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THE RISE

OF SCIENCE
How does it mix with
sustainability, business strategy
and consumer emotion?

DIRECTIONS 15

THE RISE
OF SCIENCE

DIRECTIONS 2015 SALTERBAXTER

CONTENTS

SCIENCE AND
DOUGHNUTS
IN THE
LABORATORY

DIMENSION 1:
SCIENCE-BASED
GOALS
DAVID CROFT
A MEASURED
APPROACH
MATTHEW SWIBEL
ITS NOT JUST
SCIENCE
ON OUR RADAR
MARK W. McELROY
SCIENCE + ETHICS
= CONTEXT
JOHN KORNERUP BANG
APPLYING
SCIENCE

2
4

6
8
10
12
14

Science has always been a part of


sustainability solutions. Yet in recent
years its been lurking in the background
of the corporate sustainability debate,
biding its time, waiting for its moment
to shine. It seems as though that time
has arrived.

DIMENSION 2:
SCIENCE-BASED
FRAMEWORKS
GUIDO SCHMIDT-TRAUB
ORCHESTRATED
ACTION
KATE RAWORTH
CAN DOUGHNUTS
SAVE US?
DR. JAKE REYNOLDS
REWIRING
THE ECONOMY
PETER BAKKER
THEORY INTO
PRACTICE
DR. GEOFF KENDALL
BACK TO
THE FUTURE
CHRISTOPHER DAVIS
KATE LEVINE

BEAUTY IS
ACADEMIC

16

DIMENSION 3: 36
STAKEHOLDER
ENGAGEMENT
ANDY HOWARD
DISSECTING DATA 38
ANNIE LANCASTER
THE RE40
ENLIGHTENMENT

24

CREATING
SOLUTIONS?

30
34

42

DIRECTIONS 2015 TEAM


NIGEL SALTER
Founder & CEO

28

Is science really going to unlock the big


sustainability challenges as it gets
blended into the hard realities of
business and marketing?
Are science-based targets the driver
of change?

18
20

Companies from a wide range of sectors,


from beauty to construction, are giving
a greater prominence to science in their
approaches to sustainability. Its now
being mixed with mainstream business
thinking, with sustainability theory, target
setting and strategy, and with brands
and their relationship to consumers
and investors. But can this heady mixture
be made to work?

JIM PEACOCK
Director,
Consultancy &
Communications
NINA PICKUP
Creative Director
ANNIE LANCASTER
Senior Consultant
KRISTINA JOSS
Senior
Sustainability
Consultant
CAROLINE CARSON
Sustainability
Consultant

OLIVIA STANDISH
Researcher &
Project Lead
AMY KELLY
Studio Manager
RICHARD WILSON
Design Director
AMBER HADLEY
Designer
GARY McCALL
Print Manager
LOUISE MOYNA
Production
Team Lead

How necessary and powerful are


academic frameworks connecting
the science behind sustainability
to business strategies?
And will consumers or investors ever
really be won over by scientific truths?
This 15th edition of Directions will
look at three dimensions contributing
to the rise of science in corporate
sustainability: science-based targets,
scientific frameworks, and stakeholder
engagement with science. Well hear
views for and against from academics
giving businesses the tools for sciences
adoption, and business leaders applying
these tools to their thinking and activities.
Is science going to save us all from
ourselves (and from our constant
theorising about sustainability)? Well,
take a look inside. At the very least we
think its hard to argue against the signs
that science is growing its influence and
looks set to transform the way we think
about corporate sustainability.

MARK LEVER
Senior Artworker

DIRECTIONS 2015 SALTERBAXTER

NIGEL SALTER
Founder & CEO
Salterbaxter

SCIENCE AND
DOUGHNUTS
IS THIS
SUSTAINABILITYS
NEXT WAVE?
Science was at the heart of sustainability from the start.
But now theres a renewed interest in how it can direct
thinking and lead to better, more focused action. Thats
good, says Nigel Salter, but many challenges lie ahead.

Science is, of course, not a new aspect


of sustainability thinking. It was where
it all started long before the business
strategists, the management consultants
and the communications agencies got
in on the act.
But we have seen a significant refocusing
on science recently and it now seems to
be moving back to centre stage, claiming
what many would say is its rightful place
at the very heart of sustainability.
The interesting challenge will be to see if
it can really blend with business strategy,
with marketing, with branding and with
business performance and start to bring
about real change in tackling our pressing
environmental, economic and social
issues. To play a meaningful and lasting
role it is going to have to force change in
these areas and bring something useful
to an already crowded party.
The signs are that it is already making
a significant splash.
SCIENCE MAKING A SPLASH
Science-based targets have become
something of a holy grail over the past
year or so. Most businesses serious
about sustainability now see them as
a prerequisite to tackling and reporting
on their sustainability challenges
an accepted science, you might say.
But do they work? How can they be
calculated? What are the implications of
using a real science-based approach?
And are these targets really practical or
workable enough for business to put
them to effective use?
There are, as you can see, still as many
questions as answers.
But our experience is that they are central
to the discussions in major corporations
right now, and as youll read in the
following pages, companies in diverse
sectors are grappling with them and
already applying some of the thinking.
Thats supported by some new and
developing science-based frameworks
for sustainability, that provide important
ways of looking at the sustainability
challenges we face.

One Planet Thinking and Planetary


Boundaries have given us a very useful
way to look at environmental threats.
They map the environmental limits we
must live within if we want to preserve
an environment that can be shared safely
by the nine billion people who will live here
by the middle of the century.
Then we have the UNs 17 Sustainable
Development Goals, with their 169
targets, which, rather remarkably, have
been agreed by 193 countries after a
huge and unprecedented stakeholder
consultation programme. They now stand
as a very practical guide for businesses
as they move forward on their individual
sustainability journeys.
And we now have the Future-Fit
Benchmark, which really does look like a
workable framework allowing companies
to measure their performance in practical
ways and to begin the challenging but
essential task of fundamentally rethinking
their business models.
These all look like solid progress and clear
evidence that scientific insight is gaining
a necessary influence and providing
some fascinating new models and ideas
for business to work with.
BUT ITS NOT NECESSARILY ALL GOOD
There are some risks and some possible
unintended consequences that need
to be thought about too.
As we hear in the pages that follow, in
some cases scientific targets if adhered
to too rigidly or applied too bluntly could
end up providing the wrong answers,
justifying a reduction in carbon-cutting
activity by some companies, for example.
Then theres the ever-present danger that
business could merely turn science into
another PR exercise and use it to screen
a lack of real progress a more rational
and seemingly more credible form of
greenwashing, if you like.
Similarly, as some of our writers warn,
theres a danger of turning science-based
approaches into a self-serving industry,
another time and resource consuming
exercise that holds companies back from
acting on the things that will really make
a difference.

And, finally, what about the social side


of sustainability?
The science has done a very good job
in certain aspects of environmental
performance notably in understanding
climate change and the need to reduce
greenhouse gases.
Where social issues and the need to build
a more just and equitable global economy
are concerned, science has, so far, barely
scratched the surface.
THE DOUGHNUTS
This is where the doughnuts come in.
As we hear on page 20, Kate Raworths
Doughnut Model presents a picture of
where we must get to in the 21st century:
living safely below the planetary
boundaries but lifting people above the
inner ring of social resources to ensure
they can live in dignity and with fair access
to opportunity. The doughnut gives us a
clear picture of how and why we need to
get that balance right.
But on the final frontier, perhaps, lies
a very practical question can science
help to sell stuff? By which I mean,
can science be used effectively to sell
the sustainability story to consumers?
Can it provide a new imperative to change
behaviours and alter purchasing patterns?
As we know from the GM foods debate,
consumers have very firm views about
issues and those views last even when
scientific arguments, seemingly full of
logic and reason, are presented to counter
them. Theres also a danger that attempts
to educate consumers using science and
the power of logic can end up backfiring
because they can too easily seem
patronising.
This is the true test and at present,
science isnt winning.
So welcome to the new era of science-led
sustainability thinking!
Interesting times lie ahead. Lets hope
the mixture of science, sustainability,
business strategy, brands and emotions
doesnt get too explosive. If handled right,
it could be a far more creative force.

DIRECTIONS 2015 SALTERBAXTER

IN THE
LABORATORY

John Kor ner up Bang


John Kornerup Bang is Hea
d of Positioning and
Strategic Risk Managemen
t, Group Sustainability
at A.P. Mller Maersk Gro
up. He is Lead Advisor
on Climate Change for the
Maersk Group.

Here are some of the experts who have


contributed to this years publication:

David Croft
David Croft is Sustainable Development Director
for Diageo. Previously with Waitrose, Kraft Foods,
Cadbury, and the Co-operative Group, Davids
roles included leading technical, marketing and
sustainability functions in quality, safety, brand
marketing, sustainability, and sustainable agriculture.

Peter Bakker
CEO of the World
Peter Bakker is the President and
lopment.
Deve
ble
Business Council for Sustaina
Global Citizen
on
Clint
the
of
ient
recip
Mr. Bakker is the
ership
Lead
bility
Award (2009); the SAM Sustaina
Against
dor
assa
Amb
an
been
has
and
Award (2010);
e 2011.
sinc
e
ramm
Prog
Hunger for the UN World Food
ds.
erlan
Neth
Child
War
of
rman
Chai
He is also the

Andy Howard
s Research,
Andy Howard is the founder of Dida
on long-term
sed
focu
firm
arch
rese
an independent
led the GS SUSTAIN
equity investing. Andy previously
in London,
research team at Goldman Sachs
McKinsey,
advised financial institutions with
ess.
Witn
al
Glob
NGO
the
and worked with

Christopher Davis
rate Social
the Director of Corpo
Christopher Davis is
dy Shop
Bo
e
Th
for
ns
aig
Camp
Responsibility and
2004 to work
ned the business in
International. He joi
d in 2010 was
an
,
ick
dd
Ro
ita
er An
with company found
aders Award
Le
s
es
Nations Busin
awarded the United
rk.
wo
in recognition for his

Dr. Geoff Kendall


Dr Geoff Kendall is CE
O of the non-profit Fut
ure-Fit
Foundation, which is lea
ding the creation of the
Future-Fit Business Ben
chmark.

Kate Levine
Kate Levine is the Directo
r of Commitment and
Corporate Communicatio
ns for The Body Shop
International. Kates bac
kground is in corporate
communications, having
worked for many years
in consultancies, most rec
ently as a Partner at
Pagefield in London.

Mark W. McElroy, Ph.D


and Executive
Mark W. McElroy, Ph.D. is the founder
ble Organizations
aina
Sust
for
er
Cent
the
at
tor
Direc
ext-Based
and the original developer of the Cont
under of Thomas
co-fo
also
is
He
od.
meth
bility
aina
Sust
ital Scorecard,
iCap
Mult
the
of
& McElroy LLC, creators
g for Sustainability
agin
Man
in
MBA
the
in
hes
teac
and
Vermont.
programme at Marlboro College in

Dr. Jake Rey nolds


Dr. Jake Reynolds is Director
, Sustainable Economy
at the Cambridge Institute
for Sustainability
Leadership. Jake leads the
organisations efforts
with business, governmen
t and finance leaders
to build a sustainable econom
y.

