Defining the New Language of Sustainability
February 19, 2020
The recent flurry of high-profile sustainability announcements by corporate leaders such as Microsoft transitioning to ‘carbon negative’ by 2030 and Starbucks going ‘resource positive’ are exciting steps in tackling environmental issues such as carbon and waste. Unfortunately, at the same time, these new terms are adding more confusion to the global sustainability conversation.
Sustainability in most parts of the world has always been comprehensive, addressing environmental, social, governance (ESG) and economics issues, and now we are seeing big pushes by the U.S. financial community, pre- and post-Davos, demanding action and disclosure on these issues. Larry Fink, founder and CEO of BlackRock, the world’s largest asset manager, recently announced that sustainability including environmental, social and governance issues, will be at the core of the firm’s investment decisions. Goldman Sachs announced it will no longer support IPO’s without a diverse board.
Sustainability is top of mind for clients in each of Finn’s practice areas as well. Whether it’s emission-based flight shaming in the tourism industry, tech companies battling privacy breaches, or transparency and ethics issues in healthcare product claims, sustainability – encompassing all ESG topics – is applicable to all businesses in all industries not only because ESG covers all facets of a business – but also (and more importantly) these issues address the fundamental business equation of risk and opportunity.
As sustainability takes root in the C-Suite and Board Rooms, we need to be well-versed in sustainability as it becomes mainstream in the corporate-financial lexicon. Given the changing vocabulary and alphabet soup of standards, it can still be difficult to navigate the complexity of this conversation.
As terms like ESG, climate negative, climate positive and circular economy start to replace purpose, citizenship and philanthropy, we’d like to share a few practical tips to help define and communicate sustainability for clients, regardless of which terms they use as their corporate vernacular:
- Define the terminology: Whether a client’s goal is to be climate positive or establish a sustainability initiative, you need to define what the terminology means for the business. Creating parameters – what the term includes and what it excludes – will yield clearer communications both internally and externally.
- Be specific: Be clear in not only the what (the definition) but also the how (it’s being executed) and the why (it’s important to the business and the value it creates).
- Be consistent: While some terms may seem interchangeable, they often mean different things to different people. Being consistent with the terminology being used will help avoid confusion among different stakeholder groups.
- Be aware of landscape changes. Some terms may seem outdated for various stakeholders. Investors for example, want to hear “ESG”. Communicating to investors about philanthropy or CSR for example, will not resonate the same way ESG data will.
While there is a long road ahead to standardize the language of sustainability, ESG reporting frameworks and investment criteria, these topics are top of mind for our clients and it’s helpful to have a framework for these discussions.
Elizabeth Woodworth is a Partner in Finn’s Global Sustainability and Social Impact Practice. She is based in New York.