There’s a surprising new force for sustainability gathering momentum. And it’s not the new pledges of diplomats or politicians. It’s capitalism!
Many publicly traded companies already have begun reporting sustainability metrics to Wall Street and the larger investment community, recognizing the positive bounce that sustained environmental performance improvements offer in the eyes of shareholders, sustainability-focused funds, activist investors and the public at large. But because few companies directly measure their green house gas (GHG) emissions, it appears we’re likely to suffer through a fair bit of hand-waving and greenwashing before the premium pricing attached to more sustainably produced products becomes verifiable and readily accountable across production supply chains.
I first started to appreciate this accelerating trend at a recent conference for CDOs and CIOs I attended back in March. Diana McKenzie, board member and former Amgen CIO, noted the growing role of activist and institutional investors, as well as proxy shareholder scores, when it comes to evaluating the sustainability performance of industrial companies. McKenzie also predicted that by 2023, the Securities and Exchange Commission would be adding climate performance reporting to publicly traded companies’ annual Form 10k reports. “When it becomes measurable, it becomes real,” she said.
That brings me to last week, when my guest for a Control Amplified podcast was Chris Hamlin, capability development lead with analytics provider Seeq. He argued for a needed shift in perspective across the process industries that specifically emphasizes sustainability performance over traditional measures of efficiency. And that means an explicit, run-time accounting of GHG emissions—rather than the rearview-mirror reporting typical of traditional regulatory compliance. Such run-time measurement of emissions will boost the confidence that comes with real knowledge and understanding of emissions, Hamlin said. This is in contrast to the current annual sustainability reports, where emissions estimates are often heavily footnoted and qualified. “You can almost feel the nervousness in the numbers they’re reporting,” he says.
“This shift to run-time measurement of GHG emissions is a critical first step in companies realizing an economic return for doing the right thing from a sustainability and environmental point of view,” Hamlin adds. “I see that eventually we’ll start seeing premium pricing for environmentally responsibly produced materials. This premium pricing is like the new quality—it’s the thing that enables us to get an advantage in the market.”
Meanwhile, if a recent report by InfluenceMap is any indication, industry overall—and the green funds that promote environmental leaders—have a ways to go when it comes to earning the trust of investors and the public at large. The report, published last August, indicated that the majority of 723 environmental funds studied are investing in companies that aren’t aligned with the goals of the Paris Treaty.
That brings me to datapoint number four in our sustainability tour, a press release from tech start-up Traent that landed on my virtual desk just this morning. The blockchain technology provider proposes to streamline sustainability reporting across a product’s entire supply chain, providing a verifiable carbon footprint that accounts for all of a given product’s scope 1, 2 and 3 (direct, indirect and supply chain associated) GHG emissions. Traent’s CEO, Federico d’Annunzio, “is determined to develop a positive environmental impact in the new age of blockchain technology,” the press release says.
Who knows? If successful, perhaps their application of blockchain technology can counterbalance the sustainability black eye that Bitcoin mining represents, now approaching some 40 million tons of frankly unnecessary carbon dioxide emissions each year. Here’s hoping.