Guido Schmidt-Traub
cutive Director of the UN
Guido Schmidt-Traub is Exe
tions Network (SDSN).
Solu
t
men
Sustainable Develop
eneral Ban Ki-moon,
Launched by UN Secretary-G
and technical expertise
c
ntifi
the SDSN mobilises scie
, and the private sector
from academia, civil society
elopment.
dev
able
in support of sustain

Matthew Swibel
Matthew Swibel is Lockheed Martins Director of
Corporate Sustainability, leading the sustainability
program, reporting and stakeholder engagement.
During his tenure Lockheed Martin has been named a
sector leader in environmental, social and governance
performance. Previously, Matt was an award-winning
business journalist, primarily with Forbes.

Kate Raworth
Kate Raworth is a Senior Associate of the Cambridge
Institute for Sustainability Leadership, focused on
exploring the economic mindset needed to address
the 21st centurys social and ecological challenges.
She is the creator of the doughnut of planetar y and
social boundaries.
5

DIRECTIONS 2015 SALTERBAXTER

In recent years weve seen


a surge in the number
of companies using
scientific evidence in
setting their sustainability
targets across a range
of environmental issues,
from water to energy use.

DIMENSION 1:

The following section explores some


of the different ways leading businesses
are incorporating science into their
target setting (carbon and beyond).
It highlights the positive impacts,
as well as the limitations, of setting
science-based goals.

THINGS TO NOTE:
The initial drive for science-based
targets came out of businesses
setting carbon targets in line with
requirements to keep global
temperature increases to below
2 degrees Celsius.
T
 he adoption of science-based carbon
targets has been accelerated by several
partnerships, including a joint initiative
by CDP, the UN Global Compact, the
World Resources Institute, and WWF
called Science Based Targets (SBT)
that aims to increase corporate
ambition on climate action by
changing the conversation
around decarbonisation.

SCIENCE-BASED
GOALS
6

DIRECTIONS 2015 SALTERBAXTER

Science-based targets
have a vital role to play
in creating much better
sustainability metrics,
but they have their
limitations too. The key
is to measure the things
that really add value
and to use the right
language, argues
Diageos David Croft.

Caroline Carson: Diageo has announced


20 new sustainability and responsibility
targets to be achieved by 2020. Can you
tell us more about the strategy?
David Croft: The strategy is around how
Diageo progresses in 2020 and beyond.
We are looking at three key areas
alcohol in society, the communities
where we operate, and the environment.
The targets aim to act upon our most
material issues.
Our strategy has to focus on alcohol
perhaps not usually a frontline
sustainability topic, but our approach
is very holistic. We take a grain to glass
approach: thinking through the impact
of our supply networks on their
communities.
In terms of implementation, there is a
much greater focus on impact. Were
looking at what we do and what effect
it is having on us and on wider policy
goals the Sustainable Development
Goals, for example.

THE ISSUES WERE TRYING


TO TACKLE NEED A HUGE
COALITION OF THE WILLING.
8

CAROLINE CARSON
Sustainability Consultant
Salterbaxter

A MEASURED
APPROACH

DAVID CROFT
Sustainable Development Director
Diageo

Business cannot operate in isolation.


The issues were trying to tackle need a
huge coalition of the willing. As a leading
organisation in our sector, we can help
support and strengthen that coalition.
CC: Do you think the evolution of
science-based targets has helped?
DC: Science-based activity has created
metrics that werent there before.
On the environmental side it works
fairly well, but some of the broader
issues we face are still hard to quantify.
We need pragmatism as well as metrics.
Without it you spend a lot of time and
resource measuring impacts that dont
necessarily add value.
CC: Were you able to incorporate
these metrics in deciding your
strategy and targets?
DC: Being able to measure has certainly
played a role in setting targets, but it
was not the only lens. For me, it starts
with deciding the most material issues
we face. If we cant measure everything
to the level wed like as with socioeconomic metrics we try to create
frameworks to help that happen.
Science-based activity around the
environment has been very helpful,
particularly during our recent significant
growth. It helps us measure how well we are
achieving our targets in a wider context.
Although the science-based activity
is still developing, it generates
confidence that our approach is really
relevant to the risks the world faces.
Historically, not having science-based
targets meant organisations could
remain isolated and thats not the
strongest way forward.
CC: Are there other material issues to
which you apply a science or context
based approach other than carbon?
DC: We would certainly consider it.
The environmental data is years ahead
of the social data. I think the social side
will catch up, but it remains challenging
to get hold of the detailed data on health
or on livelihoods needed for a truly
science-based approach.

CC: Alcohol in society is one of your key


sustainability focus areas. Does science
play a role here too?
DC: Absolutely. We are committed to
delivering the Beer, Wine and Spirits
Producers Commitments1. Last year
we had about 330 individual projects
to manage across a range of areas.
But the really key question is: which,
or which facets, of these programmes
are most effective?
Bizarrely, the sustainability movement
has been slow to apply impact
measurements around socio-economic
issues. Yet thats exactly what wed do
with any other business issue. It doesnt
make sense but, previously, the data just
hasnt been available.
CC: Diageo is on the advisory board
for the Science Based Targets (SBT)
Initiative. How did this come about?
DC: Weve been involved from the
start because we wanted to put this
data-driven approach alongside the
pragmatic and materiality approaches
already there.
SBT provides suggestions and guidance.
Along with others on the advisory board,
we bring an ability to translate the white
coat theory into practical approaches
for business.

WE NEED TO TRANSLATE THE


WHITE COAT THEORY INTO
PRACTICAL APPROACHES
BUSINESS CAN WORK WITH.
Because theres a danger. If detail gets
too convoluted, it can switch an audience
off. So part of our role is thinking about
how guidance might be couched in future
to create and enable the desired impact.
CC: Do you have any advice for other
organisations looking to adopt a more
science-based approach?

DC: My start point is lets not create an


industry around science-based targets.
We need to be pragmatic or well spend
a lot of time and resource that could
dilute the actual activity itself.
SBT is hugely valuable in helping us
focus on the right areas. It also enables
that coalition of the willing to move
consistently in a shared direction,
with the right degree of scale to tackle
these really big issues.
CC: What communication challenges
have you encountered?
DC: Well it can be a double-edged sword.
But I think the data helps you track
progress and communicate better.
Another danger is the language. It is
not always accessible and its important
to use language that connects with
different audiences not everybody
is a scientist.

IN MANY AREAS OF SOCIETY,


THERE IS A MISTRUST
OF SCIENCE.
CC: Is this something that can be
resolved through dialogue or
communications?
DC: I think its about dialogue, and
making certain that a broad stakeholder
group feeds into how targets are
developed and communicated.
It irritates me when a business says
the science tells me A+B = C with a
perfectly logical rationale that may
be completely devoid of any emotion.
When consumers dont agree with that
logic, the response is often: Well just
have to educate consumers. That feels
terribly patronising.
There are wider contexts that motivate
people and change. If education was all
that is needed, everybody would have
been using low-energy light bulbs way
before policy required it. And that wasnt
the case, was it?

1 Leading producers of alcoholic beverages have made a collective commitment to reduce harmful drinking across five key areas underage drinking, marketing
codes of practice, consumer information and responsible product innovation, drinking and driving, and enlisting retailer support in reducing harmful drinking.
(http://www.producerscommitments.org/)

DIRECTIONS 2015 SALTERBAXTER

MATTHEW SWIBEL
Director of Corporate Sustainability
Lockheed Martin

KRISTINA JOSS
Senior Sustainability Consultant
Salterbaxter

For Matthew Swibel, science offers a starting


point but not always a destination. Turning
data into knowledge requires judgements, too.
At their best, scientific approaches help focus
the conversation and provide the raw material
for finding effective solutions.

10

Kristina Joss: Your sustainability


report is entitled Science of Citizenship.
How do you connect the science of
your business to the value you create
for society?
Matthew Swibel: Sustainability is
often best understood by recognising
systemic impacts. A systems view
creates opportunities to use science to
address complex challenges and gather
credible data to get to the heart of the
problem. Being a scientifically driven
business, we can take a systemic view.

KJ: How is Lockheed Martin integrating


science into sustainability?
MS: Whether youre talking about
advanced weather satellites or the
science behind flow batteries, theres
a very close link between science and
our products. We also take a scientific
approach to organising ourselves,
for instance using data to analyse
where our weaknesses are in achieving
high productivity or developing work
accident risk indicators.
Most recently, we used the Centre of
Sustainable Organisations contextbased carbon metric for our emissions
targets. However, we used the
methodology as a compass rather
than as a source for new thinking.
KJ: Does this help you set goals and
measure progress?
MS: I think it helps translate the goal
and understand the relative weight of
the target. Before, all we could say was:
we are going to reduce absolute carbon
energy by a given percentage using a
2010 baseline. Now we can credibly
say how close we got to the threshold.
So if business conditions mean we dont
meet our target, we are smarter about
knowing how close we can go to the
threshold and not feel discouraged
with our performance.
KJ: How do you see the carbon
goal-setting process evolving?
MS: Theres still potential for different
carbon metrics to be harmonised.
Wed welcome that. Our voluntary
reduction targets extend to 2020,
so we will probably continue to
refer to goal-setting frameworks
in formulating our next longer-term
goals. And, as we become highly
energy efficient, well want to
demonstrate were making long-term
progress not just year on year.

KJ: How are you using science


to enhance the sustainability
of your products/services?
MS: One example is how we are trying
to make solar energy more economical
through developing low-battery energy
storage. This will enable utilities to add
renewable energy to the mix without
disrupting the grid at high cost to
customers. Mining companies have
used our seismic sensors for several
years. Now oil and gas companies
are applying the science behind these
to make fracking safer.
KJ: Do your engineers and scientists
make the connection between
sustainability and science?
MS: I think that they are driven to
innovate with purpose and thats often
closely linked to scientific discovery.
Thats a strong thread running through
our space programmes. Whether the
innovations are about finding life on
Mars or preventing wind farms jamming
radars, theres a higher purpose to those
two very different challenges. I think
thats what employees latch on to.
KJ: What are the challenges when you
talk about science and sustainability
to stakeholders?
MS: Were trying to show the
interconnection between both
corporate and wider citizenship and,
within that, the relevance of science,
in terms of discovery and finding
solutions. Sustainability is too often
linked to the heart. Now we can say:
lets put our minds to work and not
get stymied by emotions.
But when you welcome science into the
process you also have to shed long-held
biases. For example, a strictly scientific
approach to managing our carbon would
show we neednt cut carbon again in
our business operations and could
actually increase emissions and still be
contributing our fair share! So outcomes
need to be thought about too and thats
sometimes a complex conversation.

