Edition 16 | November 2022
I started the writing of this new Lighthouse Keeper on the day of the release of the UNRISD SDPI Indicators (UN Research Institute for Social Development Sustainable Development Performance Indicators), a very important milestone in the development towards ‘authentic sustainability assessments’, and an evenly important moment in time for r3.0. It’s the culmination of 4 years of hard work in designing ‘true sustainability indicators’, piloting them with all sorts of organisations around the world, working on a Synthesis Report, and now helping with the release of the SDPI User Manual and the aligned Microsite (see more below).
We’re breathing out now, but only for a moment, before breathing in again to help boost activating what we call ‘leverage vectors’, including all sorts of constituencies that now have to pick up context-based sustainability reporting and information for the many constituencies that can use the SDPI, no limits here (as literally everybody can), with a focus from standard setters to standard users and report writers, from rating/ranking/benchmarking organisations to all sorts of players in the financial sector that allocate investments, and from stock exchanges to governments. This release just marks the starting point of this new era.
At the same time there’s hardly one day without another collapse-announcing report (the authors may call it differently, but you know my take by now) or other greenwashing farces by the ‘pure ESG’ folks in #ESGLaLaLand. The contrast between what’s necessary and the failure of the current incrementalistic approaches couldn’t be starker!
It’s important to mention that my take on an inevitable collapse shouldn’t be confused with the ‘apocalypse’, the end of humanity or anything else doomy. So, it makes sense to clarify my view and to prevent to be put in the wrong corner of the wider discussion. That’s what I try to already do with my Sunday Thoughts, so I’ll give you the latest reports, my take on Degrowth, and my package of Sunday Thoughts that I offered since the last Lighthouse Keeper.
Authentic Sustainability Reporting is here!
To honour the achievement of the just released SDPIs I’ll let two of the key instigators speak with whom I had the honour to work with, while not forgetting the UNRISD folks and advisors that have been so instrumental in driving this project to its release point. My sincere thanks to Bill Baue, Senior Director of r3.0, and Mark McElroy, Founding Director of the Center for Sustainable Organizations, this great achievement would not have been possible without those two fantastic sustainability experts.
Bill Baue wrote a great post here on Linkedin that I’d like you to read in full:
A “Brundtland moment”!
That’s what Global Reporting Initiative (GRI) Co-Founder Allen White calls today’s publication by UNRISD of “Authentic Sustainability Assessment: A User Manual for Sustainable Development Performance Indicators” (SDPIs). Others agree about the significance of these new thresholds-based and transformation-based indicators:
Given that we at r3.0 supported the 4-year development of the SDPIs, Ralph Thurm and I [Bill, added] wanted to reflect on the significance of this “new era” in *authentic* sustainability assessment (by which, of course, UNRISD asserts that status quo “sustainability” assessment regimes are “inauthentic.”) So we wrote a Medium article (link below).
As the COO of GRI who directed its Principles workstream 20 years ago when the Sustainability Context Principle was conceived, establishing the need to assess “the performance of the organisation in the context of the limits and demands placed on economic, environmental, or social resources at a macro-level,” Ralph had this to say:
“While I lament GRI’s predatory delay in failing to provide the sorely needed guidance on implementing Sustainability Context, I now celebrate that companies large and small finally have the guidance needed to readily fulfill the Sustainability Context Principle, two decades after its inception, thanks to the UNRISD Sustainable Development Performance Indicators.”
For my part, I see the SDPIs as hugely significant for offering an alternative (with the United Nations imprimatur) to the problematic standards from the International Sustainability Standards Board (I?SB) and EFRAG, which both *neglect* to contextualize sustainability vis-a-vis thresholds.
Importantly, the SDPIs also offer an alternative to the Science Based Targets initiative (SBTi), which of course integrates thresholds but problematically bars use of the most robust science-based target (SBT) method (according to the 2 extant comprehensive scientific assessments of SBT methods.)
Here’s what I [Bill, added] say in the article:
“The SDPI Manual provides a better alternative than the Science Based Targets initiative, seeing as UNRISD took a ‘universal principles’ approach and appealed to scientific evidence of the best science-based target-setting method for greenhouse gas emissions. This example further illustrates how SDPI’s authentic approach to sustainability assessment transcends the path dependency of what’s available from incumbent frameworks and standards. The SDPIs thus usher in a new generation of bona fide sustainability assessment.”
