How to stay audacious in an era of sustainability compliance

The sustainability rulebook is getting thicker: 1,255 ESG regulations have been introduced worldwide since 2011, compared to a mere 493 between 2001 and 2010, according to ESG Book, which compiles global sustainability data. Since 2000, such regs have increased by 647 percent.

So, in an age in which companies are being asked to ramp up efforts to address the climate crisis, the biodiversity crisis, the water crisis and others, their sustainability departments are spending more and more time and resources focusing on meeting governments’ bare-minimum standards.

Today’s corporate sustainability professionals have come full circle. Three decades ago, the job centered almost exclusively around compliance. In the United States, it was focused largely on meeting the mandates of a spate of laws enacted during the 1970s and 1980s: the Clean Air Act, Clean Water Act, Endangered Species Act and CERCLA — the Comprehensive Environmental Response, Compensation, and Liability Act — among others.

Each required companies to, for the first time, measure and disclose their impacts and risks.

Since then, companies worldwide have gone well beyond compliance to the stuff about which we report daily on the pages of Trellis.net, from closed-loop systems to renewable and bio-based inputs to regenerative outcomes.

Compliance is a double-edged sword

But companies are now finding themselves back where all this started: a significant focus on regulatory compliance, thanks to a new spate of laws requiring companies to measure and disclose ever more impacts and risks.

Is that a good thing?

In recent weeks, I’ve posed that question to several sustainable business veterans. The responses fell into two camps:

• Compliance creates legal requirements that raise the profile of sustainability within the C-suite.
• Compliance distracts companies from doing the actual work of reducing their negative impacts, let alone generating positive ones.

All conversations were conducted on a not-for-attribution basis to facilitate candid, unfiltered opinions.

One apparent impact of the increased accountability — regulations like the Securities and Exchange Commission’s and other climate disclosure laws in the United States, and the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) in Europe — is that the era of BHAG commitments has faded.

“If you go back to the days of Paul Polman,” said one 30-year veteran, referring to the former CEO of Unilever, “he said, ‘We’re going to double our revenue and halve our impact.’ And when he was asked how, he said, ‘I don’t know, but my team will figure that out.’” Such bold, publicly uttered aspirations will likely disappear in the face of increased regulatory scrutiny of corporate statements that lack full accountability.

That’s a mixed blessing. Many of today’s leadership companies began or rocket-fueled their journeys with bold, expansive goals — for example, Apple’s 2017 pronouncement that it would build products “using only renewable resources or recycled materials,” or Walmart’s 2005 goal to be supplied 100 percent by renewable energy and to “sell products that sustain our resources and environment.” Neither set specific targets or timetables at the time.

And while neither company has fully achieved its lofty ambitions, both have made considerable progress, often forging a path for other companies. Tamping down companies’ willingness to publicly put themselves out on a limb may seem a laudable move to deter greenwashing, but it also removes a measure of audacity that might otherwise have motivated competitors, inspired customers and transformed markets.

New marching orders

Others see the new regulatory era as more of a blessing by leveling the playing field.

“I’m really excited,” said one 10-year veteran. “I think it’s awesome when there’s guardrails in place and an engineer can say, ‘This is our minimum standard. These are non-negotiables.’ Then, you don’t have to convince management. It’s just expected.”

“What regulations can do really well is create a floor,” explained another long-time professional, whose sustainability career dates to the 1990s. “But they won’t likely drive people towards bigger, more ambitious goals. Regulations are the wrong incentives for where we’ve got to go on a whole range of issues.”

That is, while creating a floor — a minimum standard — regulations may unwittingly also create a ceiling — a stopping point for further action once a standard is met.

Whatever one’s view, today’s regime requires new marching orders for sustainability professionals, according to my informal focus group. Here are three:

• Focus on data quality. It will become an increasingly valuable skill. Most sustainability teams don’t yet have this expertise, requiring either upskilling, hiring talent or collaborating with finance, legal or human resources teams that have deeper experience in data integrity.
• Get close with your cross-functional internal partners. They’re the ones most likely on the hook for regulatory compliance. “I’m getting very close with our finance team to understand their point of view,” said one CSO.
• Get involved at the beginning of projects and processes. Another CSO described watching an internal marketing presentation that seemed to break every regulation about sustainability communications. She hadn’t been brought into the process until the campaign was fully baked. By getting involved early on, she said, “You don’t have to go back and try to hold people accountable.”

In the end, it’s important to ensure that a regulatory mindset doesn’t undermine the innovations and transformations that have energized the careers of countless sustainability professionals. 

“If we as leaders show up lacking optimism,” the 30-year veteran said, “we lose the plot, and we may lose it all.”