Making Sense of Sustainability

The positive vision

We live on a planet that has finite resources and is inhabited to an increasing degree by one species of mammals: us.

This species has not only grown exponentially in numbers but gained immense technological powers that can change and alter the way the planet functions. Ecosystems are no longer merely self-stabilizing systems guided by natural processes. They are shaped by the impact of human activity and technology.

This gives us – as humans – unprecedented responsibility.

Unlike our distant ancestors who as small farmers, hunters and gatherers in their dispersed tribes wandered a vast, unknown, often unpredictable and dangerous natural environment, struggling to carve out a living, we are now in charge of the global ecosystem.

We are in a position to manage the planet on a global scale, with the power to destroy it – at least for ourselves – or to preserve and develop it. For this the challenge is to transform existing economies towards a sustainable culture, mindset and practices.

The scale of this responsibility, for which evolution never really prepared us, sometimes causes anxiety and negative reactions – but it is also a source of vast opportunities.

Rules and Regulations

The public discussion about sustainability revolves to a large degree around national and international regulations: The UN, US, EU and other institutions force us – as individuals and organizations – to comply with sustainability directives, rules and regulations.

We will not debate the usefulness or necessity of such regulations. They are arguably and for the most part both useful and necessary, while each concrete regulation should always be subject to rational, scientifically informed debate.

However, the effect of entering into the topic of sustainability primarily from a regulatory, compliance or audit-driven point of view is: It becomes connected to an extrinsic rather than an intrinsic motivation. Strategies to deal with sustainability tend to take a reactive rather than proactive stance. They also are in danger of prioritizing the negative vector of avoiding downsides rather than a positive one focusing on leveraging the potential upside.

So the question is: given the existing regulations, long-term goals and plans by large and powerful institutions, what could be a more opportunity-focused, more positive approach to sustainability and sustainable development?

Sustainability goals

When faced with the perceiced threat of state-imposed regulations, we tend to fall into a “fight or flight” pattern.

To move away from such instinctive reactions and towards a more constructive way of dealing with the topic of sustainability, a first step is to understand the relevant regulations, what they aim to achieve and how they try to do it.

As a concrete example let’s take the European Union’s “Regulation on the establishment of a framework to facilitate sustainable investment” (in short the “EU Taxonomy“).¹

EU Taxonomy sustainability goals

The EU Taxonomy is mandatory for all EU member states. It establishes six goals for sustainable economic development:

1. Climate change mitigation

Reduce greenhouse gas emissions, focusing on transitioning to low-carbon energy sources and technologies.

2. Climate change adaptation

Enhance resilience and ability to adapt to the adverse impacts of climate change, protecting communities and ecosystems.

3. Sustainable use and protection of water and marine resources

Promote efficient and sustainable use, treatment, and recycling of water to protect aquatic ecosystems.

4. Transition to a circular economy

Reducing waste and extending the life cycle of resources and products through recycling and reuse.

5. Pollution prevention and control

Minimizing the release of pollutants and improving air, water, and soil quality.

6. Protection and restoration of biodiversity and ecosystems

Conserve and restore biodiversity and ecosystem services, including natural habitats and species.

The European Green Deal

The EU Taxonomy supports the European Green Deal² which consists in a concrete set of goals to be realized within a time frame reaching up to the year 2050:

Green house gas emissions are to be reduced by at least 55% by 2030 (compared to 1990 levels)
There are no net emissions of greenhouse gases by 2050
The EU society is fully adapted to the unavoidable impacts of climate change by 2050
The EU’s natural capital is protected, conserved and enhanced
The health and wellbeing of citizens from environment-related risks and impacts is protected
No person and no place is left behind

Good to know: The European Union made a commitment to funding the Green Deal with a third of the 1.8 Trillion Euro NextGenerationEU Recovery Plan.

Sustainability Reporting

The EU’s sustainability policies pose a very concrete challenge to businesses incorporated or active inside the European Union, as covered by the Corporate Sustainability Reporting Directive (CSRD):³

What happens next and when do companies have to apply European Sustainability Reporting Standards?

The ESRS delegated act adopted by the Commission will be formally transmitted in the second half of August to the European Parliament and to the Council for scrutiny. The scrutiny period runs for two months, extendable by a further two months. The European Parliament or the Council may reject the delegated act, but they may not amend it.

Companies will have to start reporting under ESRS according to the following timetable:

Companies previously subject to the Non-Financial Reporting Directive (NFRD) (large listed companies, large banks and large insurance undertakings – all if they have more than 500 employees), as well as large non-EU listed companies with more than 500 employees: financial year 2024, with first sustainability statement published in 2025.

