Corporate management is increasingly bombarded from all directions for greater ESG disclosure and financial performance. Corporate Boards and leadership want to reduce costs, optimize resources, and yet, grow revenue by innovating before competitors. Customers want solutions but aren’t always willing to pay for them. The value chain is price sensitive, yet they are also asking for solutions and progress to reduce Scope 3 emissions. The state of business is always animated. However, the past two years industry has seen an unprecedented and even unrealistic convergence of maddening requirements.
Do more with less. Show positive ESG outcomes. Deliver products with fewer resources, less waste, and greater value. Oh, and don’t forget to turn off the lights and take the trash out!
As corporations internalize and make sense of compounding and competing stakeholder demands that shape the future of the enterprise, like ESG and sustainability performance, they must also be sure to stay operationally resilient in the present. The duality of remaining vigilant and enterprising is not a core strength for most organizations. To pursue and achieve both ongoing operational excellence and drive new investment toward a sustainable future, companies must adopt a pragmatic and prudent posture to ensure that their vitals signs are continually monitored and strong.
The popular airline safety statement comes to mind:
“…Any change in cabin pressure will also result in the aircraft's oxygen masks dropping from the overhead panels. If you're in the unfortunate position of being on a plane that is rapidly losing altitude, you should secure your oxygen mask before helping anyone else – including children.”
For most companies, sustainability can feel, and it certainly is, elusive. The definition of sustainability is open-ended and opaque. Like leadership, sustainability can be a bit subjective, requiring many different points of view to provide credence to how it is impacting the organization, customers, and broader society. And like leadership, sustainability requires periodic calibration garnered from continuous stakeholder engagement (from an organizational perspective), and from each subsequent generation of citizens and consumers (from a societal perspective), to remain evergreen and impactful.
Specific goals and targets under the corporate sustainability umbrella like reducing carbon dioxide can be abstract, particularly when framed as a climate change mitigation strategy. Of course, if all high emitting global corporations attained their CO2 reduction targets by their established dates, that will be an enormous step toward mitigating future impacts of carbon dioxide. But how and when will we know if we truly abated enough carbon emissions to curtail climate catastrophe? Who makes that determination, and how? Is it grounded in a sustained measurement of ambient temperatures that fall within some threshold that humans accept? Or is it tied to a reduction in severe storm events or insurance payouts due to natural resource damages?
When sustainability goals and targets are abstract (i.e., reduce CO2 emissions by 30% by 2040), it is much more difficult for individuals and organizations to understand (let alone get excited by) the purpose (i.e., identifying with their “why”), to act and stay the course to attain the objective. Another critical challenge for organizations pursuing [abstract] sustainability is that too often the most basic (yet critical and challenging) tenets of their operations can be put into question.
Sustainability Will Not Happen Without Immediate and Sustained Emphasis for Safety, Security, and Quality of Life
On February 3, 2023, at 8:55pm a freight train operated by Norfolk Southern Railway had 38 railcars derail in East Palestine[i], Ohio, releasing hydrogen chloride and phosgene into the air, forcing an evacuation of residents over a 1-mile radius. The East Palestine train derailment became an immediate public health and environmental crisis and emergency response incident.
It also stimulated intense immense stakeholder engagement from local citizens, politicians, and regulatory authorities and led to a focus on railway working conditions and safety including the lack of modern brake safety regulations, the need to implement precision scheduled railroading (PSR), and industry-wide questions around the length and weight of trains and the number of workers per operational train at any given time. Regulatory hearings, public meetings, and lawsuits ensued.
In April 2024 the Norfolk Southern Company agreed to pay $600 million to settle a class-action lawsuit, providing payment for personal injuries in a 10-mile radius and additional compensation to residents and businesses within a 20-mile radius who experienced disruption during and post the derailment event. Then in May 2024 the Company further agreed to a $310 million settlement for its role in the East Palestine derailment that contributed to public and environmental exposure to hazardous chemicals into the surrounding groundwater table and nearby waterways.