Mark McElroy had evenly important things to say here on Linkedin about the SDPI release:
For the past 4 years, I have been serving as special advisor to the United Nations on a project aimed at developing more effective indicators for assessing the sustainability performance of organizations.
Framed in the context of the 2030 Agenda’s Sustainable Development Goals (SDGs), the UN project is now complete, with a final report being issued today.
As indicated by its title, the report put out today is more a ‘manual’ than a ‘report’, since it includes detailed specifications for a set of indicators organizations can use to assess their own perfromance across the triple/multi bottom line.
Most important in all of this is that the UN has come down firmly and unequivocally in support of ‘Context-Based Sustainability’ (CBS), a measurement doctrine or methodology that makes authentic sustainability assessments possible by taking resource limits and demands explicitly into account instead of ignoring them. In order to do so, they’ve adopted the ‘Sustainability Quotient’ formula (S=A/N) for context-based metrics (https://bit.ly/3zvZLo8) I first put forward in my doctoral dissertation in 2008 and which has been growing in use ever since — now including the UN itself!
The contrast between what we can now say is the UN approach, too, and the arguably more incrementalist, inauthentic alternatives being promulgated by the IFRS Foundation, EFRAG, and the Global Reporting Initiative (GRI) is palpable and couldn’t be more vividly on display. Indeed, if it were not for the persistent absence of authentic CBS measurement on other fronts, this project would not have been necessary.
I want to publicly thank my friends and colleagues at the UN agency that undertook this project (UN Research Institute for Social Development, or UNRISD), as well as my close collaborators on other fronts, most especially Bill Baue and Ralph Thurm at r3.0, without whose deep involvement and support this project would not have been possible.
Let’s hope this all has the intended effect of (a) promulgating greater authenticity in the way organizations measure and report their performance, and (b) encouraging standards-makers themselves to more aggressively embrace the same principles in their own frameworks, and not only for the narrow benefit of investors!
What to take away and do now?
Let’s capture the essence as such:
- Current standard setters, esp. GRI, I?SB, EFRAG and many of the impact-language-based voluntary approaches fail to address context-based sustainability, which is now a proven, workable and a necessary concept, backed by the United Nations.
- Context-based materiality makes obsolete the endless discussion about single, or double, or dynamic (or whatever) materiality. If duties and obligations are owed to any rightsholder on any capital use and that these rightsholders are also dependent on, the topic is material and needs attention. Accountability is king!
- ESG isn’t useless, pure ESG is. Connected to thresholds and allocations it can make a huge difference, as it connects ESG data with ‘reality’. The User Manual delivers on these denominators, a judgement about the sustainability of each given performance finally becomes possible. Or better: there’s no good reason for not using them if you’d like to be serious about sustainability or regeneration.
- All possible constituencies can now join the choir in demanding context-based sustainability information. There is no reason any longer not to do so, even more those that deny the existence of these indicators may face scrutiny of greenwashing, esp. if the term ‘sustainability’ is used (as it has been so far in an inflationary manner), and the substance then doesn’t hold water. I?SB and C?RD need to take notice, evenly financial product owners that call their investments sustainable. Last but not least the EU Taxonomy, esp. Art. 8 and 9, need a critical review. TEG members and NGOs are already suing the EU for the existing inaccuracies in terminology and political decision-making, allowing gas and nuclear to be called green investments.
