Breaking free: Committing to sustainability in 2024

2023 was the year in which the world at large experienced the power of AI – both positive and negative – and the potential to be transformative in every aspect of our lives.

Long-awaited ESG disclosure standards were also published: International Financial Standards (IFRS) Foundation’s International Sustainability Board Standards (ISSB), the European Sustainability Standards Board (ESSB) and the Taskforce on Nature-related Disclosures (TNFD), which have the most far-reaching implications.

The global order is shifting. Institutions are under attack at national and international levels, and the number of wars is increasing.

The Argyle Declaration, in which Guyana and Venezuela reiterated their commitment to Latin America and the Caribbean remaining a zone of peace, stands out as a welcome exception to the general trend.

COP28

In November, COP28 concluded with the headline commitment to transition away from fossil fuels. That is unlikely to shift much in fossil fuel-based economies, including those in Caricom, such as TT, Guyana, and probably Suriname. UN secretary-general António Guterres warned delegates, with no let-up in fossil fuel extraction, “We’re heading towards a calamitous three-degree Celsius temperature rise by the end of the century.” Far beyond the maximum 1.5C increase that the Caribbean demanded and the world agreed to in 2015.

National commitments themselves are generally not ambitious enough, and on top of that, the implementation gap is still far too large.

Only 23 per cent of the measured Sustainable Development Goal (SGD) indicators in the Caribbean are currently on track.

A tragedy that is well-understood

The tragedy of the situation consists in the fact that we are all aware of this and have individual and collective capability to do something about it.

But too many are too cynical and selfish, convincing themselves that when the expected tragedy hits home, they might as well be the ones with more money since the costs will have to be shared.

So, according to their internal argument, in the absence of enforceable regulation, it makes sense for them to continue to strip mine our natural resources and social capital, move as much of their capital as possible abroad, secure foreign passports for themselves and their family, and continue to operate their business with only cosmetic changes.

ESG, sustainability, SDGs

What should we make of talk of ESG and sustainability in this context? Two years ago, most of the requests I received from companies were to understand what ESG is about. Now, most talk about it and many medium to large organisations have started to act on it. At the same time, some SMEs and start-ups have embraced it and are making sustainability their central business proposition. You can even observe quite a few annual reports of listed companies in the Caribbean liberally using the terms ESG, sustainability and SDGs – but few are meeting even the most minimal conditions and certainly exposing themselves to the risk of greenwashing.

What several companies in the Caribbean say, in a distinct and limited section of their annual report, is that they are committed to sustainability, that their work is relevant to some SDGs, they are on a journey informed by ESG concerns and particularly the ESG disclosure standards that are going to become mandatory and that they develop policies and report in accordance with them.

Decision-making vs reporting

The simple message of this article is acting on effective decisions - governance and managerial - to optimise a company’s profitable achievement of ambitious sustainable development targets is key to achieving sustainability.

For all companies committed to optimising their profitable contributions to sustainable development, the new SDG Impact Standards and ISO standards provide the right tools to implement now and achieve their aims – because that is their purpose.

ESG disclosure frameworks are not managerial and governance decision frameworks for optimising profitable contributions to sustainable development. ESG disclosure frameworks are, as the name suggests, about what to disclose. You can use the information from the management and governance frameworks to inform your responses to what you must disclose, but not vice versa.

Hedging bets

Three main reasons perpetuate the lack of commitment beyond initiatives and renewing plant and equipment with somewhat less wasteful options when the time comes. One is cynicism. Another is procrastinating the work that needs to be done after tomorrow's profit is in the bank. The third is confusion.

The confusion is genuine for many because the mentioned ESG disclosure regulations that will probably be adopted in the Caribbean are still new and most have not yet engaged with them.

They don’t know that they are focused explicitly on the risks to the company's financial sustainability within the context of E, S and G risks.

The primary users of these disclosures are meant to be investors who are assumed to have only financial interests.

More specifically, the confusion arises because the disclosures are confusingly referred to as sustainability disclosures, even though the standard setters themselves are unambiguous in saying that they mean financial sustainability and not the sustainability the world had agreed to and been using for the past 36 years.

Terms defined

Sustainable development: Development that meets the needs of the present without compromising the ability of future generations to meet their needs.

Sustainability: The state of the global system, including environmental, social, and economic aspects, in which the needs of the present are met without compromising the ability of future generations to meet their own needs.

Three points of clarity emerge from this clarity of terminology:

– Needs of present and future generations: This speaks to the importance of contribution to the well-being of all. If you are exclusively focused on consumption and sales and not explicitly also on the actual positive and negative as well as potential impact(s) your products and services have, then you cannot claim to be committed to sustainable development.

– Compromising the ability of future generations: We all utilise and depend on several forms of capital – natural, social and human – are we helping to conserve these, renewing them – leaving capitals better off?

– Thresholds: For present and future needs, contextually relevant thresholds are crucial, without these, one cannot determine sustainability.

Commitment to sustainability

Based on the clarity of the definitions and their implications, ethical companies that have been hedging their bets due to their confusion should be confident that they move into 2024 with a firm commitment to sustainable development (or sustainability), which means:

– Committing to improving the well-being of all (at least positive for some, not negative for others),

– Ensuring that all decisions in the company help to conserve and restore the capitals they depend on, and

– Demonstrate and account for the fact that the company only counts as positive impacts those that reach a minimum threshold set considering, and at times making a judgement about a mix of locally relevant, contextual (eg ecological, planetary) thresholds, scientific targets and stakeholder expectations.

Dr Axel Kravatzky is managing partner of TT based Syntegra-360 Ltd, vice-chair of ISO/TC309 Governance of Organizations and president of EUROCHAMTT. He enables companies to flourish through integrated governance, certified management systems and transformational leadership.