“We should be careful to get out of an experience only the wisdom that is in it and stop there lest we be like the cat that sits down on a hot stove lid. She will never sit down on a hot stove lid again and that is well but also she will never sit down on a cold one anymore.” Mark Twain
You may have noticed a story circulating internationally about Royal Bank of Canada. RBC, the largest of Canada’s “Big 5” banks, is dealing with an investigation by Canada’s Competition Bureau – the Federal agency that polices truth in advertising. RBC is alleged to have made claims about a sustainable business strategy, while at the same time maintaining a vigorous lending book supporting oil and gas development. We expect it’s a story that will be watched nervously in more than one boardroom.
A gap between messaging and actions on sustainability is not unique to RBC. Given the bank’s prominence, could this story affect the behaviour of other corporations when it comes to setting and communicating their ESG goals? For the NGO who initiated the Competition Bureau complaint, raising the stakes of greenwashing is a good thing. But there may be unintended consequences. One possible reaction would be for other corporate leaders to consider RBC’s plight, and take it as a cue to shy away from public ESG commitments. After all – these commitments are still largely voluntary. That would be Mark Twain’s cat all over again – taking the wrong lesson from experience.
So what’s the right lesson?
Let’s start with the baseline observation that there are both pros and cons for organisations to declare and pursue their Sustainability goals:
- It’s the accountable thing to do
- It anticipates future compliance obligations
- It improves strategic resilience (less exposure to stranded assets, rising carbon taxes, rising op-ex, and market penalties due to the concerns of employees, customers and partners.)
- It’s a complex thing to accomplish
- It will cost money that could be spent to pursue other objectives
- If you say you’re going to do it, and don’t – you’ll get caught out
As with most questions of corporate strategy – the time horizon over which a choice is considered matters. And here it seems fairly obvious: the farther out your planning horizon, the more strategic resilience matters.
So then the next question to ask is this one: How can a firm set its sights on a sustainable long-term vision and communicate that, without getting mired in contradictions between that vision and the present reality of the business? In this respect – Double Materiality assessment is an important answer. Double Materiality assessment views corporate agenda-setting through a multi-stakeholder lens. That makes it an appropriate starting point for authentic alignment between ESG aspirations and actions. Future Planet offers some tips on how to run this process effectively.
Yes the cost for making sustainability claims (for instance in terms of tighter public scrutiny over authenticity) is increasing. But the cost for not making claims (for instance in terms of employee engagement and consumer preference) is also increasing. There’s nothing wrong with stoves – just hot ones.