Doing sustainable rather than just talking sustainable! Avoiding the lip service...

The sustainability agenda has really hit home in the last few years with various governmental and regulatory forces pushing towards a new framework for financial services orientated towards long term sustainability and application of a environmental, social and governance (ESG) lens to how financial services businesses do business! ESG and sustainability are slowly working their way into the lexicon of financial services and it is hoped that by anchoring finance to sustainable business models we can all reduce the negative impact our monetary decisions have on the wider world we all share and to encourage more businesses to recognise the role they have to play in the long-term future of our planet. 

Can the financial services industry really make a difference?

Consider the answer to the following questions:

• should financial services firms get involved with sustainability?; and  
• do consumers really express their social values through the decisions they make with their money? 

The answer to either is not a settled one. The famous Economist and Nobel Prize winner Milton Freidman once cautioned that “the business of business is business”, counselling business leaders to keep away from the pursuit of social good and reminding us that price is the only real factor on which consumers ultimately make decisions.  Perhaps this is seen most prominently in the retail fashion markets where consumers continue to flock to cheaper brands like Primark and Sports Direct  despite historic allegations that both have been linked with humanitarian issues in the past (1).  A consumers’ true commitment to their social values will always be tested when put up against a cheaper alternative and the evidence often points to the fact that price wins. However, (and to bring a silver lining to this gloomy cloud) we should remember that Milton Friedman made his comments in a different time and place so perhaps he can be forgiven for a view that today may sit uncomfortably with some. After all businesses, particularly those in financial services, increasingly rely on a social license to operate, with the consumer being the ultimate arbitrator of whether the licence remains valid. Perhaps the Nirvana is for all financial services businesses to fully embrace what sustainability means while continuing to offer value for money. In this way consumers have little choice but to deal with a business who genuinely seeks to do no harm and eventually sustainability becomes the baseline expectation.   

Can the financial services industry really make a difference?

A useful measure is what the regulators are saying and it seems they are dubious. Terms like green-washing have already entered their language, perhaps hinting at concerns that sustainability may create a false gospel of sustainable marketing that some may be tempted to take advantage of. We want to avoid green-washing becoming the next big scandal for our industry.

If we take the environmental agenda as an example and look to other industries for comparison we find that many businesses have sought to take up the ‘green’ challenge but, whether well intentioned or not, most have been haunted by the ghost of green-washing at some point. An example of this can be found in Fuji water, who launched a marketing campaign claiming that ‘every drop is green’, but overlooked the fact that there is no way that shipping their water all over the planet could ever be truly ‘green’.  Also, consider Campbell’s soup who received public criticism after its marketing gurus jumped on the environment bandwagon by launching a green coloured soup packaging label (as opposed to the normal red brand) to recognise ‘Earth day’ but failed to consider that their soup contained high levels of salt (over half the recommended daily amount) and other ingredients such as non-organic chicken.  In both these examples the sustainability strategy could be said to be short-sighted, with the business focussing on outwardly ‘talking’ green but not fully committing inwardly to ‘doing green’.  I think this is as much about intention as it is communication. Perhaps if I were to be cynical (and I often am) I might suggest that some industries in the past have only paid lip-service to the sustainability agenda and have used it to cash in on the social mood of consumers rather than to truly make a difference.  In essence the concern is that ‘talking sustainable’ is not enough; regulated firms need to commit to ‘doing sustainable’ and be able to evidence it.  

So what should be done?

The real problem here is that businesses fail to recognise that there are at least four equal streams to sustainability - social, economic, cultural and environmental. To be able to claim to be truly sustainable, a business must be able to show that it has done more than change the colour of its packaging, sourced water responsibly, switched to energy saving light bulbs or offered its clients a green investing option.  Each of these may meet one of the requirements to be sustainable, but all four pillars must be present for the change to be heartfelt and impactful.  Change to behaviour is ultimately necessary and my urge for the financial services industry is to put its sustainability strategy firmly in the hands of the businesses leaders, with input by all employees and other relevant stakeholders so that change is all encompassing.  Placing the strategy only into the hands of the marketing team may not result in the desired outcomes.

What society needs and deserves is those that actually ‘do sustainable’. The Financial Services industry has the opportunity now to make a real difference and to learn the lessons from other industries. My hope is that our industry does not join a long-line of other product and service providers who (at least initially) failed to really make the change.  Creating a better world requires us all to get involved.

Matthew Austen is the Founder of Not Rocket.Compliance, a professional consultancy seeking to help firms understand their conduct and compliance risks both in the present and the future. The views and opinions expressed here are those of the author only and do not reflect the official position of any other agency, organisation, employer or company.