The Strongest Arguments for Sustainability

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Transcript

Saif Hameed [00:00:00]:

There is so much to be done on the long list of things for any Chief Sustainability officer that I think that we need to go back to basics and say, well, which ones are going to fly actually across the business now? Maybe there are some, some initiatives that are going to be easy to get past because they're going to save money, and there are some that as a CSO you believe are necessary. It is sensible for most CSOs to think about how they start bundling those sorts of initiatives so that across their roadmap they have some things that are just going to save money, they have some things that are maybe actually going to cost a little more money. They have a bunch of stuff maybe that they're pushing to suppliers and expecting suppliers to own the cost in return for maybe more volume and longer term contracts. And on the whole the full programme is more or less net neutral. Cost wise.

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Saif Hameed [00:01:02]:

I'm Saif Hameed and this is the State of Sustainability podcast. If you like what you hear on our podcast, please join us in Chicago for the State of Sustainability Summit where we discuss all the topics that we cover on our podcast and more in person. The signup link will be in the show notes below.

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Isobel Wild  [00:01:19]:

Sustainability is at a critical crossroads where it faces both growing momentum and increasing scrutiny. Balancing profitability with responsibility is not a new challenge. But as the initial wave of sustainability momentum begins to stabilise, some organisations are reassessing their priorities, leading to tighter budget and more focused resource allocation. Today we'll explore the challenges sustainability faces in 2025, the arguments for aligning it with business interests, and how leaders can reframe their approach to ensure sustainability drives both long term resilience and value. So Saif, welcome.

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Saif Hameed [00:01:55]:

Hey Izzy, how are you doing?

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Isobel Wild  [00:01:57]:

Saif, do you want to kick off by actually just maybe setting the scene a bit? And I'd love to ask you what trends are emerging in sustainability right now and how the landscape is changing and also what the primary drivers are behind this change.

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Saif Hameed [00:02:09]:

It's a crazy time. Like I think, I think the new US administration has come really tearing out of the gate on a lot of topics and I think that that has catalysed a lot of movement elsewhere as well. You know where to begin really. But let's, let's kind of say first ESG as a whole is clearly under attack versus where we were a couple of years ago and I don't think there's any dispute around that if you just look at the impact of that. Let's before we get into environment, social governance, etc. You just look at the whole ESG topic, you know, and you look at kind of how financial institutions are pulling back from coalitions and asset managers are pulling back from coalitions. G Fans is a great example. You just have so much kind of step stepping, so much of a step back on the overall ESG level.

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Saif Hameed [00:03:04]:

And I think, I think there's a very clear correlation, which is not just the new U.S. administration federally, but also just actually a fairly concerted push by state level governments across the US as well, through legal action and otherwise. And so I think that's kind of one thing that's happening that's like a trend that's not new. It's been there for a couple of years. The second is now if we start going into each of the buckets. Right, let's take social. I am somewhat surprised by the vehemence of the attacks on DE and I work, but it is quite startling to see, like I'm kind of hearing about the US Government requiring individuals working for the federal government to inform their superiors if they find anyone working on Deni topics. You know, there's a lot of this sort of stuff where it's almost just being vilified.

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Saif Hameed [00:03:54]:

I'm seeing a lot of chatter on LinkedIn and elsewhere on social media. There's just this vilification of DE and I people happening and DE and I work, which is just a bit surprising. And I think that that is almost the poster child right now of this, this anti ESG movement. Is Deni even more so than anything related to the environment or climate change?

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Isobel Wild  [00:04:17]:

Is that just in the US or worldwide?

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Saif Hameed [00:04:20]:

I don't think it's. I'm not really seeing it in such a big way elsewhere. I think that the. But this is, even. This was true actually even a couple of years ago. Like even in the private, you know, even in the market, basically, in conversations with businesses and companies, I was noticing a much more adverse reaction to DENI in the us why is that?

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Isobel Wild  [00:04:39]:

What are the causes for that?