Pure ESG further ridicules itself
We are already used to new greenwashing claims by financial institutions. I have covered many in the last Lighthouse Keepers. Now HSBC is the next in line. A lot of what’s awkwardly wrong has to do with labelling. In the case of HSBC billions of dollars that the bank labels under the header of sustainable finance is actually put towards deforestation, airlines, the cement industry, or fossil fuels. Haven’t we hear that already in the DWS case earlier? The Buerau of Investigative Journalism reports in an article called ‘Mines, Pipelines and Oil Rigs: What HSBC’s “Sustainable Finance” Really Pays For’ that ‘HSBC has committed to contribute up to $1 trillion in sustainable financing and investment by 2030. However, the Bureau can reveal that billions of dollars being counted towards this target are in fact helping to fuel the climate crisis. Central to the issue is a relatively new financial product known as a sustainability-linked bond (SLB). SLBs are an ostensibly green type of debt, designed for companies to raise money to fund their transition to more sustainable activities. Companies that raise funds through SLBs do not face tight restrictions on how that money is used; instead they agree to certain targets related to sustainability. But these targets are often remarkably weak and the penalties for failing to meet them can be paltry – leaving SLBs as a way for companies to give the appearance of environmental concern while continuing to worsen the climate crisis.’ Here’s the real problem: ‘Gustavo Pimentel, chief executive of NINT, an ESG research and advisory company, said calling this debt “sustainable” is greenwashing. “Somehow the market converged to call everything ‘sustainability-linked’ and I think this does a poor job of informing investors and society in general of what each transaction actually contributes to society,” he said.’
As a consequence, as the Guardian reports in an article called ‘Watchdog bans HSBC climate ads in fresh blow to bank’s green credentials’, ‘HSBC has suffered a fresh blow to its green credentials after the UK advertising watchdog banned a series of misleading adverts and said any future campaigns must disclose the bank’s contribution to the climate crisis.The ruling by the Advertising Standards Authority (ASA) followed dozens of complaints over posters that appeared on high streets and bus stops in the lead-up to the Cop26 climate change conference in Glasgow last October. The watchdog said the adverts, which highlighted how the bank had invested $1tn in climate-friendly initiatives such as tree-planting and helping clients hit climate targets, failed to acknowledge HSBC’s own contribution to emissions.’
Should we be surprised? Probably not. A couple of examples:
- As Reuters explains in an article called ‘World’s top finance firms continue to fuel deforestation, report warns’, ‘The world’s largest financial institutions increased their backing of companies in the agriculture, forestry and land use sectors most responsible for deforestation in 2021, a new study showed on Tuesday. Issued by the Forests & Finance Coalition of NGOs, which looks to improve transparency, policies, systems and regulations in the financial sector, the report found that finance to those companies rose over 60% to $47 billion between 2020 and 2021.’
- The Guardian, in an article called ‘Business groups block action that could help tackle biodiversity crisis, report finds’, mentions ‘Industry groups representing some of the world’s largest companies are “opposed to almost all major biodiversity-relevant policies” and are lobbying to block them, according to a new report. Researchers found that 89% of engagement by leading industry associations in Europe and the US is designed to delay, dilute and block progress on tackling the biodiversity crisis, which scientists say is as serious as the climate emergency. Just 5% of support was positive and the remaining 6% was mixed or neutral, according to the climate thinktank InfluenceMap.’
- My Linkedin contact Nawar Alsaadi, Chief Impact Officer at ScopeFour Capital, posted: ‘Here is a striking statistic from the latest PWC report on ESG/sustainable funds (https://lnkd.in/gHcKp7ye): 775 funds of the 1061 Article 9 funds in the EU are actually repurposed funds, only 286 are new products. (For those who don’t know what article 9 funds are, these funds have an explicit sustainability objective in their investment approach). Incorporating impact objectives in an investment product is incredibly complicated, and does require a total rethink around product design, and implementation. The notion that you can take an existing product, and make it impactful by re-branding and shuffling portfolio holdings, is unlikely to yield a truly impactful solution. To me, PWC’s finding is an affirmation that most of the asset management industry is still stuck in a 2-dimentional world, where impact is grafted onto the investment process, rather than having impact permeate core product design.’
- Banktrack reported in an article called ‘48 civil society organizations and networks express “profound concern” that TNFD [The Taskforce for Nature-Related Financial Disclosure, added] will assist greenwashing’ that ‘48 civil society organizations and networks – whose members include over 220 organizations on six continents – have publicly written to the Taskforce on Nature-related Financial Disclosures (TNFD) to express their “profound concern” with its work. The open letter is the latest in a series of escalating efforts by CSOs to raise the alarm on TNFD’s work and its potential to facilitate corporate greenwashing. It is timed to coincide with TNFD representatives speaking on various panels at the International Union of Conservation of Nation Leaders Forum this week.’ It went on that ‘The letter raises various concerns. This includes that TNFD’s proposal wouldn’t require a business to report on: its impacts, such as risks or harms to nature and people, complaints about its environmental practices or lobbying against new environmental laws, or even disclose where it operates, sources from or finances. The letter also calls out TNFD’s secretive decision-making processes and that it is failing to value the expertise of rights holders.’ By the way, The Taskforce is composed of 34 global corporations and is developing a framework for how businesses should self-report on their nature-related risks. You get what I want to say ;-)?
