A sustainability storm was brewing up in the Swiss Alps last week, as Davos reconvened.
At the start of the year, due to Covid concerns, the organisers of the Davos Agenda were forced to adopt a virtual event format for their January get-together, with the high-profile annual in-person meeting of the World Economic Forum (WEF) deferred until May.
Although only four months separated the two occasions, a lot has obviously happened in the meantime. The conflict in Ukraine has fundamentally redrawn the world map in terms of geopolitics. It has also disrupted global business factors such as supply chains, food production, energy security, banking, finance and the stock market.
So, when the powerbrokers and captains of industry finally did get to press the flesh and bite the sound, up amongst the snow-capped peaks in the highest town in Europe, the mood inevitably appeared somewhat subdued. Notably fewer billionaire entrepreneurs and celebrity influencers were showing their faces this time around; and the fizz was a little flat.
Frankly, however, the gloom pervading the mountain resort cannot be attributed simply to either the long shadow cast by the pandemic, or the tragic dark days of the war, or both.
The truth is the global economic downturn and climate emergency have started asking burning questions of the business elite, that currently make them less comfortable being papped schmoozing in ski-wear at a jet-set junket, enjoying an expense-account jolly.
So, is this the beginning of the end for the big-tent corporate circus?
Put simply, there is a fear that chickens are coming home to roost
The symptom, not the cause
No. Davos is still unique as a world stage. Its aura undoubtedly attracts a heavyweight, high-net-worth guest list. It remains the Champions League of the global business game.
The extensive programme of core and satellite events happening throughout the week takes place in a super-connected C-suite universe of stellar multi-nationals and brands.
As a result, its access is unparalleled; its reach is unlimited. The huge gravitational pull exerted by Davos helps the likes of EIT Manufacturing, the dedicated industry arm of the European Institute of Innovation and Technology, actively enlist support for its Moonshot Call, in front of an exclusive audience of changemakers at The Green Accelerator.
Davos itself is not the problem. It is not the cause of our sustainability ills; it is a symptom.
So, what really is wrong with the wider world of business right now?
ESG, risk and climate fear
Put simply, there is a fear that chickens are coming home to roost.
With 2025 and 2030 climate agenda deadlines racing up in the rear-view mirror, business is struggling to navigate the path towards Net Zero, given the additional obstacles thrown up by persistent spikes in Covid numbers and the chaos caused by Russian aggression.
Record inflation, interest rate rises and share-price meltdowns are headline news. In the investment community, talk is in danger of turning from bear markets to full-on recession.
Back in January, the Global Risks Report 2022 published by the WEF already made for pretty miserable reading. Only 11% of respondents then believed the world would enjoy an accelerating global recovery towards 2024. The short-term expectations of almost 9 out of 10 experts and world leaders (89%) forecast a future that would be volatile, fractured, or increasingly catastrophic; and this survey pre-dates the devastating situation in Ukraine.
The time for keeping climate promises will soon be here and, honestly, business confidence is visibly shaken. This is eco-anxiety of a different kind; one tinged with guilt.
ESG is under fire. The expulsion of Tesla from the S&P 500 ESG Index has shocked some commentators and delighted others, but also turned up the heat on everyone else.
At Davos, WEF has been calling for the adoption of universal and common standards and disclosures to firm up the foundations on ESG, with over 150 companies now signed up to the framework for Stakeholder Capitalism Metrics, plus 70 having adopted it, to date.
In the UK, the latest research shows that 77% of financial firms plan to make a permanent hire specifically to handle ESG, ahead of the impending introduction of the Chancellor’s Sustainable Disclosure Requirements (SDR) and roll-out of future ESG regulation.
For those laggards still trying to buy their way out of climate blame, Bloomberg NEF had already set alarm bells ringing months ago, warning that carbon offset prices could jump 50-fold by 2050. Doubts around the credibility of ESG ratings has only served to intensify press and public scrutiny and sharpen the investor focus on sustainability reporting.
So, as reputational stakes get raised, any gamble on greenwash looks like a very risky bet.
Instead, it is time to do the opposite; it is time to get real.
Manifesto for sustainable business
As much a to-do list as a manifesto, the beginner’s guide for any business ready to get real about its sustainability commitments is built upon just four concrete commandments:
- Set down your goals on solid ground — affix them firmly to a form of third-party validation, or verification, ideally by adopting standards and science-based targets;
- Measure everything and report on the findings and progress with radical transparency — then use the data to inform performance KPIs that will help drive-up achievement;
- Communicate and collaborate equitably with all stakeholders and supply-chain partners — upstream, downstream, internal, external, from customers to colleagues;
- Stop sounding off in an echo chamber — engage with critical friends and listen to different opinions, with an open mind, to optimise business agility and resilience.
In short: Target; track; talk and test. Then review, revise and repeat, as necessary.
For once, the lesson to be learned from Davos is actually a humble one: when the scale of the sustainability challenge starts to look scary, take a deep breath and go back to basics.
Get real; and get down to work.