Sustainability storytelling by companies has become increasingly detached from reality. Many brands claim to be sustainable, from fast fashion touting minor increases in recycled materials to airports declaring net-zero status and payday loan providers boasting ESG reports.
Annu Nieminen, asks the original question—how can a company create more good than harm? In a world where sustainability conversations often blur various issues into a confusing mix, benefiting companies by obscuring their true impact.
What does it mean for a company to be sustainable and have a positive overall impact in today’s global economy?
There are two distinct conversations within sustainability discussions that need to be differentiated.
The first discussion focuses on traditional ESG (Environmental, Social, and Governance) analysis, which emphasizes a company’s internal practices, processes, and governance. This approach evaluates “how” a company operates, focusing on risk management, compliance, and shareholder value creation. However, this old-school ESG approach is less relevant in today’s economy, where the demand is for real-world impact, not just internal behaviors.
The second, more crucial discussion centers on a company’s holistic impact on the world, asking: “What is the net effect of the company’s core business?” This approach evaluates the balance of positive and negative outcomes generated by a company’s products and services on society and the environment. The core question is whether a company contributes more good than harm, beyond just benefiting shareholders.
For example, a tobacco company may excel in internal ESG practices but still causes significant harm through its core product. Conversely, a green energy startup with less polished sustainability processes might have a highly positive net impact. The focus should be on what the company does rather than how it reports or behaves internally.
This shift in focus—looking at the actual impact instead of marginal improvements—is essential. Investors, consumers, and stakeholders need to ask these critical questions, as companies often emphasize less meaningful sustainability efforts while downplaying the larger, more negative impacts.
Incremental Tweaks vs. Real Change: The Need for a New Approach to Corporate Sustainability
For those concerned with sustainability—whether as investors, consumers, or employees—it is crucial to understand a company’s actual impact on the world. The next step is determining whether a company plans to address the status quo or merely tweak around the edges.
Currently, much focus is placed on incremental improvements, such as setting Science Based Targets, joining net zero pledges, or adhering to DEI guidelines. However, these efforts typically aim to slightly improve the existing system rather than radically transform it. This incremental approach benefits industries with no clear sustainability path and the consultants, agencies, and services that support them. It fosters a sense of progress without addressing whether a company will ever truly cause more good than harm.
While “every little bit counts” sounds appealing, it can be misleading. It creates the illusion that meaningful action has been taken when, in fact, the deeper question remains unanswered: Does this company have a credible plan to become a net positive force?
As global CO2 emissions continue to rise, it’s clear that the current model of corporate sustainability is failing. Applying the same incremental thinking to other business areas, such as finance, would be absurd. Shareholders wouldn’t invest in a company heading toward bankruptcy because of minor improvements; they’d want to know if the company can ever become profitable.
Similarly, we must apply this critical thinking to corporate sustainability—only supporting businesses that demonstrate the potential to be truly sustainable and beneficial for both the planet and society.
Source: Annu Nieminen is founder and CEO of The Upright Project, an independent impact data company hosting the world’s largest open-access database on the net impact of companies.