- Finally, the Financial Times reported in an article called ‘Climate scientists criticise corporate emissions oversight body SBTi – Arbiter of net zero plans fails to check accuracy of data reported by companies, says group’ that ‘a group of prominent climate scientists is putting pressure on the key oversight group for corporate targets to ensure that greenhouse gas emissions data supplied by companies are accurate. The independent Science Based Targets initiative has become an arbiter of corporate net zero plans, and its approval confers credibility, in the absence of regulation or mandated standards. Fashion house Chanel, for example, raised €600mn in a bond issue linked to its environmental goals, with the borrowing terms tied to SBTi-approved targets. But the SBTi does not check the accuracy of the underlying emissions data reported by companies, and does not require the data to be verified by a third party. The SBTi approach to target setting and validation was “critically flawed” and created an “ample opportunity for companies to submit flawed data”, the scientists complained in a letter.’
Let me not even continue to write about the anti-ESG movement, or anti-”woke capitalism” movement, a lot has been written about that here and here. It’s nothing else than neoliberal destructivism, but given in by the weakness of ‘pure ESG’ itself.
Collapse is not Apocalypse
The Economist, not known to be a much environment-focused weekly magazine came out with this cover this week, and it sums up quite well where we stand:
In the run-up to COKE 27 (oh, excuse me, COP 27; an insider joke), a plethora of new reports just underscored the fact that 1.5 degrees is a pipe dream, except for the technology lovers (even some scientists are in that court) that believe in massive CCS (Carbon Capture & Storage) and other technologies and think we can slurp so much CO2 out of the air to still to still meet the target. Here are just some of these reports:
- UNEP’s Emission Gap Report 2022 clearly tells us the dire reality. Called ‘The Closing Window – Climate crisis calls for rapid transformation of societies’ the report’ finds that the international community is falling far short of the Paris goals, with no credible pathway to 1.5°C in place. Only an urgent system-wide transformation can avoid climate disaster.’ Does the world look ready for that? Instead, ‘policies currently in place point to a 2.8°C temperature rise by the end of the century. Implementation of the current pledges will only reduce this to a 2.4-2.6°C temperature rise by the end of the century, for conditional and unconditional pledges respectively. The urgent message from UN Secretary General Antonio Guterres on UN News couldn’t be clearer: ‘We must close the emissions gap before catastrophe closes in on us all.’ The report got major echo in the news, see here, here, and for more breakdown into specific industries there’s more to find here.
- Further detail on where we stand is given by WRI’s report ‘The State of Climate Action 2022’. The report translates the systemwide transformations that the Intergovernmental Panel on Climate Change finds are necessary to limit warming to 1.5°C into 40 indicators of progress with 2030 and 2050 targets, such as phasing out unabated coal in electricity generation, effectively halting deforestation and much more. Of the 40 indicators assessed in the report, none are on track to reach their 2030 targets. Six are heading in the right direction at a promising but insufficient speed, while 21 are also trending in the right direction but well below the required pace. Five indicators are trending in the wrong direction entirely, while the data are insufficient to evaluate the final eight indicators.
- A new paper in the Journal Science, co-authored by Johan Rockstroem of the PIK, David Armstrong McKay et al, called ‘Exceeding 1.5°C global warming could trigger multiple climate tipping points’, states that ‘our assessment provides strong scientific evidence for urgent action to mitigate climate change. We show that even the Paris Agreement goal of limiting warming to well below 2°C and preferably 1.5°C is not safe as 1.5°C and above risks crossing multiple tipping points. Crossing these CTPs can generate positive feedbacks that increase the likelihood of crossing other CTPs. Currently the world is heading toward above 2 to 3°C of global warming; at best, if all net-zero pledges and nationally determined contributions are implemented it could reach just below 2°C. This would lower tipping point risks somewhat but would still be dangerous as it could trigger multiple climate tipping points.’ These findings were also prominently displayed in the Guardian and other newspapers. Just to be clear: ‘triggering multiple tipping points’ means nothing else than no possibility of humanity to influence downward spirals any longer. It leads to Hothouse Earth. I second Johan Rockström’s recent tweet wholeheartedly. If you’re interested in reading more about tipping points, here’s another interesting article.