KJ: Your report says you monitor


frameworks such as science-based
targets. What other frameworks do
you rate highly?
MS: We use the World Resources
Institute (WRI)/World Business Council
for Sustainable Development (WBCSD)
Greenhouse Gas Protocol, Corporate
Accounting and Reporting Standard,
and we also consult ISO 14064-3 for
greenhouse gases. Then we use a
scientific approach to mitigate cyber
threats. Our process is now reflected
in the new National Institute for
Standards and Technology (NIST)
framework, which has been endorsed
by US Administration as the cyber
security framework that large
companies should follow for reducing
cyber risks to critical infrastructure.
KJ: Some feel science-based
frameworks are prescriptive and
stifle their sustainability approaches.
Do you agree?
MS: For someone like me who views
frameworks more as a starting than
a finishing point, the challenge is that
they could limit how firms respond to
the outcomes. Maybe theres also a
fear that its a precursor to some kind
of auditable standard, which will not
necessarily drive change but just
increase costs. And maybe theres
a worry it will remove some of the
entrepreneurialism that has propelled
sustainability efforts to date.
KJ: What would be your advice to other
businesses looking to adopt a more
scientific approach?
MS: First, make sure your objectives
are well stated you can get quickly
derailed if you start with the wrong
objectives. Second: use science to
start the conversation, rather than
seeing it as a destination. It shouldnt
be the only light on your radar.

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DIRECTIONS 2015 SALTERBAXTER

MARK W. McELROY, Ph.D


Founder & Executive Director
Center for Sustainable Organizations

SCIENCE
ETHICS
CONTEXT

Science-Based Goals/Metrics
These are grounded in scientific
or factual knowledge of the worlds
vital resources and how human
activities can and/or should affect
them. But they do not fully reflect
a fair and proportionate share
of the burdens to abide by them.

Science-based metrics, while very useful, do not paint the


full picture of how sustainable individual organisations
are. Context-based metrics do. Its helpful to know the
difference, as Mark W. McElroy explains.

As the importance of sustainability


measurement and reporting grows,
its helpful to clarify the distinction
between so-called science and
context-based metrics.
These terms are not synonymous,
although they do overlap. More
importantly, science-based thinking
is by no means adequate for setting
goals or measuring performance in an
individual organisations sustainability
necessary, perhaps, but still inadequate.

12

THRESHOLDS AND ALLOCATIONS


To really understand that distinction
you need to start by understanding
the difference between thresholds
and allocations.
A threshold is a limit in the carrying
capacity of a resource, which can
either be an upper limit or a lower limit.
So a threshold of water in a watershed,
for example, is an upper limit that should
not be crossed. By contrast, a liveable
wage threshold is a lower limit that
should at least be met. Both thresholds
must be respected if societys impacts
on water and wages are to be sustainable.

Allocations, by contrast, are


fair, just and proportionate
shares of the burdens required
to abide by thresholds and
which are assigned to individual
actors, such as companies.
Once limits in the availability
of water resources in a watershed
have been determined, for
example, allocations can then
be made to individual users. In the
case of water, this will typically involve
allocations to multiple parties, the sum
of which should not exceed the available
upper limit (or threshold) of supplies.
Ethics-Based Goals/Metrics
These are grounded in moral
or ethical rather than scientific
knowledge of vital natural resources
and how human activities can
and/or should affect them. But,
again, they do not fully reflect fair
or organisation-specific allocations
of the burdens to abide by them.

Where liveable wages are concerned,


allocations are typically made to a single
party (i.e. to an employer relative to its
own workforce). So some thresholds are
shared while others are exclusive. Once
defined, allocations can be regarded as
goals or targets, since they tell us what
an organisations impacts on vital forms
of capital must be to be sustainable.
SCIENCE AND FAIRNESS
This explains why science-based
goals and metrics are by themselves
insufficient for setting targets or
assessing performance in individual
organisations. In order to be useful,
thresholds must be fairly apportioned
to individual actors.

Context-Based Goals/Metrics
These are science- and moralitybased goals or metrics that fully
reflect fair and organisationspecific allocations of the burdens
to maintain or produce vital
resources at levels required to
ensure stakeholder wellbeing.
Context-based environmental
metrics developed by the Center
for Sustainable Organizations
and the MultiCapital Scorecard
developed by Thomas & McElroy
make it possible to set goals
and measure performance in
fair and organisation-specific
ways. Companies using such
tools include Biogen Idec,
Ben & Jerrys, New Chapter,
Agri-Mark, EMC, Autodesk,
BT and Lockheed Martin.

ETHICS-BASED METRICS
Some sustainability standards are not
science-based at all and are perhaps
better described as purely normative
or ethics-based. They express duties
or obligations organisations have to act
with like fairness, justice, integrity and
respect. Respecting racial and gender
equality come rushing to mind here.
Such purely normative thresholds,
however, are no less germane to
sustainability performance and must
be taken into account.
Context-based metrics, as indicated,
always bring allocations to the table
and are otherwise science- and/or
ethics-based. Only context-based
measures, therefore, make it possible
to set goals for, and assess performance
against, organisation-specific
sustainability standards of performance.
Neither science- nor ethics-based
measures do this on their own.
Of course, there are other metrics that
are not science-, ethics- or contextbased at all and which focus instead on,
say, the beneficial effects or good deeds
of a firm, such as levels of employment
or philanthropic contributions.
These should not be confused with
measures of sustainability performance.

And all of that must be done in a way that


adjusts for changes in an organisations
size over time or other changes that
occur and have an impact on the world.
This is systems thinking at its best and
nothing less will do.
This is what the allocation side of
context-based thinking is designed
to do. It adjusts for changes in the
facts and acknowledges differences
in accountability, even if we are,
simultaneously, still striving to abide
by science-based thresholds at the
macro level. Context-based goals and
metrics do that well; science-based
measures alone do not.

Acknowledgement:
An earlier version of this article first appeared on the Sustainable Brands website on 25 May 2015 (www.sustainablebrands.com),
and has been reprinted and updated here with permission.

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DIRECTIONS 2015 SALTERBAXTER

JOHN KORNERUP BANG


Head of Positioning & Risk Management
Group Sustainability, Maersk Group

SCIENCE, AND THE ROLE


OF ORGANISATIONS
The fact that science is rapidly moving
centre stage in the context of sustainable
development is a trend that cannot be
ignored. Overall, it is a very good thing.
However, before applying science in
business target setting, we must be
mindful of the role companies can best play
in the pursuit of sustainable development.

To unlock growth, mitigate risks,


and raise sustainability performance
levels, companies are well advised
to be mindful of science when
developing their business strategies.
However, John Kornerup Bang is
sceptical of the value of scientific
goal setting when its decoupled
from your business reality.

The fact is, the real challenge for


sustainable development is generally
not the lack of knowledge, nor is it the
availability of possible solutions.
Both are there and have been for a long
time. The real problems are twofold:
the application of solutions at a scale
that is consistent with the size of the
problems; and
the political will and space to really
accelerate these solutions.
Companies have a very important role
to play in both of these challenges.

APPLY NG
SC ENCE
THE QUEST FOR BUSINESS RELEVANCE

14

THE ENGINE FOR SCALE


The engine for scale is businesss key
contribution to this space, and the
mechanism for that is profit. Its about
maximising the positive impact of your
business within the framework of that
profit generating motor.
In order to unlock that potential, its
crucial that your work and your objectives
are set in the context of your business
strategy, your core competencies, and
other considerations such as your brand,
how can you communicate to markets,
your access to capital, and your appetite
for risk. In that way your sustainability
work becomes a relevant factor in your
business strategy and as the business
grows and prospers so does your positive
impact on society.

AS THE BUSINESS GROWS AND


PROSPERS SO DOES YOUR
POSITIVE IMPACT ON SOCIETY.
When it comes to science-based targets
related to climate change, there is the
assumption that you have to work back
from the global carbon budget. But taking
shipping as an example; calculating back
from a global carbon budget, assuming a
share for the entire transport sector and
then for maritime shipping down to the
single company, can distract focus from
the businesss strategic context.
Additionally, the exercise assumes that
it is possible to predict where disruptive
innovation that could shift service
delivery between sectors will come from.
Hence, an over-reliance on sciencebased targets, at best, may just not be
relevant for developing your strategy.
But at worst it could actually induce you
to put cost into something that doesnt
drive business performance at the same
time a straightjacket that could hold
some potential back. In other words,
targets that are not based on that
business reality run the risk of being
simply empty numbers.

TARGETS THAT ARE NOT BASED


ON THAT BUSINESS REALITY
RUN THE RISK OF BEING
SIMPLY EMPTY NUMBERS.
From a strategic, risk-management
perspective, the knowledge that
frameworks such as the Planetary
Boundaries model offer is useful for
companies. It is important to know where
the natural systems are approaching
boundaries because those boundaries
can hit you from a supply, as well
as from a regulatory point of view.
Also, the information from these
frameworks or models can highlight
areas in which your business can offer
solutions, enabling opportunities for
tailored, targeted innovation in your
most significant areas.
However, when such a framework is used
to drive target setting for your company,
you can become decoupled from your
business reality. When that happens,
I am sceptical about how it adds value.
LOOKING BEYOND CARBON
Currently, the science-based targets
agenda is primarily focused on
greenhouse gas emissions, and can
therefore oversimplify or narrow the
debate. Carbon reduction is definitely
a very significant factor when it comes
to shipping. But theres no doubt that
shipping offers solutions when it
comes to the remaining Sustainable
Development Goals (SDGs). It is
important to bear in mind that our
fundamental challenge is to reduce CO2
but enhance growth and development
at the same time. By just focusing
on the reductive part, you could lose
emphasis on the growth and the
development agenda.

ACCELERATING POLITICAL SOLUTIONS


It is so easy to expect politicians to come
up with solutions, but when companies
facilitate job creation from scaling
solutions to sustainable development,
and consequently generate profit and
tax revenues, it works as a foundation
politicians can use to push the
framework conditions further in the
direction of sustainable development.
So, with the right approach, businesses
can open up policy space.
Collaboration across businesses,
sectors, and regulatory bodies is
important, because achieving that scale
and profitability of solutions is hard to
do alone. The key is a close dialogue
between business and governments.
One of the merits of the SDG framework
is that it is very mindful of that.
The whole area of science has a really
strong role to play, and I welcome the
fact that it is becoming central to the
discussion again. But we need to
ensure we find the right application for
science as part of the holistic picture.
An over-focus on science-based targets
can distract from the real progress that
can be made. Target setting has to be
integrated with where we are heading
as a business and where our capabilities
are. When that is done, that is also where
businesses have the biggest contribution
to sustainable development.

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DIRECTIONS 2015 SALTERBAXTER

As we have seen from the previous segment,


science-based goals alone wont save the planet.
So, if taking science to the heart of business
and applying scientific solutions is the key
to sustainable business, how do we get there?

This section explores the development


of leading frameworks by academics and
how they are helping businesses relate
to the science behind environmental
and social issues.

THINGS TO NOTE:
Based on social studies and scientific
research like Limits to Growth,
these frameworks give businesses
scientifically validated vision, models
and metrics to help guide their strategy.
And there are a number out there: from
Planetary Boundaries and One Planet
Thinking to The Doughnut model and
the Sustainable Development Goals.

16

17

DIRECTIONS 2015 SALTERBAXTER

GUIDO SCHMIDT-TRAUB
Executive Director
UN Sustainable Development Solutions Network
@gschmidttraub

ORCHESTRATED
ACTION
There may be a lot of them and some may seem a bit
lofty, but the 17 Sustainable Development Goals and
their 169 targets are no pipe dream, and are using
science to set targets that nations and business can
use as a guiding star. They are a remarkable action
plan for business, says Guido Schmidt-Traub.
In September 2015 the largest ever
gathering of heads of state adopted
17 Sustainable Development Goals
(SDGs) and 169 targets that will apply
to all countries. They are the outcome
of an unprecedented global consultation
process involving governments,
civil society, and business.