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Saif Hameed [00:04:41]:

Why does everyone hate DENI? I don't know if it's as much an anti DENI and I as a sentiment that people don't care enough about, like me or enough about my problems or enough about the side of the community that I'm on. And I think that kind of silent majority is now expressing itself and asking for more attention and effectively making an enemy or a victim of the other side.

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Isobel Wild  [00:05:07]:

Yeah, so this podcast was going to be around why sustainability is on the back foot, but actually sustainability in recent years has gone through a Boom of, you know, trending. A lot of focus, a lot of money going onto it, a lot of shareholder value coming off it. DENI has kind of been left behind in that, in that boom.

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Saif Hameed [00:05:27]:

No, I don't think so at all, actually. I think DENI barely existed 10 years ago as a topic. Like it was a fringe topic. In 2013, 2014, I remember McKinsey did a piece of work called Diversity Matters and it became a series of research papers done with extensive interviews. I think those started coming out in 2015, 2016, 17 and so on. There was like multiple instalments and I was a part of some of that work and it was a, it was a new big topic and it came on the scene in a big way. And many of the companies that we worked with at McKinsey wanted to talk to us about it and wanted to take the topic seriously. And there were already some poster childs in the US of companies that were doing this well.

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Saif Hameed [00:06:14]:

Like Salesforce, I remember, was a good example of a company that was doing, considered by, by that research to be doing, doing DENI well. And so I do think DENI has been a big beneficiary of like this wave of focus on ESG as a whole. And we should talk about this emerging distinction between ESG and sustainability. But I think we're just seeing now this, this backlash where you have people applying for jobs that are encouraging applicants from, you know, from diverse backgrounds to apply. And I think the applicant who's not from a diverse background is just thinking, well, who's going to hire me? Why don't I get any preferential treatment? And I think there are a lot of, a lot of such individuals out there that are making their anger felt. And you and I can talk about how diverse teams are better teams that deliver better economic output for society, that deliver more well rounded communities, that deliver bigger, better business impact as well. But I don't think that resonates so much with the people who are trying to get a job and their friends and loved ones and families. And that's a sizable part of the voter base, which is, I think, what's driving a lot of this.

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Isobel Wild  [00:07:25]:

Okay, well, I'm going to pick up on your slight hatred for the confusion of ESG and sustainability and ask you to unravel those terms for us.

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Saif Hameed [00:07:35]:

Yeah, so I think that the history of these terms is like long and not so long, but more tortuous than long. Like, I think they, that both terms kind of really came onto the scene in the late 90s in the corporate World in a big way. But today ESG in general is a term that is used more as some form of a screening or rating framework and it's generally used more by investors, analysts, sometimes banks, et cetera, asset managers. Sustainability is tended to be the term that is more often used to describe how a business approaches its own improvement programme when it comes to particularly the environment. And so within that we tend to focus on things like, you know, double materiality type topics. From an environmental standpoint, the impact that I have on the world and the impact I think the world is likely to have on me. There are elements of like, how does this stuff deal with long term business viability and so on, and sustainability from that point standpoint. But sustainability tends to be, from my perspective, much more operational.

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Saif Hameed [00:08:45]:

And ESG tends to be a little more moralistic in some ways. And I think partly that's because most of the environment side can be boiled down to numbers and quantitative data and comparison points and spectra of options. Like your emissions could be bad or good or great or anywhere in between with respect to many different benchmarks, whereas your approach to human slavery is unlikely to be somewhere on the spectrum from bad to great. You either have slavery in your value chain or you don't. You either have child labour in your value chain or you don't. It's not that you have a few units of child labour and that's okay, but actually don't let it get higher than that. And I think that's why ESG tends to be a little more of a moral viewpoint. I think sustainability is also under some level of pushback and I think that we're going to see that in terms of both a tightening of commitments and progress by the more forward leaning larger companies.

