Caroline Ditlev-Simonsen has a guide to Sustainable Corporate Responsibility. This covers much of what anyone could hope to read as a summary/introduction to the topic. The author covers the ethics of sustainability, the UN Sustainable Development Goals, stakeholder management, and ESG (Environmental, Social and Governance) reporting amongst other things. There is a lot of interesting stuff packed in.
Interdisciplinary Sustainable Corporate Responsibility
One of the challenges, and excitements, of this area, is that it is interdisciplinary. There is simply a lot to know. Who is an expert on ethics, financial reporting, environmental science, consumer behavior, and sociology? There aren’t (m)any and I certainly am not one of them. This can lead to some discussions being a bit confusing. Ideas advanced by people with different training simply don’t fit together.
Some Measures Work At Least A Bit
For example, I felt the discussion of the business case for sustainability could have been stronger. The author compared ideas without the ideas being comparable. Some worked, others didn’t. Profit works pretty well as the exemplar of a short-term financial measure. (Profit was described as revenue: presumably ‘net revenue’ which finance people often use as a profit measure, but that term itself is relatively confusing given revenue and profits are quite different, see here).
Value maximization took the place of long-term financial measures. Although ill-defined this also works pretty work. Where we have both of these we can go further and ask why profit in a single period would even be a meaningful goal for anyone? Surely the long-term should be the aim for all owners? Even if the owners plan on selling before the long-term arrives then purchasers of the company should pay more if the company has more long-term value. I.e., long-term value is the most important goal as it should help the owners sell for higher prices in the short/medium term. (We can, and should, also bring in other stakeholder ideas at this point but for now let’s stick with shareholder-based measures).
Other Measures Don’t Make Sense As Discussed
Yet some alternative ideas suggested for profit and value maximization are not really at the same level of goal. Many of the other ideas of goals advanced seem intermediate at best. Why would anyone focus on branding if it didn’t lead to something else, like value maximation? Branding isn’t an end goal. What shareholder wants to create a massively well-known, but not at all valuable, brand?
A similar comment can be made for competitive advantage. You seek competitive advantage for a reason, not as an end goal by itself. As such, gaining an advantage in doing something isn’t really the final aim of any business I know. This means it can’t really be directly compared to serving stakeholders or creating shareholder value which are end goals.
This is the challenge of interdisciplinary research. (I know I am not immune from the errors it brings). When you veer out of your expertise things can get a little squishy.
Warnings From Economists
One of the challenges we all face is that we don’t criticize people who are ‘on our side’ enough. It is understandable. People on your side are assumed to be in the ballpark with their ideas, even when they are wrong. In many ways, we see a much bigger ballpark for those who are closer to our thinking. Yet, we really need to criticize those on our side. Just because someone was worried about an issue to do with sustainability, and sustainability is important, doesn’t mean it logically follows that what they said was basically “true”. Lauding errors on your side as basically correct undermines the credibility of your team.
For example, Ditlev-Simonsen lauds Malthus’ warnings about population as “true”. What sense of true is this? Mathus’ ideas have not held up well in recent years. Starvation isn’t an inevitable check on human population. This is the sort of nonsense that gives sustainability a bad name. Should we let the poor starve for the greater good? No. We. Shouldn’t. Malthus’ idea is now (at least), how do you say it in technical terms: “not true”. For more of my thoughts on Malthus see here.
Pricing For Externalities
I don’t want to leave on a negative note because there is an awful lot of good information in Ditlev-Simonson’s book. I did like it, I’m obviously just in a cranky mood as I write and for that I apologize. Plus the book is open access so free to read online, so why not read it? Critically, she notes how markets can help encourage sustainable behaviors. We just need to price in the externalities — problems caused to other people by my decisions.
…we need to price products in such a way that includes the external costs of negative environmental impacts and the social costs.Ditlev-Simonsen, 2022, page 237
Who can argue that you should pay the full costs borne associated with the goods you consume?
Pricing matters to the future of the planet. Pricing is marketing 101, this alone means sustainability is something marketers can (should) certainly help with.
Read: Caroline D. Ditlev-Simonsen (2022) A Guide To Sustainable Corporate Responsibility, Palgrave Macmillan