For the past decade, the focus on sustainability standards, “green” initiatives and eco-friendly policies have skyrocketed as the effects of climate change — including natural disasters and food insecurity — have been more catastrophic than ever. Companies like Lego and La-Z-Boy have shown their commitment to circularity and corporate responsibility through initiatives like recycling plastics, reducing packaging and rainwater collection. Unfortunately, the ESG standards that guide these innovative environmental policies are undergoing a backlash, especially in the U.S. This, despite the fact that 80% of consumers cite sustainability as an important consideration in their purchase of a new product.
Earlier this year, a group of U.S. investors, including J.P. Morgan, BlackRock and State Street, left the Climate Action 100+coalition, citing concerns about antitrust laws, reported Reuters. Much of this backlash is politically motivated, suggests The New York Times, with certain politicians “claiming that banks and asset managers were supporting progressive politics with their climate commitments.” Some of the companies involved in the coalition faced real consequences: A key focus of the Climate Action plan is to adopt policies that require companies — including Exxon Mobile — to use fewer fossil fuels. Certain states have banned banks from doing business with the state if they distanced themselves from fossil fuel companies, the Times notes. Europe, for its part, has resisted the anti-ESG sentiment that’s common in the U.S., Reuters also reports, “due to greater political and consumer support for greener products and a swathe of regulations that underpin the operations of the finance industry and companies in the real economy.”
Despite these political implications, it’s still true that sustainable policies can be better for business than practices that rely on the use of fossil fuels, for many reasons, including less reliance on volatile oil and raw material prices and an uptick in customer loyalty. That may be why companies are including sustainability goals as much as ever in their financial reports and disclosures — they’re just talking about ESG less publicly, a phenomenon called “greenhushing,” according to the Wall Street Journal. About 97% of the mentions of ESG and sustainability “were related to financial disclosures and earnings reports… [because] many companies recognize that investing in sustainability is important for long-term value creation,” the Journal reports. But to block the ESG-related backlash from investors, they’re avoiding focusing too much on ESG standards, “overstating green claims or appearing to prioritize sustainability initiatives over profit,” the Journal notes. On the other hand, terms like “clean air, clean water, and economic opportunity” —the real goal of the environmental and sustainability guidelines — are as prevalent as ever.
According to the Harvard Business Review, “progressive companies can advance sustainability with suppliers by shifting from short-term, price-focused transactions to a long-term, trust-based relationship.” The HBR uses King Arthur Baking as an example: the ESOP is collaborating with “milling and farmer partners to convert from conventional to regenerative agriculture” and working with competitors in the meantime to provide support and benefits to farmers through lower input costs and improved soil health, “which over time will yield improved margins, more nutrient-rich wheat, and surety of supply for King Arthur. It will also lead to lower carbon emissions resulting from less tilling of the soil.” The collaborative effort — and buy-in for the results — makes this a meaningful commitment to addressing climate change. Puma follows a similar ethos, HBR notes, ensuring that company leadership is invested in meeting sustainability goals, because their bonuses depend on it. The policy is working: “Puma’s carbon emissions have come down by almost one third while revenues have doubled and gross margins have expanded over the past seven years.”
Maintaining environmental standards
As a signatory of the UN Global Compact, ASCM supports and advocates for the 17 Sustainable Development Goals (SDGs) adopted by businesses and nations worldwide. The open-access ASCM Enterprise Standards for Sustainability are mapped to the SDGs to support your business’s efforts to embrace the culture of social responsibility and showcase supply chain excellence.
To become more familiar with the standards and the sustainability guidelines that are essential for the modern supply chain, enroll in our two-day course, Building a Sustainable Supply Chain. Another option is to become an ASCM Corporate Member to receive a complementary one-day sustainability workshop that includes an assessment and roadmap for improvement. Learn more today!
