The Rise of Sustainability Ideas in Business
Euromonitor’s research1 shows that two-thirds of global consumers are worried about climate change and are willing to support sustainable practices, which indicates a strong global push towards sustainability in business strategies. According to Proxy Preview 20232, there was a notable rise in social issue proposals, accounting for nearly 65% of all shareholder proposals in 2022, compared to 55% in 2021.
Investors and stakeholders increasingly prioritize social considerations in their evaluations of corporate performance and governance. This shift underscores the importance of integrating robust social policies and practices into business strategies to meet stakeholder expectations and enhance long-term sustainability.
But why do investors and stakeholders make these social considerations? Why change pure business into a more sustainable business? Let’s dig into the milestones of the rise of sustainability ideas in business.
The concept of sustainability in business has evolved significantly over the decades, driven by a growing recognition of the interdependence between economic success, social responsibility, and environmental stewardship. This journey can be traced back to the mid-20th century, through to the present day, highlighting pivotal moments and influential figures that have shaped the current landscape of corporate sustainability.
1950 – 1970: Realizing Responsibility
In 1953, Howard Bowen’s seminal work, “Social Responsibilities of the Businessman,” laid the foundation for what we now understand as corporate social responsibility (CSR). Bowen argued that businesses should not solely focus on maximizing profits but also consider their impact on society, employees, customers, and the environment. This early call for ethical behavior towards stakeholders marked the beginning of a broader awareness that business operations have far-reaching consequences.
The environmental movement gained significant momentum with Rachel Carson’s 1962 book, “Silent Spring.” Carson’s compelling narrative on the detrimental effects of chemical pesticides sparked widespread public concern and led to increased environmental activism. Her work continues to inspire efforts towards responsible stewardship of our planet.
The early 1970s saw the establishment of influential NGOs such as Friends of the Earth and Greenpeace. These organizations played crucial roles in challenging harmful industrial practices and advocating for a more sustainable and harmonious world. Their efforts were complemented by the 1972 United Nations Conference on the Human Environment, which laid the groundwork for international cooperation on environmental issues and set the stage for future environmental agreements.
In the same year, the Club of Rome released the “Limits to Growth” report, which critically examined the unsustainable trajectory of global economic growth. The report emphasized the need to reconsider our approach to development, prioritizing the well-being of the planet and future generations.
1980s – 1990s: Shaping Strategies
The 1980s and 1990s were characterized by significant advancements in integrating sustainability into business strategies. The World Bank played a pivotal role in influencing Third World development strategies by promoting long-term economic development and poverty reduction through technical and financial support. This period also saw the United Nations investigating the intricate connection between the environment and the economy.
In 1987, the Brundtland Report, officially titled “Our Common Future,” emphasized the necessity of balancing economic growth with environmental protection. It highlighted that global environmental problems were primarily driven by poverty in developing countries and unsustainable consumption and production patterns in developed nations. This report led to the 1989 UN Conference on Environment and Development, further solidifying the environment-economy nexus.
The launch of the first social responsibility index in 1990 marked a significant milestone in the evolution of ESG (Environmental, Social, and Governance) investing. This pioneering index integrated ethical and social factors into investment decisions, paving the way for over 1,500 ESG and Climate Indexes used by institutional investors today. These indexes help benchmark ESG performance, manage mandates, and report on sustainability efforts.
2000s and Beyond: Widening Influence
The new millennium witnessed the widening influence of sustainability ideas in business practices. The UN Principles of Responsible Investment (UNPRI), launched in 2006, provided a voluntary framework for investors to incorporate ESG issues into their decision-making processes. With over 4,900 participating financial institutions as of March 2021, UNPRI underscores the importance of aligning investment objectives with broader societal goals.
The annual COP climate conferences have continually reinforced the significance of ESG in addressing climate change. These conferences focus on mitigation, adaptation, and sustainable practices, with COP28 in Dubai providing a platform for business leaders and policymakers to discuss ESG’s role in achieving net-zero emissions by 2050.
The Kyoto Protocol, adopted in 1997 and effective from 2008 to 2012, was a landmark treaty aimed at reducing greenhouse gas emissions. It set binding targets for industrialized countries and the European Union, focusing on six key greenhouse gases: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC2), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6). Despite criticisms regarding its effectiveness, the Kyoto Protocol remains a crucial step in global climate policy.
Today, ESG is integral to responsible business practices, with companies embedding these principles into their strategies, operations, products, and cultures. ESG considerations extend beyond minimizing risks to maximizing opportunities. More than 90% of S&P 5003 companies publish ESG reports, and many jurisdictions either mandate or consider mandatory ESG reporting.
On a contrary, report from ISS4 stated that in 2023 support level for E&S resolution dropped, and an “anti-ESG” proposals emerged.
Incorporating sustainability into everyday business may be tough. But this is a long journey and it should not stop before every business understands that we have but one Earth. We need to understand that to sustain a business, we need to sustain our Earth.
