Corporate sustainability: dead & buried or just resting?

It's almost 15 years since Michael Porter and Mark Kramer galvanized the stodgy world of corporate social responsibility with their report in the Harvard Business Review, ‘Creating Shared Value,’ with the not unambitious subtitle of ‘How to Reinvent Capitalism and Unleash a Wave of Innovation and Growth.’

I stumbled across that article the other day—clearing out some corporate sustainability stuff going back more than 20 years—with lots of passages dutifully underlined, margins liberally populated with asterisks and exclamation marks, and even an incredulous ‘You Must Be Joking!’ expostulation. Reading it was not just a trip down memory lane: it was super-depressing.

Nobody talks about shared value these days. Back then, the idea that the surplus value created by companies could be shared more equitably between shareholders, employees, suppliers, communities, and other stakeholders did indeed present itself as an imaginative way of rescuing capitalism from its own worst tendencies, moving beyond ‘self-defeating trade-offs between business and society.’

Companies can create economic value by creating societal value. There are three distinct ways to do this: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company's locations. Each of these is part of the virtuous circle of shared value; improving value in one area gives rise to opportunities in the others.

Well, yes—depending on how much faith you have in the idea of companies acting voluntarily for the ‘common good’—in the absence of legislation. In retrospect, Porter and Kramer were staggeringly naive in their expectations of the so-called ‘voluntary principle.’

I suspect my rather dyspeptic view of shared value may be a reflection of the much, much darker times in which we are now living. There's serious backsliding going on in every sector of the economy, with some companies explicitly flagging their retreat, while others just go silent—‘greenhushing’ for fear of political retribution. (Some have described this as ‘sustainability by stealth’). Most of this is being led by developments in America, with the Trump administration intent on purging the economy of the entirely un-American Trinity of DEI, CSR, ESG, and any other dodgy, woke-sounding acronym!

My colleague Andrew Winston wrote an excellent blog on this back in May, urging corporate America to hold firm against such an unprecedented assault.¹

Those of a sunnier disposition than I remind us that it's all cyclical—that it won't be long before the pendulum swings back again. And it's true that business surveys are showing a very mixed picture at the moment, with chief sustainability officers fearful of the lasting impact of today's backsliding (as in the survey done by IPSOS in February), even as CEOs seem rather more bullish—as reflected in PWC’s survey of 4,700 CEOs back in January, who were confident that the climate-related investments their companies have made over the last few years are already paying back, either in increased revenues or reduced costs. And they saw no reason why that shouldn't remain the case.

A lot of the corporate activity that goes on is not really very useful. A recent report from IBM showed that spending on sustainability reporting exceeds companies’ spending on sustainability innovation by 43%. And without that innovation, no amount of often formulaic, box-ticking reporting will make a dime of difference.

One thing's for sure: for those choosing the coward's path, there won't be any of the big banks or asset managers on their backs to remind them that this isn’t very smart. After many years of paying lip service to ESG principles, they’ve been delighted to be able to get back to profit-maximizing, devil-take-the-hindmost banking and investing. Voluntary initiatives like the Net Zero Asset Managers and Global Financial Alliance for Net Zero (which they signed up to not too long ago with such florid and fulsome enthusiasm) are now dead in the water. Even the Powering Past Coal Alliance (new investment in coal really is the very least we should be asking of these merchants of death!) is rapidly powering down. All of which means that the big asset managers (BlackRock, Vanguard, State Street, and Fidelity—with $23 trillion of combined assets under management) no longer use their votes to support climate or wider sustainability resolutions at companies’ AGMs.

Which tells us that the whole concept of for-profit corporations ‘voluntarily sharing value‘ has always been a total illusion. Boards of Directors can always claim that they have ironclad fiduciary duties to meet in terms of shareholder primacy, even if all the evidence tells us that doing right by shareholders is absolutely not incompatible with doing right by society and the environment. But that's how the rules of the game are framed—and it's governments that set those rules, not companies.

The real issue here, as it almost always is, is political failure. Governments the world over are failing to impose higher standards; failing to raise the bar in order to meet legitimate societal expectations of corporations; and failing to force them to stop externalizing many costs of production (most egregiously, greenhouse gases into the atmosphere), to stop exploiting employees, and to stop paying themselves utterly obscene amounts of money.

Even the holier-than-thou European Commission (which makes such a song and dance about its leadership in this space) has fallen foul of the same ’pressures from the market.’ Back in March, after five years of detailed consultation and laboriously brokered consensus, it unilaterally announced major cuts and delays in various corporate sustainability reporting and due diligence rules—for instance, exempting 80% of companies that would have been held to account by its Corporate Sustainability Due Diligence Directive and deferring reporting requirements from 2026 to 2028. Guess why: “The Commission is persuaded that these simplified requirements will greatly boost competitiveness.”

And that’s perfectly possible—in the short term. But at whose expense in the long term?

To be fair, by the time the Trump administration has leveled the terrain of corporate sustainability in the US economy as comprehensively as Israel and its allies are leveling the lands of Palestine, the EU will still be ‘a leader’—as in being the least culpable in permitting multinational companies, their investors, insurers, and bankers to go on leveling planet Earth.

To look on the brighter side, as Andrew Winston's blog suggested, this will all swing back to something closer to sanity (if not to physical reality), some of the damage will be undone, and governments will rediscover that they really do have a mandate to put people before profits.

But here's the thing: humankind's sad little geopolitical farce (markets vs. society) may well be cyclical, flowing ‘entertainingly’ back and forth. But nature doesn't work like that. With very rare exceptions, the changes we're witnessing in real time, right now, in the climate, in ecosystem stability, and in cumulative levels of pollution are not cyclical. Let alone reversible.

So, how many cycles of geopolitical dysfunctionality do you suppose are still available to us before irreversible shifts in critical planetary systems kick in?

I suspect we all know the answer to that one.