The long-awaited ESG framework, which was supposed to herald alignment for business with the sustainability goals, seems to fall short of its mark. Best efforts of corporations fail to alter the direction of the global environmental catastrophe as it continues its spiral of increasing carbon emissions and biodiversity loss. Clearly, voluntary ESG commitments will not do. What business needs is competitive sustainability of a market-led nature with environmental performance becoming a fully-fledged element of sustainable success in the long term.
This is the nub of the argument by the interim CEO of the University of Cambridge Institute for Sustainability Leadership and sustainability expert Paul Gilding. They argue that sustainability must go beyond being a moral obligation: it has to become a business necessity. If companies really want to survive in a climate crisis-stricken, resource-constrained future, their approach to sustainability needs to be fundamentally transformed.
Failure of ESG
Even though most firms claim net-zero goals, built fairer supply chains, and reduced carbon footprints, the world continues to decline at an ever-increasing rate. According to the University of Cambridge Institute for Sustainability Leadership and Gilding, the ESG model has given misleadingly comfortable security to corporations as if incremental change would be enough. In reality, however, the truth is more sobering: deterioration is happening at a level in the environment faster than companies are dealing with it, and time is running out.
They contend that the issue itself lies within the implementation of ESG practices. Existing ESG frameworks add layers of complexity to existing business models with little shift in rebalancing profit and sustainability from an angle. As long as the market rewards short-term financial gains over long-term environmental and social impacts, so long will the business sector remain complicit in environmental harm.
This is where the concept of competitive sustainability comes in: businesses must embrace sustainability measures but have them form the core of their competitive strategy, leveraging sustainability as a tool for growth, innovation, and resilience in an uncertain future.
Competitive Sustainability: Redefining Business Success
Competitive sustainability requires a new mindset: sustainability should no longer be viewed as a cost to be minimized but as a strategic advantage. The enlightened companies are already leveraging it. Sweden’s Hybrit initiative, in its very development of fossil-free steel, is a revolutionary approach that would dramatically reshape the very nature of the industry. Such companies aren’t preparing for such a future in which fossil fuels would no longer be a part; they’re creating that future. This is what business needs to aspire to if it wants to survive and thrive in an ever-changing world.
Not all sectors move at the same speed. For instance, the plastics sector has focused on changing recyclability rather than fixing system issues that lead to waste and pollution. No partial steps will have an effect if not rooted directly at the source. Only true competitive sustainability necessitates greater investments in changing processes as well as the outcomes.
Bureaucracies also have to push governments to create tougher environmental regulations. Such changes in the market incentives must be in favor of convincing companies to make investments in climate-neutral and nature-positive products and impose penalties on them for continuing to harm. Serious players who seriously wish to transition to sustainable models are at a disadvantage because of the market today, where every loophole exploited by someone and every resistance to transition by those individuals can continue hurting the ecosystem. This is the only way the market will level the field and provide sustainability as no more an option but a necessity.
Sustainability as a Business Imperative
The biggest mindset shift is recognition that sustainability, though still often viewed as a moral obligation, actually is a law of nature. Climate change and biodiversity loss are existential threats to the traditional business model. For business, the question is no longer “How much sustainability can we afford?” but rather “How quickly can we make a transition, and how can we gain from it?
It is an evolutionary process of the market. Businesses have to collectively force governments to enact legislative changes that would end conflicts between profit and sustainability. This would involve markets that support climate-neutral, nature-positive, and circular economy products. Legislative changes have traditionally been opposed by the heavy propaganda machinery of powerful lobbyists coming from the established and influential industries such as those in agriculture and the automotive sectors, who feel threatened by what that would do to their market position. But the tide is turning. As more and more companies realize there’s no way around a sustainable future, collective action will be key to a tipping point in forcing governments to enact policies that’ll really shift the market.
The Age of Old School ESG is Over
It is no longer a pure thought experiment to call for competitive sustainability. The gear shift out of the current ESG framework has been turned over, and it will be within this next decade that competition does not just occur for the share of markets but even for survival itself. The winners will be those who make sustainability a part of their business models, but old practices and clinging to the status quo will get left behind.
This is reality that must be faced by businesses. The competitive sustainability model of competitiveness has more benefits than the simple positive impact on the environment, including improved resilience, market leadership, and the chance to prosper in an increasingly volatile and globally varied landscape. As the climate crisis deepens, those who fail to adapt themselves stand to be on the wrong side of history, and on the losing end of the market.
It sets a new milestone-one of sustainability not as a checklist but as a competitive advantage. Companies’ success will come from embracing and leading the change.
Source: Financial Times