Causes of the Gap Between Good Intentions and Actual Results of Corporate Sustainability Practices


 
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Causes of the Gap Between Good Intentions and Actual Results of Corporate Sustainability Practices
Anneke Zwart, Student (University), Netherlands

Companies are increasingly addressing sustainability by incorporating CSR programs in their business models. The result is an increase in reported improvements in corporate practices. However, according to Pucker, these 'improvements' are often based on subjective judgements. In fact, many organizations still fail to create real changes especially when it comes to climate change issues.
So, what are the reasons for the gap between on the one hand the good intentions and the improvement of corporate practices in terms of sustainability, and on the other hand the fail to truly contribute to the battle against climate change?
  1. ABSENCE OF REPORTING STANDARDS: According to Pucker (2016) , the main reason is the absence of a single, consistent, reviewed and comparable set of standards for reporting greenhouse gas emissions of organizations. This is in turn mainly due to the high complexity concerning reporting on environmental impacts like carbon emissions, water usage and waste. It results to situations in which organizations reports on carbon emissions are incomplete and do not reflect reality. Rather, they reflect a subjective reality in favour of the organization itself.
  2. VOLUNTARY NATURE OF REPORTING AND NOT BEING CONNECTED WITH KPIs: sustainable reporting is unlike financial reporting not obligatory. Also they aren’t connected with the organizations’ KPIs either. As a result of that, reporting on environmental sustainable is a cost, but cannot lead to benefits in terms of improved corporate practices.
  3. MISALIGNMENT OF INCENTIVES: businesses tend to privatize benefits and socialize losses. Regarding environmental sustainability, the costs are socialized to externalities while for instance subsidies on resources raise profits. This create an incentive to actually keep on producing products that are environmentally not sustainable.
So, what to conclude from above reasons?
  • First of all, there is a huge need for transparent, reviewed and comparable set of standards that enable stakeholders to assess companies against each other (Sustainability Accounting Standard Board, a good step). A form of reporting that increase the credibility of sustainability reporting – integrated reporting - is needed.
  • Furthermore, the voluntary nature of organizations’ commitment towards sustainability should change towards a more regulated and obligatory form in which environmental sustainability metrics should also be aligned to an organizations’ KPIs.
⇒ Do you agree with these causes? Do you agree with these proposed solutions? Why (not)?
Source: Pucker, K. (2016) “How a bottle of Russian Salad Dressing inspired corporate social responsibility” The Guardian

 
 
Progress in Sustainability Reporting is Not That Bad?
Love Lonnroth, Management Consultant, Sweden
In my opinion, sustainability reporting and methods for life cycle assessment have made real progress during the last 10 years, especially in the field of climate emissions. Just look at the Carbon Disclosure Project with its massive data on corporate emissions or the real estate sector where energy efficiency and low emissions are part of the valuation of a building. There is no reason to be so dismissive about the efforts that are being made. Rather, environmental accounting is rapidly becoming a normal business practice in many industries. Don't forget that financial accounting has been a work in progress since the 15th century...
 

   
 

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