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Saif Hameed [00:09:54]:

So I think that they are going to use the current zeitgeist to lower ambition and centre ambition around fewer topics that they think they can excel at. And I don't think that's necessarily a bad thing. Like we can talk about it, I don't think it's necessarily a bad thing. And then I think there's going to be all of these companies on the outer edges that are going to kind of melt away basically as they find that they don't really need to be in this tent as much as they thought or right now or at all basically. So I think that's going to be a big shift. And then on regulation, we're seeing actually quite now a concerted pushback against a lot of the regulation that came in over the last couple of years. So for instance, there's a movement to re. Revise CSRD requirements and, you know, kind of phase in certain requirements, water down certain other requirements over the next.

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Saif Hameed [00:10:44]:

Later this year and over the next couple of years. So there's a lot of this happening as well. That's going to be interesting to see play out.

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Isobel Wild  [00:10:52]:

Why don't. So we've spoken about regulation as a point of why people don't need to be in this camp. What other points are actually pulling people back from sustainability?

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Saif Hameed [00:11:02]:

Yeah, I think that. I think what you're getting at, Izzy, is sustainability conformant with capitalism. And I think that's a debate that's being had right now quite widely, because with the new administration in the us, we are entering almost deep Darwinism. And you can actually see this with this debate over Greenland, for example, where the US is in a position where they can say to Denmark, we want Greenland, and we basically will now just watch this play out. And I think there's a reasonable bet that actually the US might get greenlit out of it. Similarly, you kind of look at the US extraditing, I think, or deporting individuals to Colombia and Colombia refuses to accept those individuals. And the US then says, well, fine, we've slapped on a set of emergency tariffs and trade restrictions onto Colombia that are going to take effect immediately because you're not playing ball. And this is kind of like, almost like a deep Darwinism, right? This is like we, we have the ability to assert ourselves.

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Saif Hameed [00:12:23]:

We are, we are going to go ahead. We are the dominant, dominant species in this, in this engagement, in this relationship. And I think that the, the capitalist equivalent of that is like, if you kind of look at, you know, Milton Friedman and you talk about business as purely existing to maximise shareholder value. Do we actually, you know, there's this view that actually all this sustainability stuff, as long as you're not breaking the law, you should do what you need to do to make money for your shareholders. And I think that is an argument that we're kind of seeing now resurface. It had sort of not quite gone into hiding, but there was this talk about, what was it? Stakeholder capitalism and how actually there's many different stakeholders that you need to account for, not just shareholders. And I think that is now also on the back foot.

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Isobel Wild  [00:13:13]:

So can sustainability be compatible with Darwinian capitalism?

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Saif Hameed [00:13:20]:

I actually think that there are multiple grounds on which it can and is. I think the first is environmental sustainability comes from an awareness that there is not enough resource to go around. Everyone who is dependent on the Material world, you know, buying things that are grown, that are mined, et cetera, has to acknowledge that there is some limit to this. And actually the rate at which you're consuming resources is not compatible with an, with an indefinite growth scenario. And so the first thing is, just like any business that is concerned about long term viability has to take some measures to act on that principle, like however they want to react to it. Like that's for every business to kind of figure out. But there is this, this is a clear sustainability imperative. The next thing is that the physical world is changing and you don't have to, all you have to do is agree with the science actually that there, that climate change is happening and that unpredictable weather events are going to become more frequent, there's going to be a higher probability of lethal heat waves than in the past, extreme precipitation events than in the past, et cetera, et cetera.

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Saif Hameed [00:14:31]:

And you know, that's going to be another source of impact on business. And it is in the interest of shareholders for companies to identify those and start to take actions accordingly. You can add on a third reason, which is for many companies there are sustainable consumers or consumers who value sustainability that they should start to think about when it comes to how they position their products, how they communicate, how they develop consistency and brand narrative. All these things are going to be important as well. And that's before I even get to the question of whether sustainability can go hand in hand with any cost savings. I don't mention that one specifically because I find it's often overblown or over calculated. But you know, there are multiple reasons why sustainability is totally compatible with a hardcore capitalist agenda.