These SDGs establish quantitative


objectives through to 2030 to end
extreme poverty, generate sustainable
economic growth, ensure good health,
promote quality education, ensure
access to basic infrastructure, protect
the environment, curb human-induced
climate change, and promote gender
equality and social inclusion.
It would be easy to fault the SDGs
for being too many in number what
company would set 169 targets?
Easy, too, to say they are, at times,
too ambitious or lofty.

But the world is complex, and its


remarkable that 193 governments
have agreed on a set of time-bound
objectives of this kind. The world needs
shared goals. We face major challenges
that can only be addressed through
enhanced cooperation across countries
and key players.
So, it would be a grave mistake for
companies to dismiss the Goals as a
UN pipe dream. Used correctly, they
can become a powerful tool for
companies to become more successful.
COORDINATED PROBLEM SOLVING
At the Sustainable Development
Solutions Network (SDSN) we have been
studying some of the main challenges
the goals address in great detail. While
solutions are available to address each
of these challenges, weve found that we
need much more coordinated problem
solving to deploy solutions at scale.
Think of the world as a large orchestra
where governments, businesses, and
civil society organisations play different
instruments. Since there is no global
conductor this orchestra lacks direction
and focus. The SDGs can become
a common song sheet. They are legally
non-binding and therefore do not
constitute rules, but as a widely
shared set of objectives they can be
communicated easily and provide
shared focus, so that our orchestra
becomes more harmonious.

18

PROOF POSITIVE
The power of global goals has already
been demonstrated by the Millennium
Development Goals (MDGs). These
have supported an unprecedented
mobilisation of business and civil society,
particularly in the fight against child
mortality and infectious diseases.
The SDGs can serve the same role and be
useful for businesses in three main ways.
First, they provide a framework for
developing immediate and long-term
business strategies to support major
transformations needed towards
low-carbon energy, sustainable use
of water and materials, sustainable
agriculture, healthcare and education
for all, and cities that are productive,
resilient, and liveable.
Each of these transformations will require
new technologies and new business
models. Yet, the transformations are also
highly complex and require long-term
objectives with clear and predictable
policy frameworks that make sure
business has a level playing field.
Widely shared SDGs will force the same
discussions about energy policies,
healthcare strategies, the use of modern
technology in education, innovation for
low-carbon transport, water-efficient
agriculture and the circular economy,
in country after country. Countries will
explore how the goals can be achieved
over the long term and how business can
be empowered to provide the necessary
financing, the technologies, and the
service delivery.
Take the work of the Deep Decarbonization
Pathway Project promoted by SDSN and
The Institute for Sustainable Development
and International Relations (IDDRI),
for example. The project has mobilised
teams from 16 of the major greenhouse
gas-emitting countries to develop longterm national pathways to ensure that
global temperatures do not rise beyond
the internationally agreed limit of 2C.

THINK OF THE WORLD AS A


LARGE ORCHESTRA WHERE
GOVERNMENTS, BUSINESSES,
AND CIVIL SOCIETY
ORGANISATIONS PLAY
DIFFERENT INSTRUMENTS.
THE SDGs CAN BECOME A
COMMON SONG SHEET.

Second, the SDGs provide a framework


for engaging governments and other
stakeholders. They also provide a
universally agreed framework for that
dialogue, helping all stakeholders
focus on the same sets of issues.
For example, several mining companies
are successfully using the MDGs as a
framework for stakeholder engagement.
Pharmaceutical companies have used
them to improve their relationship
with civil society and governments
on critical issues, such as access to
essential medicine. The SDGs are
broader and more universal, so virtually
every company will find them useful
as a basis for stakeholder engagement.

For the first time in many countries these


pathways spell out how energy systems
can be redesigned using technologies
that are available today. They are now
being discussed in countries around
the world and provide a framework
for long-term business models in such
areas as energy efficiency, low-carbon
transport and renewable energy.
This is not theory. It is real business
that the Presidents of the US and China
have just committed their countries to.

Third, the SDGs offer companies both an


accountability framework and a powerful
communication tool. As the recently
released SDG Compass developed
by the UN Global Compact, GRI, and
WBCSD demonstrates, the SDGs
can support business reporting and
accountability. Companies can use
them to train their staff on how their
products and services contribute
towards wider social objectives.

Based on this work, the World Business


Council for Sustainable Development,
the International Energy Agency, and
the SDSN have launched the Low-Carbon
Technology Partnership initiative, which
explores how businesses can promote
the low-carbon technologies needed
to stay within 2C.

Yet, success is far from guaranteed


and will not happen without decisive
leadership.

These technologies provide another


long-term business opportunity.
The SDGs will support similar
discussions in many other areas and
provide fertile ground for innovative
companies to take a lead.

If successful, the SDGs will make a


major contribution towards sustainable
development.

Business must get involved now to


overcome passivity, short-termism,
and even outright cynicism.
At the SDSN we are working to make
the SDGs a success, and we invite
companies to join us in that effort.

19

DIRECTIONS 2015 SALTERBAXTER

OLIVIA STANDISH
Researcher
Salterbaxter

KATE RAWORTH
Senior Associate
Cambridge Institute for
Sustainability Leadership

DN OUG

SAVEU

NH UTS

S? CA

Q
Our aim in the 21st century must be
to live between social and planetary
boundaries, something we are currently
failing to do. The Doughnut model is a
powerful tool for helping non-scientists
understand the science of earth systems
and of social needs. Here Kate Raworth
explains how her concept can help
companies think differently about
growth and play their part in moving
humanity into this safe and just space.

Olivia Standish: Can you give us a brief


overview of the Doughnut concept, and
what led your thinking in this direction?
Kate Raworth: Human wellbeing has
two fundamental aspects. Firstly, we all
need resources to lead a life of dignity
and opportunity the resources to
meet our human rights to health, water,
food, energy, income and education;
to be resilient, have a voice, have jobs,
and to have these things with social
equity and gender equality.
But secondly, we must also protect
and steward the planetary life-support
systems on which we fundamentally
depend ample fresh water, a safe
climate, a protective ozone layer,
fertile soil, and healthy oceans.
These two are both aspects of our
wellbeing we cant trade them off
against each other. The Doughnut
image aims to capture that in a simple,
easy-to-communicate way.
On the outside of the Doughnut is an
environmental ceiling consisting of
the planetary boundaries nine critical
Earth systems which keep the planet
in a stable state. We need to ensure that
we dont put so much pressure on any
one of those systems that we push the
planet out of the safe space that it has
been in for the past 10,000 years.
When I first saw the planetary
boundaries diagram I had this great
rush of adrenaline, because at last
I was seeing natural scientists drawing
boundaries around the space the
economy could occupy. Its a hugely
important rebalancing of our economic
thinking, setting it in the much bigger
context of the life systems on which
we depend.
But you need to supplement it with
a social foundation, because just
as beyond the environmental ceiling
lies unacceptable environmental
degradation, so too, below the social
foundation is a space of unacceptable
human deprivation.

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DIRECTIONS 2015 SALTERBAXTER

HUMANITYS FUNDAMENTAL
CHALLENGE IS TO MOVE INTO
THE SPACE BETWEEN THE
SOCIAL FOUNDATION AND THE
ENVIRONMENTAL CEILING.

resilience

th
e

VE

jobs

PM

SI

voice
T

energy
AN

DS

I
U ST
AIN ABL E ECONO M

atmosp
heri
load c aero
ing
so
l

And we invite them to look at their


business and ask: how does our core
practice put pressure on the social and
planetary boundaries? Which ones do
we affect most and what business
risks are we creating as a result?
How can we move away from the
planetary boundaries or lift people
above the social foundation?
Following the CISL programme several
businesses have approached me.
Sainsburys, for example, asked me
to work with them in using the Doughnut
to reflect on the progress they have
made to date and the progress still
needed. They also invited me to present
it to their meat, fish and poultry
suppliers, to communicate that they
were stepping up action in this area, and
thinking on a much broader scale about
the impacts of their business.

E
CD

ution
poll

ion
let
ep
d
e
on
oz

social
equity

EN

la
nd

education
gender
equality

VE

LO

l
ica
em
ch

biodiversity
loss

income

and
ogen
nitr rus cycles
ho
osp
ph

water

ocea
na
cid
i
fi
ca
tio
n

22

e
us

KR: There is certainly a growing number


of companies that are trying to figure
out how to become one. I am senior
associate at the Cambridge Institute
for Sustainability Leadership, and
we use the Doughnut in our executive
programmes, working with major
companies from across many sectors.
Its a starting place for looking at the
sustainability challenge they face in
the 21st century.

ty
ni

OS: Are there any Doughnut brands


out there at the moment?

food
health

To do that, we have to ask ourselves


what kind of economy and what kind
of businesses will help take us there.
For companies the priority is to ensure
that your business is a Doughnut Brand.

just space for


nd
hu
a
m
fe
IAL FOUNDATIO
a
C
a
O
S
N
s

CL

So humanitys fundamental challenge


in the 21st century is to move into the
space that lies between the social
foundation and the environmental
ceiling an environmentally safe space,
and a socially just one. It would be an
extraordinary achievement if we could
be the turn-around generation that
starts moving us there.

se

fre
sh
wa
te
r

ONMENTAL CE
ILIN
ENVIR
G

ge
an
ch

IN

Already we have transgressed the


boundaries on both sides. Many millions
of people live in appalling deprivation.
One person in three lives on less than
$2 a day, one in ten is undernourished
and one in five has no access to
electricity. And we have already
transgressed four of the nine planetary
boundaries for climate change, land
use change, nitrogen and phosphorus
flows, and biodiversity loss.

climate change

Then we ran a workshop with the


Sainsburys in-house team, exploring
the impacts of meat production, taking
both sides of the Doughnut into account
land use, impacts on climate change,
water impact, nitrogen impact, the
impact it had on employees, and the
wages and incomes paid to suppliers.
OS: What is the relationship between
the Doughnut model and the Sustainable
Development Goals (SDGs)?
KR: The SDGs strongly reflect many
of the dimensions of the Doughnut.
I was delighted to learn from insiders
to the process that the Doughnut
diagram was literally on the table as
the SDGs text was being negotiated.

But the Doughnut concept was itself


shaped by earlier discussions of those
goals: I sourced the social foundation
from the social priorities that the
worlds governments brought to the
2012 Rio+20 conference.
The SDGs are very important. I think
it is vital that the global community
gets together every now and then, and
says where are we going as humanity?

IT IS VITAL THAT THE GLOBAL


COMMUNITY GETS TOGETHER
EVERY NOW AND THEN,
AND SAYS WHERE ARE
WE GOING AS HUMANITY?
They provide a powerful guide to global
social and environmental priorities.
But I dont think businesses should
follow them slavishly. You need to have
a vision that is aligned with them,
rather than relying exclusively on
their targets and indicators.
OS: What would be your advice to
businesses thinking of using the SDGs or
other more human-focused frameworks?
KR: If youre really going to be a Doughnut
brand you need to go beyond having a
sustainability strategy. These ideas need
to be part of the corporate mission, part
of the vision of what the company is.
I really like the work of Marjorie Kelly
and her book, Owning Our Future,
which talks about companies having a
living purpose. The Doughnut is a great
starting point to help a company identify
its living purpose and to find ways to
earn a financial return in the process.
OS: Do you think that a scientific
approach is important to support that?
KR: Yes I do. Understanding how our
planet works and the life-support
systems on which we depend is
fundamental in designing businesses
that can thrive.

