Did you hear the one about the ice cream company that came to a sticky end? Not a Christmas cracker joke but a real-life example of the potential implications of sustainability on business.
As sustainability announcements continue to trickle out of COP28, the goings-on in Dubai are a world apart from the experiences of most businesses in the UK struggling to chart a path to a net zero future. For all the talk of transitioning to more sustainable business models, Mike Berners-Lee says there are more fundamental questions that organisations should be asking themselves. “The basic question for everyone to ask is, should this business be here right now?
“If the world economy started making a serious transition towards sustainability, would that be an opportunity or a threat for this business? If it’s an overall threat, then you need to rework the business model, because otherwise anything you try and do around sustainability is always just going to be hugely conflicted.”
Berners-Lee speaks with authority; what he doesn’t know about carbon measurement and footprints probably isn’t worth knowing. A part-time professor and fellow of the Institute for Social Futures at Lancaster University, Berners-Lee spends most of his time as a director of Small World Consulting based in the Lancaster Environment Centre at the university advising all sorts of companies – from household names including Microsoft and BT to small ice cream manufacturers – on the best way to respond to the climate emergency.
“Traditionally, our bread and butter was working out organisations’ carbon footprints, including their supply chains, and advising what they should do about it.” But with organisations wanting to lay claim to being “net zero”, Small World’s focus is shifting, he says. “We’re asking: are your products and services and the way that you’re selling them commensurate with enabling the systemic global change that we need to see to achieve net zero? It’s a much bigger conversation.”
If sustainability is genuinely on your boardroom agenda, generating revenue cannot be your primary goal, Berners-Lee says. “We may as well be honest about this from the start; it doesn’t work to have a business that primarily exists to make money. You can aspire to maximise value, but you have to have a wider definition of value than profit.” People need to be able to feel good about what their contribution is, as well as making a profit, he adds.
And yet the move to embrace broader definitions of value remains patchy, he says. “A familiar progression that happens is, a business gets all fired up about sustainability, and they’re adamant they don’t want to do any greenwashing. ‘We know this is going to be challenging,’ they say and I warn them that something will probably surface that none of us has thought about before. And then, sure enough, it does. We have these critical moments, and sometimes they go the right way.”
It was the fateful ice cream company that reached such a crunch point. Their carbon impact was all in the dairy in their ice cream. Meanwhile, another ice cream company client – Jude’s Ice Cream – reached the same juncture but decided to introduce plant-based products and changed the ratios of dairy in their traditional ranges. Today they’re selling more plant-based vanilla than dairy vanilla ice cream, have opened up new export markets and they’re “going like crazy”, Berners-Lee says.
One factor hampering progress on sustainability is the lack of understanding at board level about some of the issues at play. “It’s striking just how rudimentary the understanding of the climate situation is among people who think of themselves as really smart people. They’re on the boards of big companies, multi-billion pound companies. Progress is so dramatically more effective when the person at the top properly gets it.”
C-suite buy-in is essential, although the far-reaching implications of sustainability make it an agenda that affects everything that a business says, thinks and does. In practical terms, it means that everybody in the company needs to be a sustainability officer, Berners-Lee says.
“The worst thing is where there’s a chief sustainability officer who’s trying to run some sort of sustainability department that nobody else is connected to because they can never get anything done. The top team has to be eating and breathing this agenda.”
Whatever their job title, it’s important to have someone in the business with responsibility for “joined up thinking”, Berners-Lee says, whose job it is to ask if there’s anything going on in any part of the organisation that’s incoherent with the sustainability end goal. “A massive challenge for every organisation is how do you bring about a level of coherence in this when half of your staff have probably never even thought about this agenda, and certainly never thought it applied to them.”
Another sustainability challenge is that one size does not fit all. “We’ve assessed all kinds of companies – fashion brands, mining companies, steel manufacturers, Facebook, Google, Amazon – and we prioritise different elements of what they should be thinking about most. Some organisations will have a legitimate case for causing some environmental impact whereas others won’t be fulfilling their responsibilities unless they’re having a very positive environmental impact.
“Take Facebook as an example,” Berners-Lee explains. “Honestly, what matters is the extent to which it is helping, or otherwise, the world to distinguish fact from fiction and understand issues, not just around climate. If you think about what it will take for us to live sustainably, we need a proper view of the truth, we need our democracies to be functioning properly.
“But if you’re Rio Tinto, the energy and carbon required to turn your iron ore into steel is enormous – it’s about 1% of the whole world’s carbon footprint. They should be asking detailed questions about their business model. If the world started shifting towards a proper sustainability, we will be using some steel but there’ll be less of it, we will be recycling a lot more of it and in a higher quality way. A sustainable world will still need the mining industry, but it will be on a much smaller scale.”
Despite the subtleties at play, Berners-Lee is scathing about approaches to ESG across the investment industry. “Everyone’s talking about ESG in the investment world, but ESG is not fit for purpose. The idea that you can buy a spreadsheet and it will give you any kind of meaningful analysis about the ESG credentials of the businesses in your portfolio is complete nonsense. An assessment relies on intelligent people making evidence-based, partially subjective judgments. You can’t shortcut it.”
Meanwhile, sustainability regulation is necessary, but not enough, Berners-Lee says. “We also need a culture that says we need to be looking after the environment and society properly, a culture that says it is not okay to push at the limits of the regulation and find loopholes. Companies have certain reporting requirements so it risks being a distraction from just getting on with doing the right thing. You need to look much more carefully at a business to see whether it’s doing the right thing.”
- Mike Berners-Lee is the author of books including ’How Bad are Bananas?’, ‘The Burning Question’ and ‘There Is No Planet B’.
Making COP count
Practical content and case studies looking at accountancy’s role in building a sustainable economy.
Discover more from ICAEW Insights
Insights showcases news, opinion, analysis, interviews and features on the profession with a focus on the key issues affecting accountancy and the world of business.
Hear a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy.Find out more
News in brief
Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.See more
Stay up to date
You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.Sign up