How Big Business and Environmentalists Align in This Crisis
Big business and environmentalists are often pitted against each other. While distrust and resentment may often exist between the two groups, there is actually an abundance of win-win solutions that improve financial performance through better environmental practices—many of which have been demonstrated in these uncertain times.
The old Milton Friedman adage states that “the social responsibility of a corporation is to maximize shareholder value.” Though many business leaders were trained under this view, it is a myth that a company or investor inevitably must sacrifice financial performance and be willing to accept lower earnings to act in a more environmentally friendly manner.
Indeed, according to the 2019 United Nations Global Compact, 90% of CEOs believe that to be successful, Environmental, Social and Governance (ESG) criteria need to be included in their operations and supply chain. Therefore, increasingly, big business is straying from the stereotype of being heartlessly focused on profit above all else.
Environmentalists are often seen in a negative light as well, as hindrances that put up blockades and lack reasonable solutions. Since businesses are actually increasing sales and revenue and are enhancing shareholder value through better social and environmental practices, business leaders can begin to see environmentalists in a new light—as insightful stakeholders who identify future opportunities and grow revenue even during uncertain times. Similarly, environmentalists can see big businesses as important partners for funding conservation/clean energy initiatives and as valuable assets to stabilize our economy.
In fact, environmentalists now have allies on Wall Street and in the private equity markets. The Dow and S&P 500 prove this. Both before and during our current public health crisis and financial downturn, the Dow Sustainability and S&P ESG indexes have performed better than their classic counterparts.
Large institutional investors such as Blackrock, Goldman Sachs, Bloomberg, and State Street have put major ESG criteria into their investor analysis, and Institutional Shareholder Services (ISS) has helped move the needle by sending ESG performance requests to its largest publicly traded companies. Banks are also getting involved, as more than 100 of the world’s largest banks now follow a set of guidelines called the “Equator Principles,” which require organizations to proactively mitigate their own environmental and community impacts before getting large infrastructure loans.
Businesses and environmentalists should see the other as assets rather than liabilities. There is an incredible amount of common ground to be found. At the onset of the current pandemic, businesses leaned into solutions that were originally coming from environmentalists.
For example, environmentalists have long suggested business policies to include work from home (WFH) options. These options reduce commuting, which in turn reduces the wear and tear on employees sitting in traffic while lowering greenhouse gas emissions. WFH can also increase employee productivity and reduce office energy use and waste. However, when Coronavirus broke out across the country, WFH had another benefit: resiliency. Companies that had WFH policies and systems in place had an easier time transitioning to a full-time telework schedule with less interruption to their business.
Another example of this common ground is the explosion in virtual meetings and conferences. Reducing business travel is one of the easiest and most cost-effective ways of reducing greenhouse gas emissions. Once the risk of spreading Coronavirus during the pandemic became known, most businesses switched all of their meetings and conferences to virtual ones almost immediately.
Of course, these shifts were not optional or ideal, but many organizations have made them work. Companies that already had these practices in place were more resilient when forced to switch their operations. In this way, business and environmental interests have aligned successfully in this challenging time.
By realizing that there is much to gain by working together, big business and environmentalists can become valuable allies—exactly what we all need, now more than ever.