Leadership, Resilience, Sustainability, Safety...These Values Are Everyone's Job in the New Economy
The pursuit and attainment of sustainability is not solely a corporate, government, or societal endeavor – it is all the above. Our modern, industrialized, and increasingly digitized society has a great deal of “embedded and persistent” environmental, public health, and economic risk. These are real operational issues that many companies, government agencies, and civil society must contend with daily.
Too often people become complacent to the enormous number of resources, time and effort, and continuous monitoring, inspection, and improvement that takes place to literally keep our trains on the track and society running smoothly. When systems fail, we immediately see and feel the impact, whether it is a train derailment, an oil spill, a cyberattack or software glitch, a food recall, a bridge failure, an airline maintenance issue, or any host of other "systems-level stressors" that make headlines and are caused by human ignorance, poor judgement, or outright error.
How can our economy and society become more sustainable if the most essential functions of public infrastructure, like safety and security, fail us? How can we be more sustainable by rewarding profitability above pragmatism? This sentiment is not directed at placing blame on any one company, industry, government agency, community, or individual. Incidents like East Palestine, or the Deepwater Horizon tragedy and oil spill, or the 1989 Exxon Valdez Alaskan oil spill can certainly be prevented. It is also highly probable that society will be impacted by future incidents that negatively impact public health and the environment.
We must recognize and respect that securing a more prosperous present and future, including ensuring the safety and security of our private and public infrastructure, is never a guarantee. As citizens and consumers, we must all be willing to actively participate and serve a role in the continuous monitoring, feedback, and improvement of our built environment and society. Thus, if a situation seems unsafe, call it in. If you’re being asked to do something that feels not right, ask for clarity and seek additional perspective. Serving an active role as a citizen, employee, community member, etc. is a basic condition of how people should engage for a well-functioning democracy and society to work.
That sentiment, while grounded in pragmatism and a sensible ‘sustainable philosophy’ and thinking, is not widely accepted. Sadly, we live, work, and play in a highly litigious society. Assigning blame, winning the verdict, and getting a big fat check for any damages is our modus operandi. Of course, the rule of law and establishment of legal rights and protections is a necessary foundation for any society. But when the system skews and shifts accountability away from the masses to only a select few, the overarching hierarchy of governance, democratic values, and ultimately control, becomes skewed as well.
In a hyper litigious environment like we have in the United States, sustainability sounds great, but not if we’re inconvenienced in any way, shape, or form. People don’t want to go out of their way or be bothered with abstractions that don’t have an immediate return for their life. Symptoms of systems level stress such as inefficiency and waste frequently make headlines, like airline delays, congested roadways, poor drinking water quality, computer software malfunctions, and so on. These are symptoms of stress within our infrastructure systems, and these events feel as if they are increasing in frequency, severity, and duration.
It is quite incredible how well our existing systems tolerate stressors. We take for granted that (for most regions of the U.S.), systems generally are working – energy, transportation, public health, financial, security, food, and so on. This said, we’ve taken some systems for granted, presuming they will always be there, delivering value and service as intended, and not anything we should ever concern ourselves with. That has created a false sense of security in our systems, something that is becoming more evident as systems are stressed and occasionally fail.
As our societal demographics change, our needs evolve, creating different and new demand for infrastructure services. Much of our existing physical infrastructure is aging and has not been adequately maintained, upgraded, or modernized. Simultaneously, new technologies are being deployed to provide new services, further rendering some elements of infrastructure as inadequate or obsolete, which further puts financial pressure on continued maintenance. The net result of dynamic change and attempts to maintain the old while infusing the new is a continual flexing of the “state of the system,” which is increasingly more stressed.
Whatever our definition of prosperity may be, and whatever virtue and value we prioritize toward prosperity, be it safety, health, security, independence, clean air and water, education, economic opportunity, and so on, then we must be willing to get off the bench, roll up our sleeves, participate and work for it. Nobody and nothing are going to step in and hand prosperity to us. Democracy, capitalism, freedom and independence – none of these ideals are guarantees of prosperity or privilege. I’d argue that the privilege that they do afford us is the right to continually pursue them, day-in and day-out, to ensure their longevity, as foundational pillars for how we choose to embrace life, liberty, and the pursuit of happiness.
