Finding the Win-Win

There is no denying that the private sector has a significant role to play in the campaign to contend with climate change. Without corporate buy-in, achieving climate goals is not likely, considering the massive impact industry has on every aspect of our environment from deforestation to water pollution to greenhouse gases. Private sector partnership and leadership are crucial if we are going to reshape the global economy towards a more socially and environmentally sustainable future. While it is easy to point the finger at corporations and resort to blaming and shaming, I don’t see this as the best way to promote change. This is not to say that irresponsible and destructive business practices should be ignored, but that efforts to improve our economic system should include both carrot and stick (not all stick). 

Identifying opportunities for businesses to benefit through sustainable practices is an important mechanism for driving private sector reform. For example, the increase in renewable energy over the past few years was not achieved solely by government regulation and social pressure, but also because these technologies are now producing cheaper energy than traditional fossil fuels. Achieving a sustainable economy necessitates a multifaceted approach that includes public investment, regulation and grassroots collective action but also private-sector incentives for sustainable practices. The green economy transition will occur more rapidly and comprehensively if corporations are able to implement practices that pair social and environmental benefits with efficiency and profit gains.

The nexus of social, environmental and business benefits is precisely where my teammates and I have spent the final weeks of our sustainable finance research. Our client finances renewable energy projects in climate and conflict vulnerable countries through corporate partnerships. In the first part of our research, we investigated which industries have geographic value-chain overlap with fragile countries to identify potential partners for our client. In the second stage of our research, we conducted case studies on individual companies from the industries identified in stage 1. The purpose of these case studies is to evaluate the stakeholders and decisionmakers within the corporate structure and develop an approach for our client to engage with potential financing partners. 

Throughout the case study stage of our analysis, it was essential for us to place ourselves in the shoes of these corporate decisionmakers and answer the question; why should you purchase renewable energy credits from our client? While providing green energy to vulnerable populations is a clear social and environmental benefit, we needed to go deeper and examine how an individual company might benefit from this investment. Essentially, we needed to make the case that this partnership is a good business decision. This may seem a cynical situation; shouldn’t companies do the right thing simply because it is right? But I don’t see it as such, forging any successful partnership requires a clear understanding of the mutual gains for all parties. While the social and environmental benefits are the centerpiece, secondary gains for the company are the bonus factors that may make the difference when it comes to a final investment decision. 

With this in mind, we set out to develop an approach for our client to engage with potential corporate partners, looking for win-win opportunities. We collated evidence supporting the positive relationship between ESG initiatives similar to our client’s, and factors that corporate decisionmakers are likely to take into account.  These variables included; sales and consumer appeal, reporting and risk mitigation, government relations, public affairs, and shareholder/investor appeal. I was excited to find that these shared benefits are in fact multitudinous and there is ample research to support the theory that investing in social and environmental projects has significant positive impacts for a business as well. 

Moreover, these benefits extend beyond the near term and into the long run interests of corporations. These long run factors really tied the whole story together, back to the starting point of this project. When we talk about sustainability, we are evaluating not only social and environmental sustainability, but also the sustainability of companies, industries and the economy as a whole. In the end, these areas are all linked together; a sustainable business requires social and environmental stability and security to thrive in the long run. For our client’s corporate partners, investing in renewable energy for their value-chain countries is not only a social good but also an investment for the longevity of their business. Supporting social stability and the wellbeing of communities along their value-chain prevents volatility in their supply chains. Supporting environmental protection and decarbonization ensures that these industries will be able to continue operating into the future.

This is not to say that companies only invest in sustainability based on self-interest, I believe some companies and their leadership genuinely feel and act on a sense of responsibility for the societies they operate in. But appealing to self-interest and finding opportunities where benefits overlap for society, environment and the bottom-line are the most promising avenues to pursue positive impact. Understanding the motivating factors for corporate decisionmakers and the influencers that affect their choices was an important aspect of this work. For professionals working in the ESG space, emphasizing the shared benefits of sustainability and communicating this narrative effectively to corporate decisionmakers is necessary to advance the change we hope to see in the economy and the world. As I move forward in my career, I intend to take these lessons with me and continue promoting sustainability by finding the win-win scenarios.