- A consequence of the climate breakdown is described in WWF’s ‘Living Planet 2022’ report. ‘The Living Planet Report 2022 is a comprehensive study of trends in global biodiversity and the health of the planet. This flagship WWF publication reveals an average decline of 69% in species populations since 1970. While conservation efforts are helping, urgent action is required if we are to reverse nature loss. The evidence is unequivocal – we are living through the dual crises of biodiversity loss and climate change driven by the unsustainable use of our planet’s resources. Scientists are clear, unless we stop treating these emergencies as two separate issues neither problem will be addressed effectively.’ And to be clear here as well: Biodiversity decline puts humanity closer to extinction. No biodiversity, no humanity.
I am personally at beyond the point that I believe collapse can be avoided. In fact, it is happening already right now, in many different places. As Richard Lowenthal writes in his long essay ‘How Close Are We, Really, to Societal Collapse? Our persistent, delusional belief systems are leading to social and ecological catastrophe’: ‘The thing is, though, that we’re not talking about a discrete event or a sudden “Oh shit!” moment of horror — or even several such events or moments (though these are likely to occur also!). Rather, societal collapse [as a consquence of ecological collapse (added)], takes place gradually, in an escalating series of small, painful changes, losses, and disruptions. It’s not an event or several events, it’s an intensifying, ongoing process — a gradually worsening, accelerating series of downward spirals. In truth, we’re already in its early stages — and how we respond to intensifying collapse will determine how, or even whether, humanity survives and finds new, better ways to thrive on planet Earth: Our one and only beautiful, irreplaceable Home.’
So, while this is sad, even disastrous on one side, there’s one thing for sure: the meandering towards collapse doesn’t mean ‘apocalypse’ for humanity; at least it doesn’t have to. It offers opportunities for a world beyond the failed one we know so well, and therefore my energy goes towards the creation of post-collapse readiness.
But first of course a realization, riffing off David Wallace-Wells’ recent NYT essay ‘Beyond Catastrophe – A New Climate Reality Is Coming Into View’: ‘What will the world look like at two degrees? There will be extreme weather even more intense and much more frequent. Disruption and upheaval, at some scale, at nearly every level, from the microbial to the geopolitical. Suffering and injustice for hundreds of millions of people, because the benefits of industrial activity have accumulated in parts of the world that will also be spared the worst of its consequences. […] At two degrees, in many parts of the world, floods that used to hit once a century would come every single year, and those that came once a century would be beyond all historical experience. Wildfire risk would grow, and wildfire smoke, too. (The number of people exposed to extreme smoke days in the American West has already grown 27-fold in the last decade.) Extreme heat events could grow more than three times more likely, globally, and the effects would be uneven: In India, by the end of the century, there would be 30 times as many severe heat waves as today, according to one estimate. Ninety-three times as many people would be exposed there to dangerous heat.’ Phew, that’s hard to grasp. But… the article goes on by saying’ “We live in an unimaginable future,” says the writer Rebecca Solnit, who has grown increasingly focused on the political and social challenges of climate change. “Things thought impossible or inconceivable or unlikely not very long ago are accepted norms now.” Today, as a result, “a lot of my hope is just radical uncertainty,” she says. “You see that the world can’t go on as it is — that is true. But it doesn’t mean the world can’t go on. It means that the world will go on, not as it is but in some unimaginably transformed way.”’
Tom Murphy recently wrote an essay he called ‘A Climate Love Story’ and presented a set of principles that offer a starting point to ‘envisage the unimaginable’, and create a mindset shift:
1. Humans are a part of nature, not apart from nature.
2. Non-renewable materials cannot be harvested indefinitely on a finite planet.
3. The ability of Earth’s ecosystems to assimilate pollution without consequences is finite.
4. Energy throughput is essential to all human activities, including the economy.
5. Technology is a tool for deploying, not creating energy.
6. Fossil fuel combustion is the primary cause of ongoing global climate change.
7. Exponential growth, whether of physical or economic form, must eventually cease.
8. Today’s choices can simultaneously create problems for and deprive resources from future generations.
9. Human behavior is consciously and unconsciously shaped by mental models of culture that, while mutable, impose barriers to change.