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Isobel Wild  [00:15:16]:

I like that. And maybe the last one, which I mean we've spoken about before, but regulatory pressures, even if they are diluting they, that they said all that for sure.

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Saif Hameed [00:15:25]:

And the thing is you can have, you can, you can go ahead with the regulatory pressure because it's there, or you can try and get some advantage out of it. And you know, like European digital passport is going to be a good one, right? Like you can comply with regulation or you can kind of say, well, I'm going to have to do that anyway. What can I build on top of this? What value can it bring to me? How can I use this thing that I'm going to have to do anyway to create new value for shareholders? And I think the same is true for sustainability regulation. We're seeing lots of great examples of this actually where companies that are working with us because of CSRD or otherwise are finding that actually having great oversight into their data landscape can identify opportunities that they might have missed. We had a great example just a couple of months ago about someone identifying gas leaks that had a meaningful cost impact because they're monitoring the emissions data. And it was the sustainability team that, that identified this, this leak. So, you know, there, there's, there's a strategic way to approach what you would have to do anyway.

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Isobel Wild  [00:16:31]:

But how can sustainability leaders actually reframe their approach then to better align kind of with this capitalist interest? Especially as we spoke about before, like resource constraints, targets kind of being diluted down, etc. Etc.

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Saif Hameed [00:16:47]:

I think everyone in sustainability needs to talk about the business case. Why does this make sense for business? Why are we doing this? Like, that's where you kind of need to start. You need to start with the purpose and the purpose has to be aligned with shareholder value. And there's a world where we say actually, you know, there should be another purpose outside of this. There should be actually the fair share of every business. There should be a science based trajectory for the corporate world so that we don't all, you know, end this life in flames at the same time. Like, we just have to acknowledge that's not where we are at right now in the corporate dialogue, you know, and maybe it, maybe it's not going to be for several years and maybe ever, right? Maybe actually the only way that we can ever get to be science aligned is actually another big regulatory intervention. Because the inertia of the corporate world is always going to be very strongly towards shareholder value.

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Saif Hameed [00:17:44]:

It's too deeply rooted in the hearts of capital in, at the core of capitalism. So I do think that the main lesson or learning for every sustainability team is focus on the business value. Whatever it is that you want to do, bring it back to the business value, bring it back to the value for shareholders. There is a case to be made and that's the one you should make.

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Isobel Wild  [00:18:04]:

And so if you were advising a CSO today, or anybody in sustainability, what would you tell them to prioritise in the next few years to ensure that sustainability drives both business value as well as have long term resilience?

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Saif Hameed [00:18:22]:

I think that, you know, it's like some of this is old and some is not so much new, but some has additional emphasis, let's say where if you were, you know, like the way that you would identify initiatives in any real strategic exercise is you'd say there are dozens of things I could be doing. Which of these things are easiest and which of these things are most valuable? And let me ideally do the ones that are easiest and most valuable, basically that, you know, meet those two things. And I think that there's so much to be done on the long list of things for any chief sustainability officer that I think that we need to go back to basics and say, well, which ones are going to fly actually across the business? Now, maybe there are some, some initiatives that are going to be easy to get past because they're going to save money. And there are some that as a cso you believe are necessary. And I'm not saying necessary ideologically, but necessary maybe for consistency, necessary maybe for like, you know, table stakes. Right? It's just kind of, you have to get it done, you have to, let's say, get, you know, you have to get a new emissions management system in place and it is in your interest that that system be better and more automated and more flexible because that's going to make life easier for your team. But maybe it's an expense beyond, let's say, the cheapest version of the setup, for example. So, and you have that, but then you also have stuff that is going to be an easy sign off for a CFO or a CEO because it's just going to straight up save money.

