Bad news for the environment: sustainable business isn’t succeeding. I’m frustrated, too. But we can make it succeed.

The two-decade-old sustainable business movement has reached a major crossroads that few of its participants yet recognize. While the movement can claim many early successes, it is increasingly diverting effort and resources away from the only form of change – policy change – that can now adequately address our environmental challenges.

The sustainable business movement has long confronted instances of so-called greenwash, whereby certain companies cynically promote token ‘green’ initiatives to distract attention from unsustainable core businesses.

Today, we face a new affliction of greenwish – the earnest hope that voluntary sustainability efforts are much closer to achieving the necessary change than they really are. This condition may prove every bit as harmful because it is more widespread and arises principally from good intentions.


I reach this conclusion reluctantly because, for 25 years, I have been an advocate of the sustainable business movement, first at an environmental non-profit organization and then at a sustainable investment firm. As environmental policy initiatives faltered in the late 1990s, I, like many others, turned to market forces to promote sustainability, encouraged by the prospect of win-win opportunities – business solutions good for both planet and profit.

Today, sustainable business appears to be thriving. A socially responsible investing (SRI) industry now accounts for a quarter of global financial assets and many sustainable investment funds have outperformed. In the corporate sector, chief sustainability officers – a designation virtually unknown before 2004 – are ubiquitous.

Yet, 20 years after this major transition to market-led environmentalism, key environmental metrics continue to deteriorate. Global CO2 emissions are now 55 percent higher than in 1997, the year of the landmark Kyoto meeting. After a brief hiatus between 2014 and 2016, emissions are growing faster again. In May, the United Nations reported that ecosystem health is declining at rates unprecedented in human history and that the rate of species extinctions is accelerating.

While environmental indicators would surely be even worse without the sustainable business efforts of the last 20 years, the fact that matters in 2019 is that these indicators are not much, much better. The harsh reality: sustainable business is necessary for a sustainable culture but far from sufficient. It is not that there are not win-win opportunities nor good investment returns to be had from identifying them, only that the global metrics reveal today’s economic growth remains an overwhelmingly win-lose phenomenon, but one now granted inadvertent cover by the current form of sustainable business.


The core problem is that sustainable business’s well-intended efforts are undermined by their deeper prior commitment to shareholder value maximization (SVM), which, applied to today’s incomplete prices, induces business to cause more ecological damage than their voluntary efforts can repair.

Only three hundred years after the market began its cultural ascent, our price system remains a work in progress, and the profit calculations it engenders remain incomplete. Our markets are riddled with negative externalities; our ‘economy’ is more unpriced than priced. Consequently, the financial statements that steer business activity offer a highly skewed picture of wealth-creation.

Energy and manufacturing companies have no line items reflecting the damage caused by their greenhouse gas emissions. Agricultural companies have no bills recorded for soil erosion, nor chemical companies for mounting pesticide resistance and toxic runoffs into our waterways. The food industry shows no financial outflows for the obesity crisis prompted by their sugar, salt and fat offerings of past decades. The tech industry’s accounts seem to be missing cost entries for the adverse mental health and privacy consequences of business models optimized to promote screen time.

Yes, there is certainly a tax line intended as a contribution to society, but this is an indiscriminate catch-all – florists and mining companies face the same basic rate.

Ponder this for long enough and eventually one’s eye is drawn from the profit margins within the income statement to the empty margins of the surrounding page. Those empty margins are a curiously eloquent expression of everything that is missing – the deforestation and species loss not paid for, the animal cruelty not fully compensated, the screen addiction not charged, the contribution to climate change not reimbursed, the plastic pollution not indemnified. They are all there in the empty margins if you look closely enough, but – be warned – once you start looking, empty margins might become all you see.


To be sure, companies have sought to address this problem by disclosing supplementary environmental, social and governance (ESG) metrics. Initially, in the late 1990s and early 2000s, this proved beneficial. The mere act of compiling such data prompted many companies to view their business in a brand-new light, fostering a new ecological awareness and teasing out new areas of innovation. However, with each year that passes, this disclosure strategy exhibits diminishing returns to effort. While businesses are now alert to sustainable innovation paths that are profitable, environmental and social metrics that dutifully flag unprofitable challenges cannot escape their second-class status. They are metrics investors may consider, but, unlike profit numbers, rarely lose sleep over. Pitting values with prices against values without prices is not proving a fair fight. SVM trumps SRI.


The critique signals the opportunity. The low-hanging fruit for meaningful corporate action now lies firmly on the side of systemic interventions. The disclosure now required is not more detail about a company’s greenhouse gas emissions or water use, but rather what companies publicly stand for regarding the changes in rules and prices needed for a more sustainable world – and what, exactly, they are doing about it. This is the critical question we must now ask our portfolio managers and corporations.

Obviously, for business to demand potentially costly new rules to protect the planet challenges the institutionalized self-interest of the modern corporation. So, it will have to be up to the human beings that work in corporations to reflect on whether the sustainable potential of their organizations is ever thwarted by commercial imperatives, and, if so, what that implies about our market system.

My comments may dishearten members of the sustainable business community, but in many respects, that community has successfully executed on a genuine opportunity that unfortunately now appears more limited as an ecological strategy than we had all first hoped. What would be a mistake is for the sustainable business community – and society more broadly – to deny the crossroads we have reached. Today, our rapidly deteriorating environmental situation prompts justified calls for urgent response. The sustainable business movement must avoid falling into the trap of responding simply by pursuing old strategies with more urgency, and instead urgently adopt new strategies that the moment demands.

Duncan Austin, July 2019

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