What Is The Fastest Way to Gauge a Company’s True Sustainability Ambition Level?

What is the fastest way to gauge a company’s true sustainability ambition level? It may not be what you think.

It is not ESG ratings, obviously, the mainstream ones do not assess sustainability in the first place. But it is not by assessing the sustainability report either, in my experience.

Over the last few years, boldly declaring “we have embedded sustainability into our core business” has become the go-to mantra for companies attempting to project a sustainability leadership status (or at least for those who write the reports on such companies’ behalf). Spoiler alert: barely any company has actually done that (see comments).

How can one quickly tell apart those who do sustainability-on-the-side and those who truly attempt to integrate sustainability into their core business — not only speak about it?

Check the Annual Report, not the sustainability report. Why?

It’s a much shorter read, and #greenwashing -prone communicators have not yet tapped the real estate. Companies not authentically invested into sustainability seem to expect the Annual Report will be read by shareholders alone, and hence tailor it to what they think shareholders want to hear. This sometimes results in stark contradictions to what the sustainability report says, other times merely showcases a disconnect.

A real world example: a sustainability report claims “our guiding principle is doing the right thing by all”, while the annual report of the same firm declares “our purpose is to maximize shareholder value”.

What to focus on in an Annual Report:

• Statements of purpose and North Star guiding principles, if included. Companies that have embedded sustainability into core business would proudly proclaim so here too.
• Statements about #strategy and future goals of or plans. If the strategy a) says nothing about a sustainability roadmap and/or b) clearly defies scientific consensus on the state of the world (the need for an immediate radical systems change), no true embedding of sustainability into core business has taken place.
• Disclosures of ESG risks in the Annual Report. If they are absent, the company has not yet understood the point of #ESG, let alone being ready to meaningfully engage in sustainability

When it this relevant:

• When making purchasing or investment decisions
• When assessing potential employers
• When getting a quick sense of a prospective client or partner before meeting them for the first time
• Anytime you want to quickly fact-check a company’s carefully crafted sustainability narrative

Why not the sustainability report:

• It is the primary outlet for both intended and unintended #greenwashing, hence requires methodical scrutiny, attention to nuance and interpretation of subtle discrepancies, including reading what is not being said.
• This process results in a fairly accurate assessment of a company’s actual ambition level, including the gap between actual and projected ambition levels and their likely causes. But it takes easily 2–3 hours per report.

What’s worked for you?

The truth is, there are barely any companies that have truly embedded sustainability into their core business: Adopting science-aligned sustainability ambition levels, informed by proportional responsibilities towards all ecological ceilings (planetary boundaries) and social foundations, for many industries requires a reinvention of value propositions, business models and value chains, investment levels that defy short-term business case, and importantly performance metrics that have moved beyond financial growth. This is not only a major endeavour, it collides head-on with the imperative of perpetual short-term shareholder return, and one could argue with corporate law. While every other large MNC claims to be a sustainability leader, we do not have sustainability leaders in this authentic sense yet. But yes, we have companies who are making genuine attempts towards making sustainability part of core strategy considerations, investment decisions, etc. May there be more of them!