When it comes to discussing sustainability, terms matter. How do they differ? In her blog series, Tiina Saukko, the founder of Infine, explains both the cornerstones and pitfalls of corporate responsibility.
Our mission is to give consumer business companies “headlights”—a tool for managing with sustainability data. We’ve discussed this topic with at least 500 companies in Finland. We have encountered a sustainability data dashboard in just one of these companies. ESG work has been observed in at least half, and impact metrics (such as the Upright impact model) are relatively common. However, they represent different perspectives on the same topic—or do they?
Impact Evaluation Isn’t the Same as Sustainability Evaluation
Impact evaluation can be done at the company, function, or product level. It examines the impact of a specific function in different dimensions, often including sustainability aspects, which is why impact and sustainability are frequently confused. Sometimes this confusion is justified; other times, it’s not.
Take, for example, a company that makes children’s animations. The impacts come from its production chain, such as social rights—are employees paid fairly, and how are they treated? Environmental and climate impacts—what kind of environmental and climate burden is caused by production and distribution? Good governance—are taxes paid?
In our example, however, the end product—the children’s animations—has more impact than anything else. What messages do these animations convey to children? The worldview, relationship to nature, safety, entertainment—all these affect children, who will go on to impact the world for many decades. This is something companies like Upright have realized, incorporating dimensions like “meaning and joy” into their impact measurement model. For instance, Disney earns points for this aspect, though from some perspectives, the impact of princess imagery may not be positive.
ESG Is the Emperor's New Clothes
Environment, Social, Governance—ESG evaluation is always conducted at the company level, as it was developed to meet the financial market’s need to assess corporate responsibility. Companies have only been evaluated for responsibility for a few years, so the metrics are underdeveloped. Additionally, ESG metrics completely ignore the sustainability of the company’s industry. This allows companies that produce fossil fuels or fast fashion to be considered responsible in ESG evaluations, even though these sectors contribute substantially to the climate crisis.
Because evaluating corporate responsibility as a whole is challenging, various binary indicators have been developed for ESG metrics, such as “Do you have an HR handbook?” or “Do you have a Code of Conduct?” Finnish companies are almost always ESG-compliant because things are generally handled well here. Of course, this is not the case for many companies globally. ESG has an important place.
However, I am still critical of ESG measurement for now. You can find more information and well-founded critiques by googling “ESG Mirage.” That said, ESG will continue to evolve and may eventually become good. Responsibility for the industry must be considered alongside the activities of individual companies.
The Core Business Responsibility Matters Most
Managing with sustainability data is similar to other data-driven management. Concrete goals can be set for sustainability, and they can be broken down into actions. Product responsibility, consumer sensitivity to sustainability, and corporate responsibility are all things that can be measured and tracked.
The biggest challenge for consumer businesses is integrating sustainability information into product data. This is also where the biggest opportunities and risks are in terms of margin and risk management. Expertise and services for sustainability management are still developing, and many companies are now sitting in different working groups and hiring consultants to handle these matters.
Fortunately, the next generation is studying these topics at nearly all universities and secondary education institutions. It’s essential because sustainability is complex and multi-faceted, just like most business challenges and opportunities. There are best practices, choices, and absolute truths, just as in HR or marketing.
Prediction: Sustainability as a Service
My prediction is that sustainability as a service will become widespread and a standard practice. Just as HR cannot operate without software support, sustainability soon won’t be able to function without “Sustainability as a Service” providers. We are developing our SaaS solution to produce automated sustainability data and to condense the latest sustainability understanding into dashboards tailored for different functions. It’s an exciting trailblazing journey as sustainability transitions from separate responsibility departments to just being part of everyday business.
Tiina Saukko
The author is the founder and CEO of Infine, with over 20 years of experience in product responsibility, sustainability marketing, and corporate responsibility.
