Companies Are Choosing Efficiency Over Bold Climate Goals

It was hard to go even a few minutes at this year’s GreenBiz conference without hearing about the business case for sustainability. Over and over, executives repeated that efforts to cut emissions were also reducing waste, cutting costs, and delivering durable efficiency gains.

It’s a perfectly reasonable pitch. It’s also a much more modest one compared to the sustainability zeitgeist of just a few years ago when companies proclaimed a green transformation to be the growth story of the 21st century. 

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In some ways it was a necessary reset. In the heyday of ESG investing, trillions poured into vague notions of sustainability with a vision of enormous returns but without a clear plan. Getting precise is necessary, but in reframing the business case for climate and sustainability around efficiency, businesses risk missing the excitement—and capital—that comes with growth. 

At the GreenBiz conference in Phoenix, sustainability executives wrestled with what their role should be amid government pushback against efforts to tackle climate change and the public’s prioritization of other issues. Many executives told me how their jobs have become focused more on compliance with the myriad rules and regulations. Despite roll backs from the U.S. federal government, other countries and some U.S. states continue to pursue a range of climate regulations. Some spoke of concerns about shrinking sustainability teams as CEOs prioritized other issues. Almost all of them said they had managed to continue making climate progress by finding ways to save the business money. 

Finding efficiencies is a necessary component of decarbonization, but as sustainability-focused professionals consider the future of their positions and their field, they will need to figure out how to make climate and sustainability key to tantalizing growth, not just marginal efficiency gains. 

There’s perhaps no clearer indication of the existential questions lingering for sustainability executives than the conference’s on-stage debate over whether the chief sustainability officer (CSO) role has become irrelevant. At the crux of the debate wasn’t whether sustainability is important. That was taken as a given. Instead, the discussion largely centered on whether sustainability is best situated in its own department or whether everyone—from finance to strategy—needs to take up sustainability on their own.

Judging simply by the crowd’s response, the debaters arguing that CSOs remain relevant won handily. To me, the winning argument was simply that someone within the company needs to be willing and able to make the case to counterparts elsewhere in the organization. “The CSO serves as a compass,” said Olubamise Onabanjo, manager of sustainability reporting at E.L.F. Beauty, from the debate stage. 

But where is the compass pointing? 

There’s a hard truth that many executives are wrestling with behind the scenes: in many cases the business case for big, growth-oriented investments isn’t immediately clear. A C-suite survey released by The Conference Board in January found that while a majority of CEOs globally still say they are prioritizing sustainability, they view waste reduction and efficiency as their top ways to tackle the issue. Greening the supply chain and green product innovation rank lower.

Jesper Brodin, the former CEO of Ingka Group, the primary operator of IKEA stores, told me earlier this month that the efficiency return on investment from sustainability is easy to see across industries. “It has great impact on your cost side,” he said. “The business upside of climate smart transformation depends a little bit on which type of business you are.”

Some of the most interesting moments in Phoenix came in discussion with executives who are arguing that sustainability can drive growth and innovation. Executives at consumer facing companies repeatedly pointed with amazement to research about Amazon showing that products labeled as “Climate Pledge Friendly,” meaning they met certain sustainability metrics, saw a 14% bump in sales immediately after being labeled. In other words, investing in sustainability can drive business growth.

Perhaps there’s no better example of a decarbonization innovation eventually becoming a growth engine than in the energy sector. A generation ago, the business case for energy sources like solar and technologies like battery storage rested in large part on vague notions of coming regulatory risk and the need for energy security. The road has been much windier than anticipated, but today returns are being realized as the cost of those technologies have come down and demand for electricity is growing.

Realistically, big companies are risk-averse. Investments need a decent guarantee of return. But efficiency may not be enough to put sustainability back at the pinnacle of the business zeitgeist. 

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