Of course many companies still struggle


with the eternal tension between
creating shareholder value and hitting
sustainability and social targets.
Thats why I think the ultimate act of
sustainability this century is going
to be the transformation of corporate
governance. I hope well see more
companies saying: if we are going to
be truly socially and environmentally
sustainable, we need to change the
way we are incorporated. If we are
forever bound by the belief that we need
to maximise shareholder return we are
never going to tackle the real priorities.
OS: How do you see businesses leading
in this area?
KR: The 20th century was a century
of monetary metrics; it was the century
in which GDP was invented and in
which accounting and shareholder
value really moved centre stage.
I think the 21st century will see us
move beyond monetary metrics to
material or biophysical metrics,
and those metrics are fast improving.
Fifteen years ago, if you asked
somebody what their carbon footprint
was they would have thought it
absolutely bizarre. But now everyone
understands that concept its become
part of how we understand the world.
Using an environmental profit and loss
account is a good example of leadership
in attempting to make this calculation.
We will see companies looking not just
at their carbon footprint, but their
nitrogen, water and land footprints,
and then aiming not just to reduce their
footprint but to become net positive.
The cradle-to-cradle and the circular
economy movements are leading
in this area.
A good example is Desso Carpets.
On its website, it reports its biophysical
metrics right up front next to the profits
because taking these new metrics
seriously is clearly at the heart of what
the company considers itself to be.
I hope to see a lot more companies
following that example.

OS: Coming back to Planetary


Boundaries and the Doughnut model,
how do you see them evolving?
KR: Planetary boundaries are a
very powerful tool for bringing an
understanding of Earth-systems
science to non-scientists.
Its not perfect or set in stone,
but we urgently need this science.
Over the past five or six years weve
seen it used widely outside the scientific
community. It has been very powerful
for the UN, NGOs, business and across
society, enabling people to understand
and talk about the Earth system as
a fundamental part of our wellbeing.

ITS NOT PERFECT OR SET IN


STONE, BUT WE URGENTLY
NEED THIS SCIENCE.
The 21st century part is figuring out how
to use resources efficiently and equitably
so that we can meet the human rights
of more than nine billion people.
OS: How can businesses best
communicate the link between
environmental degradation and
economic development to consumers
and other stakeholders?
KR: Its all about the language. If we
pitch it as a tension between economic
development and environmental
degradation, it creates a false
competition one that just feels
impossible to win.
So to me it comes back to is your brand
a Doughnut brand? If youre part of
that, youre part of the 21st century
transformation that we need.
And if youre not part of that, theres
only one question: whats stopping you?

23

DIRECTIONS 2015 SALTERBAXTER

DR. JAKE REYNOLDS


Director, Sustainable Economy
Cambridge Institute for Sustainability Leadership

Incremental change is no longer enough: organisations


need to incorporate climate science and the context in
which they operate into their sustainability strategies.
Achieving sustainable development means fundamentally
rethinking our approach to managing the economy,
says Jake Reynolds of the Cambridge Institute for
Sustainability Leadership (CISL).

24

Based on 25 years of working with


business leaders, we have reached
a clear conclusion and its this: we need
a fundamental rewiring of our economy
to tilt the operating conditions for
companies in favour of sustainable
development. That means actively
encouraging business models that
create prosperity without eroding
the natural and social capital on
which we rely.

WE NEED A FUNDAMENTAL
REWIRING OF OUR ECONOMY TO
TILT THE OPERATING CONDITIONS
FOR COMPANIES IN FAVOUR OF
SUSTAINABLE DEVELOPMENT.
Rewiring the Economy our recently
launched ten-year, ten-point plan
is aimed at laying down these new
economic foundations. The plan
pinpoints ten tasks, which if addressed
collaboratively by governments, business
and finance institutions would match
up economic progress with the UNs
sustainable development goals (SDGs).

BOLD AMBITIONS

REPORTING SHORTFALLS

One of the ten tasks in the framework


is all about the need for businesses
to set truly bold ambitions.

There has been a radical improvement


in sustainability reporting over the past
decade, with more information and metrics
available than ever before. While thats
undoubtedly a positive development,
its clear not all reports get to the heart
of the companys core business.

The economy is clearly not set up to


deal with the significant impacts we
have seen since the great acceleration
began in the 1950s. Business-asusual operation is contributing to
environmental degradation rather
than offering solutions.
In the absence of public policy action,
many companies are responding
with well-intentioned sustainability
strategies. Thousands are reporting
sustainability performance or investing
in CSR. But the economy remains largely
unchanged by these initiatives they
are too small and incremental to alter
conventional economic behaviour.

BUSINESS-AS-USUAL OPERATION
IS CONTRIBUTING TO
ENVIRONMENTAL DEGRADATION
RATHER THAN OFFERING
SOLUTIONS.
Tackling this problem head on, Rewiring
the Economy encourages the key players
governments, business and financial
institutions to work together to
create conditions where sustainable
business models thrive because they
are commercially successful. Such
conditions would see poor performers
lose market share and ultimately
disappear, replaced by firms that
generate social and environmental value
as a function of their core business.

The audience is becoming less tolerant of


such anomalies. Indeed as both oil and
gas companies and banks have learned
some industries are being characterised
as having no social purpose.
There are, of course, a number of
businesses leading the way in
measurement and disclosure. Kering,
owner of Puma, has its Environmental
Profit and Loss approach, and Kingfisher
and BT have net positive and net good
strategies.
But even they face a significant challenge.
What does a company do once it has set a
goal of becoming net positive? How does
a business deal with a debt to nature of
hundreds of millions of dollars per annum?
How to respond is a big question, full of
value judgements as well as scienceproofed targets and metrics. For example,
if a company wishes to claim it is a good
climate-change performer, it might
choose one of three very different options.
It could take the position that it
will emit less CO2 than last year
the incremental position.
It could show that it has calculated
what its fair share of global emissions
is and will stay within budget
the science-based approach.
Or it could demonstrate that it has a
plan for ensuring that its whole industry,
and the economy in general, is working
to ensure the planet stays within two
degrees of global warming the science
+ system approach.
The stance taken will depend on the
extent to which the company regards
itself as a leader, the nature of its
dialogue with civil society and the risks
it sees of not tackling pressing issues.

25

DIRECTIONS 2015 SALTERBAXTER

CISLs ten tasks for business,


finance, and government to
lay the foundations for a
sustainable economy.

26

RE-ENGINEERING BUSINESS
PRIORITIES
Business can and must play a central
role in this process of economic rewiring.
Take the work being done through the
Cambridge Natural Capital Leaders
Platform, for example. This brings
together companies who are placing a
value on their impacts and dependency
on natural capital, and who can,
therefore, make better decisions,
identify new opportunities and
contribute solutions to natural capital
loss and ecosystem degradation.
CISLs new project, Action Linking Growth
with Nature (ALIGN), is taking this
work further by convening companies
actually investing in natural capital and
asking: can we produce private returns
alongside things of real public value such
as improved livelihoods, conservation
and resource protection?

THERE IS NO DOUBT THAT


PRIVATE SECTOR ENGAGEMENT
ON SUSTAINABILITY
IS GROWING.

MAKING THE CASE


We urge companies to help build the
momentum for sustainability among
the public through consistent brand
and marketing messages.
But its vital that these communications
are authentic and are not perceived
as greenwash. Its precisely this
sort of approach that has allowed
Marks & Spencers widely publicised
Plan A to make a positive connection
with customers.
The UNs launch of its Sustainable
Development Goals, and the COP21
climate change talks in Paris in
December provide opportunities
for companies to make the case
more strongly than ever.
Many will be showing the public, and
governments, how they are meeting
the challenge of converting the science
of sustainability into world-class
business strategies that will make
a meaningful difference.
COLLABORATION
Why are we so confident about that?
Well, there is no doubt that private sector
engagement on sustainability is growing,
including among the investors and
financial intermediaries that shape
the flow of capital into the economy.
A new class of collaboration is
foreseeable that will help meet
emissions targets quicker; one that will
extend over time to other critical issues
like global health, resource use and
ecosystem quality based on increasingly
robust science and standards.

SUSTAINABLE BUSINESS MODELS


WILL BE BUOYED BY A TIDE OF
ECONOMIC LOGIC RATHER
THAN AGAINST IT.
could be severe, but it will serve to
stimulate already fast-growing, lowcarbon innovation exactly the kind
of tilt we are seeking to, as we say,
rewire the economy.
We foresee other opportunities for
rewiring, not least in the area of tax
reform where burdens still fall on
goods like labour, rather than bads
like pollution and over-consumption.
Innovation policy and economic metrics
are other examples of where we see
rewiring opportunities. If we get this right
then sustainable business models will
be buoyed by a tide of economic logic
rather than against it; it will be possible
to take a science-based approach
to target setting without fear of being
undercut by competitors who have
no such intent.
In short, with those foundations in
place, business will be enabled to
get on with the task of building a
sustainable economy.

In tandem we foresee governments


beginning to call into question the vast
sums of money spent on subsidising
fossil energy estimated by the IEA to
be $548bn in 20141 (four times those to
renewable energy) and over $5tn p.a. by
the IMF2 (more than global government
health spending). In seeking alternatives
to this inefficient use of resources the
net effect on carbon-intensive assets

1http://www.worldenergyoutlook.org/resources/energysubsidies/
2https://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf

27

DIRECTIONS 2015 SALTERBAXTER

PETER BAKKER
President and CEO
World Business Council
for Sustainable Development

The World Business Council for Sustainable Development has


developed a number of sustainability frameworks for businesses
which are rooted in scientific consensus. Peter Bakker details
how these science-based frameworks and scientific approaches
are challenging business as usual, and helping business to lay
the foundations for a more sustainable world.

28

The need for a sustainable world is


more urgent than ever. As we count
down towards the end of this critical
year, it would be easy to lose hope.
The climate has changed, land is
degraded worldwide and biodiversity
loss shows no signs of slowing.
There is still war, growing inequality,
youth unemployment and hunger.

