Top CEOs must act on commitment to transparency and sustainability

It’s easy to be cynical about the new statement from the Business Roundtable, which recently revised its longstanding philosophy on the purpose of a corporation. Much of what has been written since that announcement has downplayed its importance.

In the statement, 181 of the country’s top 200 CEOs united to say that returning profits to shareholders no longer will be the exclusive purpose of their work. Corporations must serve their customers and communities, they write, and “protect the environment by embracing sustainable practices.” 

But what are these CEOs actually going to do differently to live up to this statement? For sure, they need to let us see behind the curtain.

And in fact, commitment to transparency is starkly embedded in the Business Roundtable statement, which is great news to us at CDP. For nearly 20 years, CDP — formerly the Carbon Disclosure Project — has been the bedrock of corporate accountability on sustainability, creating a systemic link between environmental and financial information, and providing a unique X-ray into corporate environmental performance and ambitions.

Many of the signatory CEOs are walking this talk. Over 75 percent of their companies will disclose their climate footprint and strategies to CDP in 2019. Many have responded to our annual disclosure request for years. It’s a straightforward, impactful way for C-suites to put their money where their mouth is. 

The principles that these corporate leaders are affirming simply make good business sense. Companies such as Apple, Coca-Cola and General Motors have known for years that they must act urgently to reverse environmental destruction. For them, sustainability is the way to stay ahead in the modern market. In 2019, no tension exists between being a socially responsible business and creating value for shareholders. Sustainable business is good business. 

But companies must go beyond environmental disclosure; they need to act to reverse unsustainable resource use and resulting pollution that business activity has caused for decades. Swift action to cut carbon emissions, protect precious water sources and halt deforestation is urgent and imperative. Some Americans may be surprised to learn that many corporations already are filling in a void where federal leadership has failed. Many of the world’s largest companies are committed to environmental transparency and sustainable practices. 

In fact, these companies view sustainability as a business opportunity, citing over $2 trillion in potential growth within the next five years if they embrace this transition rather than resist it. For them, sustainability is a chance to flex their muscles of ingenuity and innovation, to prove to their stakeholders that they are thinking in the long term. Take the examples of Walmart, which requests that its suppliers set science-based carbon emissions reduction targets, or Google, which already achieved its goal of sourcing 100 percent renewable electricity globally in 2017.

The Business Roundtable statement suggests that market-based solutions could be the way out of the climate emergency that unfettered industry has created. At CDP, we agree it’s an important part. Over 7,000 companies disclose to CDP voluntarily and over 600 have set science-based emissions reduction targets to date. Not a single one of these did so because they had a regulatory requirement to do either. This is recognition of the power of business to influence societal outcomes. It’s an exciting race to the top. 

This is, in fact, what shareholders want. Investors working with CDP, representing $96 trillion in assets under management, have told companies for years that environmental disclosure and action matter. They know that failure to adequately shore up on climate change is a threat to future returns, but that decisive action can lead to greater value. Investors should now double down on their engagement with companies to help them succeed in the long term. 

At a time when the world equates U.S. leadership with the actions of the White House, it is gratifying to see the country’s most powerful business leaders committing to a sustainable future. They could easily skirt responsibility in today’s political climate, with Congress in gridlock and the EPA relaxing regulation and enforcement to allow polluters to continue business as usual. But instead, the Business Roundtable statement shows how tomorrow’s business can benefit all participants — not just those in power. 

These CEOs have committed to purpose and transparency. They now need to take decisive,  ambitious action. We as stakeholders — as regular Americans who are their shareholders, customers and employees — need to hold them to their promises. Our collective future depends on it. 

Bruno Sarda is president of CDP North America, an organization that helps investors, companies, and cities take urgent action to build a sustainable economy by measuring and understanding their environmental impact. He is a faculty member and senior sustainability scholar at Arizona State University. Follow him on Twitter @bruno68.