- Created: 27 January 2013
First the good news. Companies took strides towards sustainability in 2012. Some of them even made money doing it, writes Stephen Gardner.
The Massachusetts Institute of Technology 2012 Sustainability and Innovation Global Executive Study, for example, found that more than half of companies that made a business case for sustainability said that it had boosted their bottom line.
Now the bad news. Whatever companies did on sustainability in 2012, it was nowhere near enough. This was true of all the areas that fall into the environmental, social and corporate governance brackets. It was in the battle for environmental sustainability that the disjunction was most evident, however.
It was on display in June 2012 at the Rio+20 conference. This was a showpiece event, the follow up to the 1992 Rio Earth Summit which created the United Nations Framework Convention on Climate Change, among other accords. Rio+20 was supposed to reinvigorate sustainable development and promise hope. It did neither.
Instead, decision makers dithered. They produced a document entitled The Future We Want, but this was a list of aspirations rather than commitments.
The inability of policymakers to do anything about environmental degradation was thrown into sharp relief by a series of natural disasters in 2012, culminating in “superstorm” Sandy, which hit New York in October after leaving a trail of devastation in the Caribbean. Sandy was both deadly and expensive. The cost to the state of New Jersey alone has been estimated at nearly $30 billion. The cost to New York has been estimated at $19 billion.
Sandy was far from the only climate-related disaster in 2012. Much of the US also suffered record-breaking drought in the summer. The World Bank calculated a 10 percent increase in global food prices as a consequence. In China, dozens died in floods that hit Beijing in July. Parts of Britain and Ireland also saw devastating flooding during 2012.
It was Sandy, however, that really focused attention on the mounting costs of climate change. The storm hit a few days before the end of a US presidential campaign during which global warming was barely mentioned, but New York's influential mayor Michael Bloomberg, and New York state governor Andrew Cuomo were in no doubt. Cuomo said that it was “denying reality” to say that weather patterns had not dramatically changed. Bloomberg was blunter still. His Businessweek magazine carried the stark headline: “It's global warming, stupid”.
Coincidentally, a fortnight after Sandy hit, PricewaterhouseCoopers published its Low Carbon Economy Index. This pointed out that the amount of carbon dioxide produced per unit of gross domestic product in the world's major economies will need to decrease by 5.1 percent annually until 2050 if global warming is to be kept within supposedly safe levels.
Global carbon intensity did decline in 2011, PwC said, but only by 0.8 percent. Reaching the target would seem “highly unrealistic”. In fact, according to PwC, the temperature rise by the end of the century could be up to 6 degrees Celsius – which by all forecasts would signal disaster.
Politicians, in international negotiations, such as the United Nations climate change conference in Doha, Qatar, in late November and early December, continued to call for global warming to be limited to no more that 2 degrees Celsius above pre-industrial levels. But for some the game is up. As Nicolas Stern pointed out at the World Economic Forum in Davos, a 4 degrees rise is more likely.
The scale of the climate challenge had the unfortunate effect of making the efforts of companies to cut their emissions look puny. There were significant achievements in 2012. Marks & Spencer's British and Irish operations became officially carbon neutral from the beginning of the year, while according to the Carbon Disclosure Project, the top firms that integrate climate change into their business strategies reduced their emissions by nearly 14 percent in 2012. But the global trend of rising emissions was not dented.
Social responsibility setbacks
The question of how much progress has really been made was also asked of corporations over social and governance issues in 2012. The year was punctuated by events that suggested that corporate responsibility often involves one step forward followed by two steps back.
Progress on working conditions and ethics in the supply chain was brought into question by terrible factory fires in Pakistan and Bangladesh. A fire in September in a garment factory in Karachi killed 249 workers; the same day a fire in Lahore killed at least 25. In November, a blaze in Dhaka, Bangladesh, at a factory producing clothes for, among others, C&A, killed more than 110.
In South Africa in August, meanwhile, police gunned down 34 striking miners protesting at a platinum mine run by London-based Lonmin. Miners' strikes in South Africa took place in a context of unsafe working conditions in many mines, and low wages for unskilled miners, according to the International Labour Organisation.
Scandals over corporate behaviour and tax also continued in 2012. Manipulation of interbank lending rates led to multi-million dollar fines for Barclays and the resignation of senior executives, including Barclays CEO Bob Diamond. Later in 2012, attention focused on use by multinational companies of offshore structures to reduce their tax liabilities in Britain. Executives from Amazon and Starbucks were subjected to particularly uncomfortable grillings over this by parliament's Public Accounts Committee. If more of the same is to be avoided in 2013, companies must do much, much more to clean up their ethical acts.
A version of this article was published by Ethical Corporation magazine.