Chapter 8: From follower to forerunner

Today, change is brewing across multiple levels, from companies experimenting with novel solutions to grand challenges, to new corporate reporting frameworks and standards (e.g. ISSB, ESRS, TNFD, GRI, and the EU taxonomy). Some of this change is the concrete outcome of a shift in the broader policy debate represented by the EU strategy for financing the transition to a sustainable economy. At even higher levels, novel narratives are emerging that challenge traditional ways of “doing business” and measuring progress, while also outlining new economic paradigms. A prime example is the Earth4All report, which highlights the need for economic models that prioritize ecological sustainability, social equity, and long-term resilience over short-term gains, and suggests a fundamental rethinking of how societies define and pursue prosperity. These evolving narratives are helping to pave the way for large-scale transformations that can facilitate doing business within planetary boundaries and align economic practices with the urgent need for sustainability and equity.

The content of this report speaks to each of these scales of practice and levels of ambition. It encourages all corporate and financial actors with a desire to be credible ambassadors for change to engage with the ideas, guidelines and tools presented here.

All businesses can contribute to stewardship of nature and the planet

At a time when society and business are transgressing critical limits, beyond which the planet may no longer deliver a stable and predictable flow of the goods and services we depend on, businesses must accelerate their sustainability efforts, and begin to align their operations with planetary boundaries. This requires companies to redefine their relationship with the planet, from merely extracting the resources of the natural world to becoming active stewards of them. While no single business can make this happen alone, all businesses can contribute to such stewardship, and choose to become active change agents for a larger transformation towards sustainability.

The good news is that already today much can be done (and in some sectors and jurisdictions is done). Companies and investors can improve the accuracy, simplicity and transparency of reporting, while future-proofing investments. A key insight from this report is that corporate environmental disclosures can and should contribute to filling the currently vast information gap about our collective trajectory vis-à-vis planetary boundaries. Widespread environmental impact monitoring or stringent environmental
regulation is unlikely to emerge in many nations in theforeseeable future. Corporate reporting therefore still has the critical role of informing investors of financially material nature-related risks and opportunities. Moreover, by mainstreaming the inclusion of environmentally material information corporate reports will also provide valuable data to a range of other stakeholders, including public agencies and academic institutions seeking to provide reliable analyses of global and local environmental impact and status that can inform risk analysis of society, business and investors alike.

This report has outlined critical realizations and steps necessary to embark on this path, emphasizing the importance of absolute data, location-specific assessments, and the integration of environmental materiality into decision-making processes. Our ambition is to contribute to the momentum seen in sustainable business practices, reporting and sustainable investments while highlighting that without changing certain fundamental departure points – such as taking what is material for the planet as seriously as financial materiality – our efforts are likely to become misguided.

Needless to say, accurate analysis, accounting and disclosure of environmental impact is a necessary, but not sufficient step towards sustainability. Acting on the improved analyses of risk and opportunities that can emerge from revised practices put forth in this report, by adjusting operations and investments to minimize negative impact and maximize positive impact – that is what really matters. But such adjustments will only be effective with more accurate assessments of actual impacts.

Transformation to sustainability demands a fundamental rethink

The changes to how we measure and “do business”, proposed here, must be understood within the broader context of societal transformations that extend beyond individual corporations, and encompass shifts in rules, regulations, values, and paradigms. Such large-scale transformations are urgently required to address the global systemic risks and the threat of multiple compounding crises facing humanity. In sustainability science, transformations are defined as deliberate change processes that are initiated when prevailing ecological, economic, or social conditions make the existing systems and ways of “doing business” untenable. In essence, a transformation to sustainability necessitates a fundamental rethink of key relationships that govern the distribution and flow of authority, power, and resources, as well as fundamental shifts in underlying norms, values, and beliefs. Additionally, transformations require redefining the relationship between humans and nature.

This report shows how businesses and investors can contribute to and play a key role in these transformations. Research on societal transformation shows that such change often begins with a few dedicated actors that recognize the problems, question traditional practices, and start experimenting with novel solutions or practices on the fringes. As interest in, and acceptance of, these potentially disruptive innovations grow they can lead to transformative impacts. Over time, these new practices may spread, challenge and eventually replace existing norms, resulting in the emergence of new and different
institutional settings. An example of this is the shift from fossil fuel-based electricity to renewable electricity technologies.

Changing one’s own practices is a first and important step. This report outlines how companies can begin to do this by collecting and disclosing information about absolute environmental pressures from their operations guided by the prioritization suggested by the Essential Environmental Impact Variables (EEIVs) (Chapter 6), and also take stock of, and understand, their global Earth system impact through the ESI tool (Chapter 7).

As a growing number of actors change practices this can itself create a critical mass and a momentum that begins to challenge existing norms. However, change is often accelerated and amplified as actors look beyond their own operations to contribute to a change of the wider playing field, including other actors such as policy-makers. Becoming a change-maker does not have to be difficult but entails taking every opportunity to challenge the norms that guide current practices. This can include helping suppliers to adopt new practices and urging them to follow suit and embrace sector-specific disclosures proposed by EEIVs or applying the ESI tool, thus gradually facilitating the achievement of shifts in reporting that can pave the way for radical transparency and a hope for credible scope 3 assessments.

It can also include engaging with investors, showing the hands-on value of changing reporting practices and the transparency and enhanced credibility of ESG that it provides, and urging them to demand such disclosure across their portfolios. This, in turn, can put pressure on and provide support for policymakers to shape the playing field and governance schemes that enable new science-based reporting standards.