Multiple Networks Syndrome: Diminishing Sustainability Impact

Commentary by Bob Massie

The Take-Away: Partitioning ESG Activism Undermines Sustainability As A Holistic Concept

Many thanks to those who commented on my first post on “silo” thinking.  Here are some additional thoughts on necessary improvements to sustainability activism.

It is true, as Joe Uehlein commented, that the original categories of sustainability metrics were “social, environmental, and economic” (the original categories of the Global Reporting Initiative and the Triple Bottom Line concept that John Elkington coined), but that never quite rolled off the tongue.  Joe is also correct that whenever issues of labor are avoided, the deeper questions about whether markets – and corporate design – really meet global human needs get marginalized.  Clearly economic issues need consideration under ESG, but adding another letter to the acronym (EESG) won’t necessarily help create uptake of the term – nor make it more memorable.

One positive thing about the appearance of ESG: it clearly links governance to the traditional sustainability concepts, at least in theory.  A problem persisted for many years where one group of institutional investors worked on corporate governance questions (board composition, executive compensation, management oversight) and another, largely separate group of activists worked on the same companies from the different angle of sustainability.   For example, it was unimaginable ten years ago that CalPERS, which focused on governance, would also advocate for the strategic value of sustainability.  Now, as I mentioned in my piece, CalPERS stands at the forefront of such integration.

In the winter of 2003, I organized one of the first meetings of sustainability and governance leaders.  Many of them met at the Pocantico Conference Center for the first time, and found considerable common ground.  However, the continued instinct towards silo thinking has reinforced corporate managers’ belief that outside interventions focus on isolated issues rather than the core strategic direction of the firm.  This in turn strengthened the perception that only management (acting on the principle of shareholder primacy) had the exclusive duty and capacity to integrate the competing interests of stakeholders who were, in the judgment of executives, pushing narrow agendas.

It is absurd that activists and investors have not found a way to work more closely together.  The field has slowly been partitioned into multiple “investor networks” – one for climate risk, another for toxics, another for labor and human rights, another for water, and on and on.  No wonder that many people – including corporate executives and SEC regulators – have trouble perceiving the full, holistic vision of sustainability.  Only when activists, supported by their donor foundations, learn to be more mutually supportive, and institutional investors act like true universal owners (such as Bob Monks and others have been describing for years) by following an integrated sustainability agenda, will they have lasting impact on corporate purpose and strategy.

The views expressed in this commentary belong to the author only, and do not necessarily represent the views of The Transition Group.

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