The Big Sustainability Illusion – how to escape the ESG bubble and finally deliver on sustainability!
Part three of a mini-series, see link to earlier parts at the end.
When I wrote the first and second part of ‘The Big Sustainability Illusion’ I had little idea what would happen, somewhat throwing myself in the ring here, and ready to expect some punches. What actually did happen was a massive uptake of reads for both parts, and an avalanche of private messages to me. These caused me to continue this little series with two more parts.
Looking through all the responses there were mainly two directions: the first was people being thankful that the shortcomings got addressed, admittedly none of them really new, I just picked up some of the daily smörgåsbord of articles as examples to illustrate the illusion of progress that ‘pure ESG’ creates in the whole information food chain and the systemic and mental barriers it produces to progress to real sustainability. As the late Brendan LeBlanc, member of r3.0’s Steering Board from 2015 to 2020, used to say:
But the time seems to be ripe to ‘again call out the bullshit’ (as per one respondent). What was clearly visible was the fact that many recognise the issues, but feel too stuck to take a view over the fence and into a new wide-open space of possibilities. ‘I can’t bite the hand that feeds me’, or the arguments of ‘not throwing out the baby with the bathwater’, or ‘needing to honour the little steps in the right direction’, and finally ‘you are so far advanced, would anybody be aware of the demand?’ came up quite a lot. It sounded like part resignation and part defence. Also, part of this group are those that didn’t react at all to the articles, but the article statistics tell me they’ve seen them, they actually lead the charts.
At r3.0 we long recognise the devastating effects of ‘career risk’, culminating to ‘existential risk’ through partial ignorance to include severe systemic risks into a company’s Enterprise Risk System. Not daring to clearly address what’s needed is a severe shortcoming of ESG.
The other direction was responses from those that said ‘what can we do? You have clearly articulated the problem, now let’s move to solutions. What would you recommend?’ Hence this continuation of this mini-series.
When thinking about ways to structure this continuation I once again came about one major question, not new at all to us at r3.0, and that is:
Is it still worth it to invest time and energy to try to get the ESG disciples across their own barriers and mental blockages, or is it useful to just focus time on the ‘parallel universe’ that is already evolving for the ideal of a regenerative & distributive economy, and in which the majority of existing initiatives may cease to exist?
Now, since I addressed the shortcomings to the ESG community in my two earlier articles, I think I need to best shed light on both ‘maturation pathways.’ This part 3 tries to make recommendations for those that are considering to cross the bridge and want to learn what steps they could take towards the other side of the bridge. A future part 4 will argue from the other side of the bridge for those that like to step out of current treadmills and become active in more transformative ways. There, I will argue that ‘breakthrough needs breakout first.’
So, for those of you who responded ‘what can we do form where we’re at right now?’, here’s a couple of steps: Let’s simply first state again that ESG work is useful if it is connected to the real world through thresholds & allocations. The job here is to position ESG as a ‘component’ of the solution. Doesn’t that already sound much better? A second step would be a deepening of that positioning in an Otto-Scharmer ‘U-Curve’-like process, envisaging the journey that we’re all on towards a regenerative & distributive economy, knowingly or unknowingly. In one of r3.0’s Medium-articles we made such a list (please use this link to Medium for animated links to all the below terms). You’d find ESG being contrasted with ‘Context-Based Sustainability’. It helps to understand that the end goal here isn’t ‘less degeneration’ (what ‘pure ESG’ supports), but more regeneration. Sustainability starts where the first ends and the second begins. You’d also see the shift from ‘Supply & Demand’ to ‘Thresholds & Allocations’ as a changed paradigm in macro-economics, that needs to be reflected in the micro-cosmos of organisations. You’d also recognize the need to change motivation form ‘Monocapitalism’ to ‘Multicapitalism.’