10. Apparent success for a few generations during a massive draw-down of finite resources says little about chances for long-term success.
I first looked at those as being ‘dah…isn’t that all self-evident?’ On second thought it pushed me to go to the ideas that felt most logic: Bioregionalism and Degrowth. Is there something else than those two concepts as a post-collapse alternative? At this moment I wouldn’t know. I have written quite a bit about Bioregionalism in the last couple of Lighthouse Keepers already. Now what about Degrowth?
That attracted me to Samuel Alexander’s essay ‘Life in a degrowth economy, and why you might actually enjoy it’, first explaining the link between Degrowth and the Steady-State-Economy (hat-tip to the late Herman Daly who passed away two weeks ago). ‘The idea of the steady-state economy presents us with an alternative. This term is somewhat misleading, however, because it suggests that we simply need to maintain the size of the existing economy and stop seeking further growth. But given the extent of ecological overshoot – and bearing in mind that the poorest nations still need some room to develop their economies and allow the poorest billions to attain a dignified level of existence – the transition will require the richest nations to downscale radically their resource and energy demands. This realisation has given rise to calls for economic “degrowth”. To be distinguished from recession, degrowth means a phase of planned and equitable economic contraction in the richest nations, eventually reaching a steady state that operates within Earth’s biophysical limits. […] The very lifestyles that were once considered the definition of success are now proving to be our greatest failure. Attempting to universalise affluence would be catastrophic. There is absolutely no way that today’s 7.2 billion people could live the Western way of life, let alone the 11 billion expected in the future. Genuine progress now lies beyond growth. Tinkering around the edges of capitalism will not cut it.’
Alexander continues ‘Degrowth, by contrast, would involve embracing what has been termed the “simpler way” – producing and consuming less. This would be a way of life based on modest material and energy needs but nevertheless rich in other dimensions – a life of frugal abundance. It is about creating an economy based on sufficiency, knowing how much is enough to live well, and discovering that enough is plenty. The lifestyle implications of degrowth and sufficiency are far more radical than the “light green” forms of sustainable consumption that are widely discussed today. Turning off the lights, taking shorter showers, and recycling are all necessary parts of what sustainability will require of us, but these measures are far from enough.’
He then brings together localization, sufficiency and degrowth: ‘In a degrowth society we would aspire to localise our economies as far and as appropriately as possible. This would assist with reducing carbon-intensive global trade, while also building resilience in the face of an uncertain and turbulent future. Through forms of direct or participatory democracy we would organise our economies to ensure that everyone’s basic needs are met, and then redirect our energies away from economic expansion. This would be a relatively low-energy mode of living that ran primarily on renewable energy systems. Renewable energy cannot sustain an energy-intensive global society of high-end consumers. A degrowth society embraces the necessity of “energy descent”, turning our energy crises into an opportunity for civilisational renewal. We would tend to reduce our working hours in the formal economy in exchange for more home-production and leisure. We would have less income, but more freedom. Thus, in our simplicity, we would be rich. Wherever possible, we would grow our own organic food, water our gardens with water tanks, and turn our neighbourhoods into edible landscapes as the Cubans have done in Havana.’
The essay goes on in much more detail on various other fronts of life, lifestyles, togetherness, so I recommend a thorough read. He closes by saying ‘We need to create new, post-capitalist [I’d prefer post-collapse, added] structures and systems that promote, rather than inhibit, the simpler way of life. These wider changes will never emerge, however, until we have a culture that demands them. So first and foremost, the revolution that is needed is a revolution in consciousness. I do not present these ideas under the illusion that they will be readily accepted. The ideology of growth clearly has a firm grip on our society and beyond. Rather, I hold up degrowth up as the most coherent framework for understanding the global predicament and signifying the only desirable way out of it.’
In closing, here are my latest ‘Sunday Thought’s, one at a time, every Sunday morning CET on Linkedin. They receive great attention. They also seem to inspire and help rethinking some of the mainstream thinking. May they continue to do so! Your comments and private comments are uplifting!