considerations in their decision-making processes. Central to this initiative is the introduction of mandatory due diligence requirements, obliging corporations to assess and address the environmental and social impacts of their operations throughout their value chains. Its no longer good enough to state a company has ‘sustainable practices’, it now must prove they are working as advertised.
The European Commission has also unveiled plans to update the Non-Financial Reporting Directive (NFRD), expanding the scope of disclosure obligations to include climate-related risks and opportunities. Under the proposed revisions, companies will be required to provide detailed information on their climate-related risks, mitigation strategies, and resilience measures, fostering greater transparency and accountability in corporate reporting.
Read ‘'Greenwashing' lawsuit against KLM to proceed, Dutch court rules.’
Similarly, the United States has witnessed a significant shift towards enhancing ESG disclosure and accountability within the corporate sector. In November 2023, the Securities and Exchange Commission (SEC) announced proposed rule amendments to modernize climate-related disclosures for public companies. The proposed amendments seek to enhance the quality, consistency, and comparability of climate-related information disclosed by issuers, enabling investors to make more informed decisions about climate-related risks and opportunities.
Meanwhile, the Biden administration has prioritized climate resilience as a cornerstone of its green policy agenda, signaling a fundamental shift in the approach to environmental governance at the federal level. From executive orders mandating federal agencies to integrate climate considerations into their decision-making processes to ambitious infrastructure investments aimed at bolstering resilience against extreme weather events, the US government is taking decisive steps to address the escalating climate crisis.
Read: Climate and Resilience in the Bipartisan Infrastructure Law
The most important recent change corporate sustainability and ESG professionals must contend with is an ‘inconvenient truth’. Despite hundreds of thousands or hours of well-intentioned efforts by corporate sustainability & ESG professionals, the $300+B annual global trade in Carbon Offsets/Credits, $200-400B investments in cleantech by venture capital, and $500B spent on climate change mitigation by the USA alone, the realities are:
CO2 levels continue to rise.
Sea levels and global temperatures continue to rise
#2 above is causing more frequent and more severe weather events causing billions of dollars in damage that is affecting communities and business world-wide.
The ‘sustainability’ discussion must evolve to sustainability and resilience - because the climate is not sustaining.
Learn more about building financial resilience for an uninsurable future; the impact of climate change on personal finances and the wealth of the nation.