Another helpful step is to paint a picture what the information infrastructure has to deliver if we want to be successful. At r3.0 we have consolidated our views into a ‘regenerative & distributive economy in one page’ overview over many years. See this as the to-do-list that data & information needs to contribute to:
Can you now see the spectrum of necessary changes, and in how far ESG performance is just part of the solution? This is where r3.0 is already busy with structuring its work ecosystem covering new Reporting, Accounting, Data Architecture, New Business Models, Transformation Journeys, Sustainable Finance, System Value & Fractal Economy Design, Educational Transformation (forthcoming) and Systemic Governance & Funding (forthcoming), all creating that space for those combined processes that need to simultaneously leapfrog to get us to a regenerative & distributive economy. At r3.0 we are offering Transformation Journey Programs for those who like to take steps from cementing degeneration to unlocking regeneration.
I am a big fan of ‘third way’ solutions, as the unhealthy relationship of dualistic discussion of ‘good or bad’, ‘left or right’ or ‘right or wrong’ usually doesn’t work, we’ve seen it all too often and are tired of it, especially in the political realm. Founding r3.0 in 2013 was my very own ‘third way solution’, creating this strange animal of a ‘pre-competitive & market-making’ non-profit, offering ways how to simultaneously leapfrog to an ideal of a regenerative & distributive economy. All we produce through Blueprints and White Papers are global public goods, free to download from www.r3-0.org.
Our offer was to both sides: come on board to unload old mental stereotypes, relearn what’s necessary for regeneration & thriving, and then either see how to implement that in an existing business model (reshape over time) or design a completely new business model (innovate from scratch), allowing business to exist with the ideal in mind and define the contact points in your maturation pathway where certain ’switches’ from old to new can happen. We designed an ‘Integral Materiality Process’ and a ‘Maturation Matrix’ as tools, and offered a ‘New Impetus’ for Reporting. All that can also be found in our ‘Reporting Blueprint’, if you prefer to just pick one of our Blueprints to start with. Please delve deeper as you wish.
In the end, what would we have achieved if we all opened up towards this ‘third way’ and allow ‘true sustainability reporting’ to actually see the light of day? Here’s my top 5:
1. Positioning ESG as necessary ingredient, but not the end goal, in an information infrastructure that delivers true sustainability performance.
2. Recognising Thresholds & Allocations as the new supply and demand in an age of scarcity. Without them, true sustainability reporting doesn’t exist yet, and will never exist in the future. It simply misses any connection to the real world.
3. Accepting a learning curve and consolidated action around delivering Thresholds & Allocations. The r3.0/UNRISD project is the prototype collaboration now underway to do so. Already more than 70 participants have joined and are now experimenting with this new generation of indicators. Several new organisations joined since I published the first article, last seats are still available, just PM me if that sounds exciting for you.
4. Letting go of attempts to converge amongst ‘pure ESG’ numerator data initiatives. This is wasted time and energy! I know, the Big 5, the existing standard setters and IFRS won’t be happy with that, but well… Better spend time in harmonizing around Thresholds & Allocations, as these are science-based and/or ethical norm-based. This is what r3.0 also instigates with a ‘Global Thresholds & Allocations Network’ at this moment. All those that feel attracted are asked to join and support this idea. It is necessary that this becomes a network of many voices.
5. Help to develop necessary education and new governance models that actually don’t obstruct but deliver on the necessary components of a regenerative & distributive economy and scale this learning through education, collaboration and advocacy. The r3.0 Transformation Journey Programs are one starting point to get you there.
Following this agenda is something you can all do at your own pace and let it sink in while thinking about enlarging your framing and position your own contribution in this larger frame. We’re all needed to deliver on this ultimate challenge: corporate reporters, standard setters, rating & ranking organisations, industry federations, local/regional/global public authorities, investors, NGOs, ministries and governments, stock exchanges, multilateral organisations and foundations. Let’s catapult ESG to where it can make a useful contribution to sustainability!
Here are the links to part 1 and 2 and the final part 4 of this series:
The final Part 4 can be found here: https://www.linkedin.com/pulse/big-sustainability-illusion-goodbye-esg-lalaland-hello-ralph-thurm/