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The time is now for companies to emphasize sustainability

The Montreal Gazette by Leanne Keddie 05 March 2018

BlackRock, the world’s largest investment firm, recently issued a wakeup call to CEOs. The firm, whose investment decisions have a major impact on the economic health of major companies, advised them that their success depends on embracing sustainability and responding to climate change.

How can a corporation make a profit, satisfy shareholders and protect the planet, all at the same time? This appears to be a tall task, but do these interests really conflict?

Those questions are made urgent by the fact that our climate is changing, and the scientific community agrees we are the cause. With rising temperatures comes increased flood risks in some areas and droughts in others. Here in Quebec, we recently had scores of citizens affected by a greater than one in 100-year flood. Meanwhile, Alberta was experiencing a dramatic heatwave, more intense than any in recent memory. These changes bring with them any number of serious consequences, including for agriculture. While many firms have committed to reducing their greenhouse-gas emissions in an effort to help control climate change, others are still under the misguided notion that only profit matters.

Organizations often cite pressure to create returns for shareholdersBut to say the only thing shareholders want is a return on their money is simplistic. Yes, I want to earn a return on my investment, but not at the expense of the air I breathe, the water I drink or the wellness of myself or my neighbours.

And shareholders are not the only ones whose views should be considered. In 2008, Canada’s Supreme Court was asked whether a board of directors should consider other stakeholders beyond shareholders. It found that stakeholders should be considered. It also confirmed that the law does not require that shareholders be prioritized over other groups. A board has broad discretion to make decisions in the best interest of the company as a whole. Given that organizations rely on stakeholders (employees, suppliers, community support) and access to water, trees or other environmental resources to succeed, it makes sense for them to take care of these resources for the long-term survival of the business.

In any case, contrary to popular belief, sustainability isn’t necessarily costly for businesses in the short term. Research by Michael Porter and Mark Kramer, published in the Harvard Business Review,  outlines how incorporating sustainability into company strategy can help identify new opportunities. The case of clothing and gear company Patagonia provides a good example. Company founder Yvon Chouinard created a successful business making products that people can use for life, while countering the throwaway culture, treating his employees well and sourcing sustainable materials.

Catherine McKenna, Canada’s minister of environment and climate change, maintains that we need systems in place to both protect the environment and support the economy, ensuring opportunity for all, and has worked to embed this philosophy throughout the federal government. Innovation Minister Navdeep Bains recently backed this up with a $700 million investment to develop Canada’s green technology industry, combining job creation and environmental protection.

Sustainability, investing and profit do not need to exist in conflict; they can be mutually supportive. Ignoring these issues, however, would be a big mistake for organizations: it will affect their business model. Sustainability ensures we have what we need in the future.

Consumers can drive profits to sustainable companies that provide living wages by buying products that are recyclable, reusable, and have low environmental impact. Investors can achieve strong returns and open the door to new opportunities by pressing companies to be more sustainable. Boards can ensure long-term corporate viability by taking a holistic view of the business, protecting its social and environmental resources. We all have a role to play, and the time to take action is now.

Leanne Keddie is a Public Scholar, CPA, CMA and PhD candidate in accountancy at Concordia University. Her research focuses on corporate governance and sustainability.