Better Business: What are the challenges in making business more sustainable?

At the World Economic Forum's Annual Meeting in Davos in January, the Forum launched a new “Davos Manifesto” in support of stakeholder capitalism, which says companies should "pay their fair share of taxes, show zero tolerance for corruption, uphold human rights throughout their global supply chains and advocate for a competitive level playing field,” as Founder and Executive Chairman Klaus Schwab explained.

Little could we have known just how relevant this new manifesto would be for the year ahead.

In the midst of a global pandemic, a global economic crisis, a global climate crisis and a global movement to end systemic racism, stakeholder capitalism is more important than ever – and business needs to play a role in building a more inclusive and sustainable world.

There are a lot of challenges to getting there. Rising emissions and use of the world’s natural resources. The gender pay gap, which the World Economic Forum predicted would take 257 years to close – and that was before the pandemic-induced economic crisis, which has shown to have a greater impact on women. Systemic racism, which is not only unjust, but also hurts productivity, creativity, employee health and the bottom line. Ensuring data is used safely and ethically, and ensuring new technologies don't displace workers.

Without a doubt, COVID-19 makes these goals more difficult to reach – but it also makes them more urgent, given all that we know about the links between the environment and the pandemic, and climate change and human health.

As we embark on the Great Reset after the pandemic, we have a chance to “build entirely new foundations for our economic and social systems,” said Schwab.

“The COVID-19 crisis is affecting every facet of people’s lives in every corner of the world. But tragedy need not be its only legacy,” he continued. “On the contrary, the pandemic represents a rare but narrow window of opportunity to reflect, reimagine, and reset our world to create a healthier, more equitable, and more prosperous future.”

While corporations committed to stakeholder capitalism should pay attention to all 17 SDGs, meeting the targets of two in particular will help make business better:

SDG 9: Industry, Innovation and Infrastructure. Targets related to stakeholder capitalism include promoting inclusive and sustainable industrialization and, by 2030, significantly raising industry’s share of employment and GDP and doubling its share in LDCs. Other targets include increasing access to financial services for small enterprises, upgrading infrastructure and retrofitting industries to make them sustainable.

SDG 12: Responsible Consumption and Production. Targets include achieving sustainable management and efficient use of natural resources and reducing waste generation (especially in food supply chains), and by 2020, achieving environmentally sound management of chemicals and reducing their release. The goal also encourages companies (especially large ones) to adopt sustainable practices and integrate sustainability information into reporting cycles.

“Capitalism as we have known it is dead,” said Marc Benioff, Chairman and CEO of Salesforce, in Davos in January 2020. “This obsession we have with maximizing profits for shareholders alone has led to incredible inequality and a planetary emergency.”

So, how far have we come? Is the business community becoming more inclusive and sustainable?

It's hard to say exactly how much impact has been achieved, but businesses and investors have made substantial and relevant changes to how they finance and fund new initiatives.

“Environmental, social and governance (ESG) considerations are at the forefront of financial decisions, supported by the Sustainable Development Goals (SDGs) and increased awareness of the climate emergency,” wrote Cécile André Leruste, Managing Director of Banking, Europe, at Accenture, a Forum Strategic Partner.

At Davos 2020, 140 CEOs expressed support for a set of core ESG metrics and disclosures for companies, Toward Common Metrics and Consistent Reporting of Sustainable Value Creation. Developed by the Forum's International Business Council (IBC) in collaboration with Deloitte, EY, KPMG and PwC, the proposal intends for the metrics to be reflected in the mainstream annual reports of companies on a consistent basis across industry sectors and countries.

More companies are reporting their sustainability activities and demonstrating their commitment to the SDGs, says the UN SDG Progress Report 2020. “Since 2017, the overall quality of sustainability reports has improved around the world. The share of reporting in the environmental, social, and institutional and governance dimensions that is aligned with the minimum requirements outlined in SDG indicator 12.6.1 (the number of companies publishing sustainability reports) has almost doubled."

And many companies are taking tangible action on environmental and social issues, like systemic racism, carbon emissions and climate change, while giving back to stakeholders in their local communities, to name just a few.

The fact that so many companies have stepped up to respond to the pandemic is a sign that we can achieve these goals, said the Schwab.

“Clearly, the will to build a better society does exist,” he continued. “We must use it to secure the Great Reset that we so badly need. That will require stronger and more effective governments, though this does not imply an ideological push for bigger ones. And it will demand private-sector engagement every step of the way.”