WHAT FILLS ME WITH


OPTIMISM IS SEEING HOW
BUSINESS IS NOW ADDRESSING
THE GLOBAL SUSTAINABILITY
CHALLENGES THAT
GOVERNMENTS CANNOT
RESOLVE ALONE.
But there is also opportunity. What
fills me with optimism is seeing how
business is now addressing the
global sustainability challenges that
governments cannot resolve alone.
Forward-thinking companies know
their success depends on developing
sustainably. The WBCSD have long
championed the integration of
sustainability into core business
strategy. With real integration,
sustainability will become an integral
part of a companys decision-making
and performance management
systems. The integration of financial,
environmental and social capital
elements into corporate governance,
valuation and reporting will incentivise
sustainable corporate behaviour.
And, by enhancing the overlap between
public and private interests, businesses
can help lay the foundations for a truly
sustainable world. Here are some of
the WBCSDs key frameworks helping
businesses to achieve this:

PUTTING VISION 2050


INTO ACTION
In 2010 the WBCSD published Vision
2050 a wide-reaching report on the
priorities that must be addressed by
2050 in order for nine billion people
to live well and within the boundaries
of the planet.
It was the result of an intensive 18-month
study of environmental, demographic
and development trends, and was
completed in partnership with the
Stockholm Resilience Centre, the World
Resources Institute and our member
companies. Significantly, for the first
time, insiders from global business
publicly stated that business-as-usual
was no longer an option and outlined
pathways for transformational change.
Vision 2050s long-term perspective
needed a pragmatic roadmap and that
led to Action2020. This action plan
identified the targets that must be
achieved by 2020 to stay on track for
2050. These goals form the core of
our work programme which seeks to
accomplish a science-based societal
target by 2020 for six key areas:
social impact
sustainable lifestyles
climate change
ecosystems and landscape
management
water
safe and sustainable materials.
Across these areas, our members
develop and deploy business solutions
whose impact can be measured. There
are sector and value-chain projects
too, ranging from sustainable cities
to forests and biomaterial solutions.

REDEFINING VALUE
A defining part of the WBCSDs work
is building frameworks that help
sustainable companies become
recognised and rewarded for their
integrated performance, and showing
others how they can gain this competitive
edge. Our Redefining Value Programme
aims to achieve this vision by improving
the effectiveness of non-financial
reporting so that it progressively reflects
the true value of a company by disclosing
true profits and true costs.
Additionally, in 2016, two consortia
managed by the WBCSD and the
International Union for Conservation of
Nature will deliver the Natural Capital
Protocol, a harmonised measurement
and valuation framework for natural
capital. We are also developing a Social
Capital Protocol to measure and manage
social impact.
HELPING BUSINESSES TO REALISE
THE SDGs
We are developing the SDG Compass for
Business in partnership with the United
Nations Global Compact (UNGC) and
the Global Reporting Initiative (GRI).
The SDG Compass will help businesses
understand the methodologies and tools
available to match up their strategy with
the SDGs. We now need business to get
engaged and bring forward its positive
influence on society through innovation,
investment and labour. The SDGs
constitute the framework conditions
for successful businesses of the future.

Were taking steps towards meeting


human needs within planetary
boundaries, but theres much more
to do. At the WBCSD, we are pioneering
collaborative solutions to drive
sustainability deeper and further.

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DIRECTIONS 2015 SALTERBAXTER

DR. GEOFF KENDALL


CEO
Future-Fit Foundation

BACK

TO

02

Sc
Science

Current ways of measuring sustainability either


exaggerate achievement or utterly fail to capture
real progress. We need a new kind of metric
that connects businesses with the scientific context
surrounding their actions, and gives them a clear
and compelling destination, says Geoff Kendall
of the Future-Fit Foundation.

01

Su
Sustainability

04

Fu
Future-Fit

THE
Almost 50 years ago we put a man on
the moon. But here are a few questions
for you about that extraordinary
achievement:
What was the first, necessary
precondition for making it happen?
Was it our ability to develop sophisticated
technologies? Was it our willingness
to embrace a seemingly impossible
vision? Was it our commitment to invest
whatever it took to get the job done?
All these factors were, of course, critical.

03

Bu

Business

30

But the first and most important


precondition was that the destination
was clear and compelling we knew
exactly what to aim for, and we all
wanted to go.

FUTURE
WEVE HAD NO CLARITY WHEN
IT COMES TO WHAT HAS
OFTEN BEEN CALLED THIS
GENERATIONS MOON-SHOT:
THE TRANSITION TO A
SUSTAINABLE ECONOMY.
Unfortunately, weve had no such clarity
when it comes to what has often been
called this generations moon-shot:
the transition to a sustainable economy.
It is now widely accepted that we need
to rapidly and radically change the
way we do business if we are to avoid
the worst effects of climate change,
resource scarcity, environmental
degradation and population growth.
And we need every business to play
its part in this transition, because our
economy as a whole can only become
sustainable if every company operating
within it is sustainable too.

CURRENT LIMITATIONS

But what, exactly, does it mean for


a company to be sustainable?
And how can we measure and thus
manage progress toward this
destination? Until now there has been
no clear answer to either question.
You may be thinking: but there are
no end of ratings, rankings and indices
that claim to measure corporate
sustainability performance
surely theyre telling companies
what to aim for?
The answer, in a word, is no.
Current metrics measure relative
improvements in todays best practice.
They do not track absolute progress
toward tomorrows required practice.
That matters because there are two
problems with rewarding incremental
progress.

Thats not exactly going to keep the


companys CEO and investors awake
at night, pondering how to decarbonize
their business model. Current metrics
lull decision makers into believing that
doing better than last year, or better
than the next guy, is enough.
The second problem is that by not
putting todays actions in a future
context, were failing to acknowledge
those companies that are really
stepping up to do whats necessary.

A handful of forward-thinking CEOs


have committed to deliver net positive
benefits to society, in areas as diverse
as reforestation, carbon capture, and
poverty alleviation. Thats what true
sustainability leadership looks like.
But metrics that dwell on the status
quo often dont even register such
bold commitments, let alone capture
their full potential.

First, it can make companies look


far better than they actually are.
For example, last year the Dow Jones
Sustainability Index announced that
an oil company was 85% sustainable.

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DIRECTIONS 2015 SALTERBAXTER

A NEW KIND OF METRIC


So we need a new kind of metric, one that
tells companies where they need to be
based on best-available environmental,
social and systems science and which
encourages and rewards progress
towards that point.
That, in a nutshell, is the motivation
behind the Future-Fit Business
Benchmark, a new open-source
tool grounded in a simple definition:
a Future-Fit company is one that in
no way undermines the possibility
that humans and other life will flourish
on Earth forever.1
This is far from utopian. Future-Fitness
is not about demanding that every
company tackles societal problems,
eschews growth, or renounces profit.
Rather, it is about defining the minimum
that any company must do to avoid
degrading the social fabric and natural
processes we all depend upon.
The Benchmark centres around
21 Future-Fit goals: performance
thresholds spanning the full range of
environmental and social issues that
may be affected positive or negatively
by a companys operations, its supply
chain, and the products it sells.
These goals collectively define the line
in the sand that all companies should
aim for. And were close to completing
work on a complementary set of FutureFit key performance indicators (KPIs),
to help companies measure where
their biggest gaps are, and where to
prioritise accordingly.

01

Over the past year weve worked with


a range of companies from social
enterprises to global brands to explore
what the Future-Fit goals mean to
them. No two businesses are the same,
so its unsurprising that discussions
have varied wildly.
For example, one goal all employees
are paid at least a living wage was
quickly dismissed not as unimportant,
but as unproblematic by a wealth
management fund.
But it proved a major sticking point for
a company that depends upon cheap
labour in developing nations.
Another goal Products emit no
greenhouse gases when used as
intended was understandably a source
of concern for one car manufacturer, the
bulk of whose products are still powered
by fossil fuels. However, another car
company Tesla has already reached
this goal, as all of its cars are powered
by electricity.

In every such discussion, reactions to


Future-Fit goals tend to fall into one
of three categories. There are goals
that seem easy, because the companys
business model has very little impact
in that area. There are goals for which
the path to success is clear its just
a matter of time and money. And then
there are goals that appear impossible.
This last category is the most interesting.
When someone says that a particular
goal cant be reached, what they
really mean is that it cant be reached
within the confines of their current
business model.
Which of course begs the question:
how would the business model have
to change? Now that is a conversation
worth having.
Going to the moon was a choice;
transitioning to a sustainable
economy is not.
The Future-Fit Business Benchmark
offers companies something theyve
been lacking: a clear destination to
aim for.
But to reach it will require a willingness
to explore and embrace completely
new ways of doing business. Incremental
improvement is not enough. After all,
we didnt reach the moon by shuffling
up the nearest mountain.

03

Bu

Su

Business

Sustainability
02

Sc
Science

32

THE FUTURE-FIT BUSINESS


BENCHMARK OFFERS
COMPANIES SOMETHING
THEYVE BEEN LACKING:
A CLEAR DESTINATION
TO AIM FOR.

CONVERSATIONS WORTH HAVING

04

Fu
Future-Fit

1This is based on John Ehrenfelds definition of a sustainable society, more details of which can be found
at johnehrenfeld.com

BUILDING
SCIENCE-BASED
CREATING THE FUTURE-FIT BUSINESS
BENCHMARK INVOLVED THREE STEPS
Step one began with identifying a
set of system conditions that describe
how a truly sustainable society must
operate. Thankfully, more than
25 years of academic research have
already been devoted to this task2.
We translated the results of that
effort into a set of Future-Fit business
principles that can be applied at
the level of an individual company.
There are seven of these principles.
Heres an example: A Future-Fit
business ensures no harmful
substance escapes into the
environment.
Step two involved translating
the principles into a clear set of
environmental and social performance
thresholds or goals. To develop these
Future-Fit goals we cross-referenced
all of a hypothetical companys critical
relationships with its customers,
communities, suppliers, employees,
owners, and the environment
against each business principle,
to identify the full range of actions
that might cause breaches to occur.
For example, by looking at the
intersection of customers with
the principle mentioned above,
we deduced that a Future-Fit
companys products emit no harmful
substances when used as intended.

2You can find out more at thenaturalstep.org

FUTURE-FIT IN THE FIELD


Companies, sustainability
professionals and consultants
are now beginning to adopt and
use Future-Fit concepts.

BENCHMARK
Step three after a round of public
consultation to challenge and refine
our work, weve arrived at a set of
21 Future-Fit goals. Collectively,
these goals draw the line in the
sand the business world has been
lacking. But to identify their biggest
performance gaps and thus
prioritize what matters most
companies also need to be able
to tell how far away they are from
reaching each goal. So we created
a concise, credible and comparable
set of KPIs that enable progress
toward each goal to be measured
and thus managed. This work is due
for completion in December 2015.

Step one: Identified a set of


seven Future-Fit business
principles that can be applied
at the level of an individual.

Step two: Translated


the principles into a clear
set of environmental and
social performance
thresholds or goals.

Step three: Arrived at


a set of 21 Future-Fit
goals with KPIs.

The first company to commit to


becoming Future-Fit is the social
enterprise BR!GHT Products.
Its Sun Bell product is claimed
to be the worlds most elegant,
durable and multi-functional
solar lantern and over a million
people in the developing world are
already benefiting from it. BR!GHT
embraced Future-Fitness to
ensure the positive social impact
of its products is not compromised
by any other aspect of its rapidly
growing business.
Large companies are
understandably slower to
declare ambitions that may mean
disrupting established business
models. But over the past year
weve heard from a dozen or
so sustainability professionals,
working for global brands in
sectors as diverse as fashion,
cosmetics and mining, who are
using the Benchmark to spark
conversations within their
organisations.
And its not just companies who
are paying attention. Future-Fit
concepts and goals are cropping
up in consultant offerings and
supply chain tools. For instance,
we are partnering with B Lab to
ensure the next iteration of the
methodology it uses to score
prospective B-Corps matches
up, where appropriate,
with Future-Fit criteria.
These early signs suggest that,
when it comes to setting sciencebased business goals, the debate
is shifting: from what and why,
to how and when.