Other large companies, including other large non-EU listed companies: financial year 2025, with first sustainability statement published in 2026.

Listed SMEs, including non-EU listed SMEs: financial year 2026, with first sustainability statements published in 2027. However, listed SMEs may decide to opt out of the reporting requirements for a further two years. The last possible date for a listed SME to start reporting is financial year 2028, with first sustainability statement published in 2029.

In addition, non-EU companies that generate over EUR 150 million per year in the EU and that have in the EU either a branch with a turnover exceeding EUR 40 million or a subsidiary that is a large company or a listed SME will have to report on the sustainability impacts at the group level of that non-EU company as from financial year 2028, with first sustainability statement published in 2029. Separate standards will be adopted specifically for this case.
https://ec.europa.eu/commission/presscorner/detail/en/qanda_23_4043

This means for many of most businesses (including small and medium sized): They must be prepared within the coming years to not only introduce and implement sustainability measures but also include them in their mandatory financial reporting!

Sustainability and circularity

One core idea of sustainability is circularity.

It is the notion that things, materials, resources flow in a closed cycle and are not just wasted, consumed and depleted.

The most obvious form of circularity is “recycling”: that we let as little as possible of valuable natural resources go to waste and instead bring them back into a cycle of continuous production.

As covered also by the EU Taxonomy: economies are challenged to move from a linear model of consumption that leads to waste towards a circular model of reuse and recycling.

Circularity is not restricted to natural resources. It goes beyond mere material flows, and it involves also social and systemic aspects:

Are we “burning” employees in jobs or are we supporting their own development?
Are our business models simply scaleable up to a point where a founder can “jump off” and make an exit – or will they last and survive, also supporting future generations of employees and business owners?
Do our organizations exploit their partners and suppliers to a maximum degree of profitability until they are replaced or are we aiming for a culture of mutually beneficial and lasting relationships?

Circularity is a mindset. Without it, it may be possible to comply with rules of sustainable behavior and reporting, but it falls short of its potential.

Sustainability and purpose

Purpose has been a big theme during the early adult years of the “Millennial” generation. Millennials demanded a sense of purpose from their employers and workplaces asking the big question “WHY are we doing this?”

It has now fallen a bit in popularity since the following “Generation Z” which is now entering the workforce seems to have become more relaxed on the topic.

However, this does not mean that purpose is a thing of the past. Even for the younger, supposedly more “pragmatic” generation, the question “why” is not simply discarded. It is just not asked as explicitly – and then companies ignoring the question wonder why they are losing their younger talents.

Sustainability provides opportunities to revisit the purpose and the “why” of an organization. This may have positive effects such as:

Strengthen market positioning as a leader in sustainable development
Seriously and honestly re-thinking the “why” of doing what you do
Attract purpose-driven, environmentally and socially aware talent
Actually do something that is good for the planet

In short, sustainability can strengthen your “why”.

Sustainability and agility

If a company is not yet infused with a purpose that involves sustainability and circularity, it will have a hard time getting there without agility. To come up with meaningful sustainability measures and solutions demands creativity and an ability to innovate.

Organizational agility in this sense includes:

Being a knowledge-sharing and knowledge-generating organization
Being able to change direction and re-organize internal processes
Involving people and stakeholders on different levels in decision-making
Working based on intrinsic motivation

If an organization is not yet quite there, considering sustainability may be a strong motivation to develop into a direction of greater business agility.

Sustainability and data-driven culture

As tough as it may seem for companies that are not yet working in a data-driven way, regulations for sustainability reporting such as the CSRD can also have a positive side effect.

Reporting directives create a “forcing function” or behavior-shaping constraint towards including data into business processes. Examples:

Reporting sustainability KPIs calls for an overall KPI framework along with processes and tools to support it.
Collecting data on sustainability makes most sense when it is part of a strategy of data collection involving also other business critical and organizational data.
Measuring sustainability is one aspect of overall performance measurement. It works best when integrated into a comprehensive approach to measuring business performance.

Investing in sustainability reporting can be used as opportunity to improve overall data management capabilities.

How can we help?

To sum up: Sustainability means much more than just “thinking about the environment”. It covers a whole range of fundamental aspects of business strategy, organizational development and culture.

Together with our partners we can support you in a wide range of topics relating to sustainability from data management, reporting and dashboards to agility, organization and culture. Feel free to contact us:

The full text of the regulation can be accessed here: REGULATION (EU) 2020/852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088
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Further details on the EU Green Deal: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en ↩︎
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022L2464 ↩︎