At any given moment the fragility of our human-built systems can be revealed. Human error is an element of risk that is infused throughout our modern economy and society, it’s part of us. Although some people postulate that artificial intelligence (AI) can dramatically reduce human error, we must recognize that the building blocks of AI, in all its current and future forms, originally stem from human intellect, design, manufacturing and interaction. AI needs fuel (energy), instructions (code), and governance (rules and structure). All of those requirements for AI to thrive are tied to infrastructure, systems, and structures that continue to require a human in the loop. This point may be self-evident; however, it is worth remembering that there is no panacea when it comes to fully removing human-induced errors or influences into the technologies, systems, and infrastructure that uphold our current economy. This reality should not hinder us from attempting to remain vigilant and ready to mitigate any risks that impede our health and safety, environmental quality, and capacity to prosper.
The Sustainability Balancing Act: Performance and Profit through Pragmatism
Most companies are doing the “sustainability balancing act,” akin to riding a unicycle across a high wire in a stiff headwind, juggling rare bird eggs, while onlookers throw rotten tomatoes. The direction of the high wire represents the future. The unicycle represents the existing enterprise. The stiff headwind signifies the uncertainty in the market. The rare bird eggs personify innovation and new products, the leadership team and employee talent mix, proprietary information and partners. The onlookers include the diversity of stakeholders, investors, customers, regulators, suppliers and vendors, community organizations, and others, all waiting to take their shot at the unicycle.
The current business sustainability environment is working hard to keep the unicycle steady and always moving forward, without dropping any of the eggs. Some core elements of the balancing act include:
Provide timely delivery on internal and external ESG reporting obligations (see ‘Real and Lasting Sustainability Happens in the Moment’).
Identify, prioritize, and invest in meaningful operational and capital expenditures that seek to achieve operational and value-chain (i.e., Scope 1, 2, and 3) climate, waste, efficiency, and other ESG and sustainability targets. Stakeholders want to see investment, action, and results. The days of simply quantifying the target and reporting out on incremental improvements are limited. Institutional investors, NGOs, consumer organizations and others are pushing companies to show their ‘return-on-sustainability’ in a way that accomplishes financial objectives, social and sustainable impact.
Remain competitive on innovation and new products/services that create value and deliver functional, social, emotional, and financial benefits through customer-facing ‘sustainable’ solutions throughout the entire corporate value chain (i.e., to suppliers, vendors, other systems providers such as energy, logistics, IT/digital, etc.).
Ensure the safe, resilient, and adaptive continuity of business operations, particularly as value-chains, markets, and entire industries transition toward lower carbon energy, materials, and relationships. As industry transitions to lower carbon inputs, the traditional values of environmental, health, and safety (EHS), quality, and efficiency cannot be forgotten or sidestepped to create and accelerate “sustainable change.” There is compounding pressure on businesses to invest in the future, however they must also maintain and reinforce existing infrastructure and systems to ensure a safe and smooth transition.
The corporate (and societal) pursuit of sustainability should not and cannot be an abstraction from addressing and delivering upon our immediate needs. If the ideals and investments in sustainability exist only in the ether, then we will continue to prod along and suffer the consequences of human errors in our products, systems, and infrastructure.
Profitability (and attainment of greater prosperity) stem from 'planet and people pragmatism.' We must be willing to actively participate with our systems, our companies, and economy to ensure bad things don't happen, and great things do. Corporations must continually assess and address operational risk and infuse sustainable thinking into their actions and behaviors in the present moment. In doing so, they will envelop a more pragmatic, preventive, predictive, and proactive posture in how they factor-in, assess, respond to, and mitigate risk that directly or indirectly impacts their operations and value chain, and greater society's goals for prosperity (i.e., safety, security, public health, environmental quality, short-and-long term economy and sustainability).
[i] Source: Wikipedia. Accessed August 7, 2024. “East Palestine, Ohio, train derailment.” https://en.wikipedia.org/wiki/East_Palestine,_Ohio,_train_derailment
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