33

DIRECTIONS 2015 SALTERBAXTER

CHRISTOPHER DAVIS
Director of Corporate Social
Responsibility and Campaigns
The Body Shop International

KATE LEVINE
Director of Commitment and
Corporate Communications
The Body Shop International

The Body Shop is known for being one of the first businesses to shape
ethical consumerism, led from the heart. But as the sustainability debate
has matured, there is a need to change tack: to embrace the latest scientific
thinking and collaborate with academia to continue to drive the agenda.
Christopher Davis and Kate Levine talk to Annie Lancaster about
how scientific thinking is helping The Body Shop do just that.
Annie Lancaster: As your sustainability
strategy has developed, what role has
science played in that development?
Christopher Davis: Historically, the
company has been led from its heart;
building sustainability strategy around
the philosophies of Anita [Roddick] that
business can be a real driver for change,
so I think its fair to say that science
hasnt been at the centre of our strategy
in distant past. However, we are now
embracing what we see as an exciting
new development science moving
more to the fore.

34

AL: What is driving this change in


approach?
CD: Being led by your heart is a
wonderful thing, but times are changing
and for us its time for us to look at things
a little bit differently too. The advances
in science and academia are a massive
factor. The way the academic community
has begun to work with business, even
in the past few years, has led to a
transformation in our own perspective.
Likewise, were witnessing scientists
having an interest in what were doing,
applying theory into practice. We are
seeing a big shift, and a positive shift too.

AL: You recently reviewed Natural


Capitalism and Planetary Boundaries
as potential frameworks to support
The Body Shops strategy. What was
it about these approaches that
appealed to you?
CD: It was the fact that they were taking a
different approach; a holistic perspective,
looking at society and the ecosystem.
Of course, the fact that these approaches
are based wholly on credible scientific
data had a really big influence on us.

ANNIE LANCASTER
Senior Consultant
Salterbaxter

Our challenge is taking that scientific


study and applying it to business.
Thats where the future lies: ensuring
that theory and practice can be joined.
And thats where the scientific and
business communities have got such
a rich opportunity to collaborate
much more effectively.
AL: Do you see science playing a
bigger role in corporate sustainability
in the future?
CD: Yes, absolutely. I have no doubt
its going to be the thing that drives us.
We have started to embrace the work of
the Cambridge Institute for Sustainable
Leadership. Weve been sending our team
members on courses there to connect
them to leading perspectives. Its got us
thinking differently on a strategic level.
Were also exploring a new partnership
with a leading academic institution
around scientific innovations and
sustainable design. It is our intention to
apply our learnings to the business on a
practical, rather than a theoretical, level.
Both are equally valuable, as were
getting that independent perspective
into our business, challenging our
thoughts and our norms. Its about the
meeting of minds, isnt it? Its about
both parties wanting to learn from one
another: for businesses, the academic
theory. For academics, the faster,
more rapid application of thought.

ITS UP TO ALL OF US
TO EMBRACE, INTERPRET,
AND APPLY THE SCIENCE
THE BEST WE CAN.

AL: One of the challenges around


science-based target setting is
whether or not they stifle innovation.
Kate Levine: Theres a parallel with the
argument from years ago as to whether
corporate sustainability should be
regulation based or voluntary. A lot of
people were saying that regulation would
stifle innovation. But leaders see where
they have to go for compliance and then
look where they can innovate beyond
that. I think this is exactly the same with
science-based targets.
AL: Can science play a significant role
in helping businesses connect their
business ambitions to the bigger
challenges facing society?
CD: Yes, certainly. Whats interesting
about science is that it can be a meeting
point for business, for government, for
civil society; when fact-based knowledge
is there at the centre. Its up to all of us
to embrace, interpret, and apply it the
best we can.
AL: Do you think consumers care about
science when it comes to sustainability?
CD: I think that one of our responsibilities
as a company is to lead our consumers;
to take decisions that have been
influenced by and have embraced the
latest scientific research. For example,
recently we have been working with
concepts like green chemistry in making
our formulations more degradable.
We are not doing it in response to specific
customer demands; often there are
actions well take because they will
have a more positive effect on the
environment, but we also hope to lead
the debate.
AL: Which ties right back to the history of
The Body Shop taking that leadership
role before it was demanded of you.

giving customers security in the


knowledge that our actions are endorsed
by independent third parties. But it might
also give those, who didnt think they
were interested, that curiosity to know
more. We can lead the way, but the
key is to make sure that we take our
customers with us.

SCIENCE CAN TURN PEOPLE


OFF UNLESS YOU CAN MAKE
IT INTERESTING.
AL: What advice would you give other
businesses that are looking to adopt
a more scientific approach?
KL: Science can turn people off unless
you can make it interesting. Its really
important for the communications
and the sustainability teams to work
very closely together in order to
create engaging messaging. Internal
communications pieces are absolutely
vital and also must be consistent with
what we are saying externally.
CD: Go back to school. Learn from super
smart people who were studying the
environment or social sciences. Go back
and listen because this area of study is
growing and advancing at a tremendous
rate. Go back and challenge academics
to address some of the challenges that
we are facing within our business.
In our experiences academia has been
so open to us, its a great opportunity
for all of us to take action. If we dont
work together the planet and society
are facing potential disaster there is
a moral as well as a practical imperative
to take action.

KL: We have a very close connection with


our consumers perhaps more so than
other brands. The challenge is to use
science for leadership purposes but also
continue to connect with our customers.
This is where communication is really
important. Economists, academics and
social sciences are very important in

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DIRECTIONS 2015 SALTERBAXTER

DIMENSION 3:

STAKEHOLDER
ENGAGEMENT
There may be convincing arguments for adopting a
science-based approach, and targets and frameworks
in place to help you achieve it, but how can this be
turned into compelling storytelling for either investors
or end consumers?

The following section explores how


organisations can communicate
successfully around scientific
sustainability concepts with
different key stakeholders.

KEY QUESTIONS:
Whether its in raising investment or
in increasing sales, does science
have a role to play in bringing
stakeholders along on the journey?
What can organisations do to
successfully communicate the science
behind their decision-making to
consumers, and should they even try?

36

37

DIRECTIONS 2015 SALTERBAXTER

ANDY HOWARD
Founder
Didas Research

Scientific may be too strong a word, but some


organisations are taking a more structured and
data-driven approach to their sustainability
communications with investors. Analysts are also
becoming more systematic in their use of data
to inform their investment decisions or ratings.
But the bridge between environmental and social
trends, business models, and investment analysis is
still being built, says Andy Howard of Didas Research.

DISSECTLong-time environmental, social and


governance (ESG) analysts were
schooled in an era where if companies
reported any CSR information, it was
patchy and inconsistent. Content was
more an adjunct to case studies and
photographs of polar bears, icebergs and
smiling children, rather than reflecting
a companys core business issues.
The truth is, until seven or eight years
ago, quantitative ESG analysis was
a largely theoretical exercise
predominantly untroubled by data.

That picture has changed significantly


in recent years. Corporate sustainability
reporting has ballooned in breadth and
depth. Investor demand for objective
environmental and social analysis has
grown as the commitment to integrate
it into mainstream reporting has spread.
Younger generations of analysts trained
in numerical analysis have entered the
industry and technological advances have
made extracting and using data easier.
These changes are all structural and
they will continue to increase demand
for rigorous, objective and investmentrelevant ESG analysis.

But what is the real supply and demand


picture here? Well, the numbers are
pretty impressive.

The Governance & Accountability


Institute finds that three-quarters of the
S&P 500 published sustainability reports
last year, up from just one-fifth in 2011.
Globally, the number of sustainability
reports tracked by the Global Reporting
Initiative has grown eight-fold since
the launch of the UN Principles for
Responsible Investment a decade ago.
The information they contain is also
becoming more rigorous and objective.
Data is replacing stories and case
studies, with the GRI providing the
reporting standards most follow.
RISING DEMAND FOR DATA
Rising demand prompts more analysts
to use that data. Nine in ten of the top
50 global fund managers have signed
the UN Principles for Responsible
Investment, which commits them to
integrating environmental, social and
governance factors into investment
decisions, processes and stewardship.
Investors growing willingness to adopt
long-term investment strategies
also tends to raise the importance
of environmental and social analysis.
The decades long march towards
shorter-term investing bottomed out
in 2008. Since then, the average length
of time investors hold onto stocks has
doubled, to around 16 months currently.

DOUBLE-EDGED SWORD
However, having more data is a doubleedged sword.
Distilling performance into formulae and
metrics may bring an objective lens to
an otherwise woolly subject and be more
scalable than relying on conversations
with silver-tongued investor relations
executives. But data-driven metrics are
only as useful as the logic on which they
are based. Data analysis is a tool and not,
in itself, an answer.
Unfortunately, there has been too little
attention paid to the logic underpinning
ESG analysis. A perception of ESG
performance persists. It is a convenient
illusion that sidesteps the need to think
about what it means, how it should
be measured and the investment
value of the results.
While a few investors venture into the
primary data that companies report,
most rely on ESG ratings from firms like
MSCI, Sustainalytics or EIRIS to provide
bite-sized answers, which are then
used to screen stocks for investment
and engagement.
That emphasis on single-number ratings
is evident in Bloombergs statement that,
of all the detailed raw data it collects
and publishes through its terminals,
the single most used ESG data point
by far is its ESG Disclosure rating
a score which provides, at best,
a crude proxy for performance.

DATA-DRIVEN METRICS
ARE ONLY AS USEFUL AS THE
LOGIC ON WHICH THEY ARE
BASED. DATA ANALYSIS
IS A TOOL, NOT AN ANSWER.

ING
DATA

All this would matter less if there was,


at least, a consistent view of strong or
weak ESG performances. There isnt.

Our analysis of the ratings six large


agencies give to the same 100 large
global companies shows very little
correlation between their conclusions.
Theres just no apparent agreement
between them on how to rate this
group of companies.

The challenge is reflected in academia.


We examined 20 of the most downloaded
research articles looking at the
relationship between ESG performance
and profitability or stock returns.
Unsurprisingly, most conclude that ESG
measures can enhance performance.
But, on a closer look, seemingly rigorous
conclusions are, in effect, mostly exercises
in correlating opaque ratings of unclear
provenance with stock price data.
These challenges will subside. As fund
managers awareness of the importance
of environmental and social change
grows, scrutiny of the analytical
process is becoming more intense.
Most investors now understand
how important it is for companies
to be able to adapt to the changing
expectations of workers, customers,
communities or other stakeholders.
So, it is likely that the discussion will
shift from does ESG affect financial
performance? to how do environmental
and social trends affect financial
performance? and how should we
measure performance?

HOW SHOULD WE MEASURE


PERFORMANCE?

The latter questions are a prompt


re-examination of what ESG issues are,
how business models are affected and
how best to measure performance.
The result will be a welcome broadening
of the topic and more understanding
of the relationship between social and
environmental trends, industry impacts,
business performance and profitability.
A sharper light of investor scrutiny
should drive rhetoric and irrelevance
from the discussion, with interesting,
but immaterial, topics hopefully
consuming less attention.