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Saif Hameed [00:19:49]:

It's a transition to lower volume packaging formats and you're going to save money on packaging just by weight. For instance, it is sensible for most CSOs to think about how they start bundling those sorts of initiatives so that across their roadmap, they have some things that are just going to save money, they have some things that are maybe actually going to cost a little more money. They have a bunch of stuff maybe that they're pushing to suppliers and expecting suppliers to own the cost in return for maybe more volume and longer term contracts. And on the whole, the full programme is more or less net neutral, cost wise. I think you kind of want to almost take that programme for budgetary sign off rather than approach things one at a time or year by year. Because the trap you risk falling into then is you get signed off on all the stuff that makes money, the other stuff gets kicked down the road and you'll never get signed off for it because it'll never, never save money.

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Isobel Wild  [00:20:43]:

And so one last question is around stakeholder versus shareholder and what the relative weighting you would apply to both in terms of, we've spoken a lot about shareholder value, but I guess there's a lot of stakeholder value that can be generated from society sustainability. How would you manage both of those groups?

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Saif Hameed [00:21:08]:

You Know, this is kind of actually the fault line between the two arguments right there, which is if you are going to take a, you know, if you, if you are going to kind of take a straight narrow view of capitalism, you're not going to acknowledge all the other interests of these stakeholders as being important because you're basically going to say, look, my interaction with my consumer is shaped by the price the consumer is willing to pay and the volume the consumer is willing to buy. And there are elements of like, how loyal is the consumer, how long is the consumer going to stay with me, et cetera. But these would typically be baked into how you build your brand. This is goodwill value, for example, and this idea of saying, well, actually, am I doing good for the community? That this is an intangible and I can't actually account for it in goodwill on my balance sheet and I can't actually extract it in terms of price that I'm charging. But I know it's there, I know it's a value to society. This, I think is pretty much at the core of the fault line that we're talking about. And I think we're kind of seeing this also with things like science based targets, like if there is a delta between what the business needs to do from a target perspective to avoid losing brand credibility, to avoid breaking the law, to avoid, to avoid pissing off its talent base, to avoid, in short, doing any of these things that would destroy shareholder value, I think there is today a challenge which is to say the business shouldn't do anything more. Actually, most businesses aren't aiming to beat the goalpost on things like regulation.

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Saif Hameed [00:22:48]:

And I think a lot of the same thinking will start to be brought up in this space over the next few years.

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Isobel Wild  [00:22:54]:

So 2025, this feels quite depressing, but you think maybe then it's going to be a scaling back of ambition and instead looking towards the low end of the spectrum at what is the minimum input, maximum output.

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Saif Hameed [00:23:10]:

I think 2025 is definitely not a scaling up of ambition across the business community and I don't think it flat on ambition and therefore I think it is definitively a scaling down of ambition. I don't think there's any two ways about it at the same time. I think that ambition was at unrealistic levels a couple of years ago. Like there was no way that a lot of the commitments that we were seeing out there were ever going to be realised. So, you know, I'm kind of disheartened as an environmentalist, right? Like there's a wistful part of you that wishes the world was rational and able to act in concert to avoid creating these massive externalities that are ultimately going to mean that we breach 1.5 degrees easily. You know, at the same time, from a business perspective, I feel like 2025 is probably just going to result in a more pragmatic place for business and I kind of hope that it does, that things don't get watered down too much. But actually, you know, for business to arrive at a place that business thinks is long term viable from a sustainability standpoint, you know, I don't think that's a bad thing.

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Isobel Wild  [00:24:15]:

Well, Saif, I think that is what most sustainability, corporate sustainability professionals are going to be grappling with themselves this year. The ideological versus the business. So it's going to be a lot of, a lot of pondering and big thoughts and recalibrating. But any final thoughts before we wrap up?

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Saif Hameed [00:24:33]:

No, I think we've covered all the bases, Izzy.

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Isobel Wild  [00:24:35]:

Awesome. Well, thanks so much Saif and thanks everyone for listening. Goodbye.

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Saif Hameed [00:24:39]:

Thanks all.

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