On the other hand, definitions of


sustainability are likely to broaden.
If supply chain ethical standards are
important, why shouldnt information
on supplier concentration and
geographic distribution, or insight into
supply chain strategies and information
systems, demand similar scrutiny?
More sophistication in ESG analysis will
also push more of the information out of
companies control. For instance, todays
technology makes it relatively easy
to examine employees perceptions of
companies, customers views of their
products or the lawsuits, and product
recalls or corruption probes they have
faced without opening a CSR report.
Frameworks like the one being developed
by Future-Fit should find a willing
audience amongst fund managers
building ESG analytical tools. Our own
research is grounded in bottom up,
evidence-based analysis of trends in
the stakeholders most important to each
sector. This informs the performance
areas we focus on and the data we use
to gauge strengths or weaknesses. Other
analysts are likely to develop similar
products using different frameworks.
The result will be a more rigorous and
investment-focused ESG analysis,
with less room for companies to hide
behind sustainability reports that sit
at a tangent to core business functions.

39

DIRECTIONS 2015 SALTERBAXTER

ANNIE LANCASTER
Senior Consultant
Salterbaxter

THE RE-ENLIGHTENMENT
Science and emotion are often believed to be
entirely separate, non-complementary entities.
Therefore a common fear expressed over the
preceding pages is that without an emotional hook,
communicating the science behind your strategies
and activities can leave audiences cold. But is this
the case? Annie Lancaster argues that, when it
comes to science, consumers are now more
receptive than ever before.

I THINK THAT OUR SOCIETY


NEEDS MORE HEROES WHO ARE
SCIENTISTS, RESEARCHERS
AND ENGINEERS.
Mark Zuckerberg
Over the previous pages we have seen
how science, the long-time partner of
sustainability, is once again coming to
the forefront of sustainable leadership.
And yet, very few outside of the
sustainability community
would know that this change
is taking place.
The reason? Brands are
wary of leading their
communications with science
for fear that it will be boring,
or confusing, or both. For too
long, science has had a bit
of an image problem.

40

THE TIMES, THEY ARE A-CHANGING


For decades science has been seen by
many as boring and best kept behind
closed doors, but the last few years have
seen a change: science is now breaking
out of the laboratory.
We face many problems as a global
society, problems so enormous, they
seem impossible to solve: economic
stagnation, environmental degradation,
population explosion, climate change,
the list goes on. Its no coincidence
that superhero films have seen such
resurgence of late: the world is longing
for a hero to swoop in and solve our
challenges for us.
But we are also witnessing scientific
breakthroughs at an unprecedented rate:
artificial intelligence, 3D printing, the
discovery of the God Particle, and the
possibility that the conditions for life
exist on other planets. In the absence of
The Avengers, we are increasingly aware
that we need scientists today to solve the
problems of tomorrow. Rather than fear
or deride the men in white coats, we are
starting to revere them.
Take the Brian Cox effect here in the
UK. The captivating physicist, now an
A-List celebrity, is single-handedly
credited with raising the university
application rate for Physics by 52%.1
American astrophysicist Neil deGrasse
Tyson hosted one of the most watched
events at this years South by
Southwest festival, and is so popular
online he has triggered his own meme.
The Facebook fan-page I F*cking Love
Science, dedicated to popularising
scientific breakthroughs, has just
under 22 million fans. Thats more
than Harry Styles, Leonardo DiCaprio,
or the Rolling Stones.

The last time science was so much in the


spotlight, combined so powerfully with
art, culture and commerce, was during
the Enlightenment in the 18th century.
Then, as now, scientists were the heroes
of the day, and audiences clamoured to
be the first to experience technological
breakthroughs as they happened.

The impact of this interpretation of the


science has been terrifying. Two years
ago, the US saw its worst whooping
cough epidemic in 70 years. And this
year has seen the worst measles
epidemic in 20 years spiral out from
Disneyland in California, fuelled by
growing enclaves of unvaccinated children.

As with the previous enlightenment,


spread across western Europe by a vast
increase in literacy thanks to the invention
of the printing press, the internet means
we are now sitting at the starting line of a
new communications revolution, bringing
with it its own seismic shifts in attitudes
and behaviours.

The scientific and medical communities


have repeatedly released evidence that
vaccines are safe. However, it is an
unfortunate but sad truth that humans
are often drawn to the flashy and
attention grabbing as opposed to
boring, peer-reviewed research articles.

Right now, science is seriously cool.


Rather than shunning science in favour
of natural, organic concepts as they did
in the 90s and early 2000s, consumers
are instead seeing its relevance
and appeal in their day-to-day lives.
Scientists are the heroes of our age.
WHEN SCIENCE GOES WRONG
However, recent history is littered with
examples of how the mixture of science
and emotion can prove explosive.
The anti-vaxxers movement, which
blames vaccination for a range of health
problems, is a perfect illustration of
how sometimes ideas that originate in
science can seep out into the broader
culture and take on a life of their own.
Members run the gamut from vague fear
that vaccination is unnatural and thus
inherently risky, through to those who
fear the ingredients in vaccines are part
of a government conspiracy to subdue
its own citizens.

SOMETIMES IDEAS THAT


ORIGINATE IN SCIENCE CAN
SEEP OUT INTO THE BROADER
CULTURE AND TAKE ON
A LIFE OF THEIR OWN.

Another example, that perhaps hits


closer to home for consumer brands, is
the furore over formaldehyde in Johnson
& Johnson baby products. Several years
ago, The Environmental Working Group
raised concerns about a formaldehydereleasing preservative in Johnson &
Johnsons baby shampoo and other
products. Parents and special interest
groups were unrelenting in their outrage
towards a brand they trusted to care
for their children. The company sprang
into action, initially insisting that the
products were safe, before promising
to introduce reformulated products
by the end of 2013.
But why did Johnson & Johnson remove
the preservative if its safe? That is
exactly the question that consumers
started asking.
The company argues that their job is not
to combat misconceptions in the public;
its to sell products. They removed the
formaldehyde because they were asked
to. But in doing so, Johnson & Johnson
are creating a precarious path for
themselves, simultaneously insisting
that the products are safe while they
reformulate them. Safe or not, the
company decided it was worth investing
in a team of close to 200 scientists who
worked for two years on removing an
ingredient they insist posed no danger.

Or take the controversy that has


surrounded aspartame since its initial
approval by the U.S. Food and Drug
Administration (FDA) in 1974. The weight
of scientific evidence indicates that
aspartame is safe for human consumption
the FDA describes it as one of the
most thoroughly tested and studied food
additives the agency has ever approved.2
Nevertheless, repeated consumer scares
have resulted in reputational damage,
such that in some markets, like France,
it is being phased out by the food and
beverage industry in favour of natural
sweeteners such as stevia.
There are certain subjects, then, in which
emotion can often trump logic, and what
we put into our bodies and particularly
the bodies of our children is one of
them. These examples share the
terrifying taint of poisoning, and better
safe than sorry starts to feel very
reasonable where babies are concerned.
Whats clear is that despite its current
popularity, using science to counter
emotionally-driven reactions is very,
very hard to do, and usually falls well
short of the mark.
WHAT DOES THIS ALL MEAN?
As the worlds problems continue to
mount, consumers are increasingly
looking for someone to provide solutions
to challenges that feel too massive
to overcome. For many, science and
scientists are filling this gap.
When it comes to ingredients, people will
likely always look askance at scientificsounding formulas. But when it comes
to tackling global crises, now could be
sciences time to shine.
Brands able to facilitate a better dialogue
between scientists and the wider public
will stand out as confidence-inspiring
leaders. When it comes to sustainability,
concerned audiences seek reassurance
that someone, somewhere, knows what
they are doing. In this crucial year in
which businesses, governments, and
scientists are coming together, those
brands that can offer that assurance
will be light years ahead.

1 According to the University of Manchester, School of Physics and Astronomy.


2 Henkel, John (1999). Sugar Substitutes: Americans Opt for Sweetness and Lite. FDA Consumer Magazine 33 (6): January 2, 2007.

41

DIRECTIONS 2015 SALTERBAXTER

42

Weve heard from a number of


experts who have shown that
science can be a powerful force
for sustainability. But alone
it is not the answer. Across
the range of perspectives
and experiences weve seen,
five key points stand out:

1. Theres definitely a role for science


and data in sustainability target
setting. But its uptake comes with
a warning label: the science has
to be shot through the lens of your
business context.
2. Science-based goals are not a single
solution to the challenges we face.
For one thing, the focus on carbon and
other environmental issues is leading
some to call for a similar drive on the
social sustainability side. For another,
there are those that argue imposing
targets from the outside-in can
stifle innovation.
3. Academics and earth scientists are
changing the ways in which solutions
are created. We are seeing leading
researchers and theorists develop
frameworks rooted in science, which
help businesses integrate their social
and environmental performance
into their overall approach.
4. Weve seen proof of how these
frameworks are making companies
think and act differently. However,
their true impact is yet to be seen.

5. To date, businesses have been


cautious about engaging investors,
customers and consumers with the
science behind their sustainability
decision-making. This is either
because they feel their stakeholders
will not be interested, or that they will
misinterpret the science behind
strategies and actions. However,
if businesses dont capitalise on
science being cool, it could prove
to be a missed opportunity.
Its clear that science is taking its
place, once more, at the centre of the
sustainability debate. The potent mix
of science, business, and sustainability
is creating impactful solutions; social
and environmental scientists, academics
and business leaders are facilitating
this through collaboration. But its
also clear that were not yet seeing
the full impact that science can have.
How will the formula for science and
corporate sustainability evolve?
The proof will be in private sector
adoption and tangible results.

43

DIRECTIONS 2015 SALTERBAXTER

ABOUT US:
We work where business strategy,
sustainability and creative communications
meet, creating strategies and stories for
some of the worlds leading businesses
and brands. Our aim is to help business
perform better, communicate better
and deliver better long-term outcomes.
We call this Ideas for Better Business.

Our clients include:


adidas Group
Anglo American
BP
C&A
Coca-Cola Enterprises
Diageo
Giorgio Armani
H&M
Hilton Worldwide
LOral
LEGO Group

Maersk Group
Premier League
PVH Corp.
Richemont
Sky
Sustainable Apparel Coalition
The Body Shop International
Thomson Reuters
Trafigura
Unilever
Viacom

Contact us:
Samuel Griffin-Flynn
sgriffin-flynn@salterbaxter.com
Tel +44(0)20 7229 5720
salterbaxter.com
@salterbaxterMSL

44

Salterbaxter MSLGROUP
The Dome, Level 4 Whiteleys Centre
151 Queensway
London W2 4YN
Tel +44 (0)20 7229 5720

ABOUT DIRECTIONS:
Directions, now in its fifteenth year,
is widely viewed as the leading
annual publication on trends in
sustainability and communications.
Salterbaxter also produces
supplements and events on
key topics throughout the year.

2001
Trends in CSR
reporting

2002
Trends in CSR
reporting

2003
Trends in CSR
reporting

2004
Trends in CSR
reporting

2005
Best in show of this
years crop

2006
Is CR in your blood?

2007
Cutting through the
noise of the climate
change debate

2008
Sustainability
gets tough

2009
Mapping the
landscape of
European CR

2010
The Innovation
Edition

2011
Opportunity in
the new age of
uncertainty

2012
Profits from
purpose

2013
Authentic?

2014
Getting under
the surface

2015
The rise of science

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