The Business Case For Sustainability

Sustainability rhetoric and actual practice are not one and the same.

“There’s a gap between the rhetoric of sustainability in the business case and the actual practice,” according to Kenneth Pucker, Professor of the Practice, The Fletcher School at Tufts University. Pucker was the keynote speaker at Sourcing Journal’s Sustainability Summit on March 19 at the TriBeCa Rooftop in New York. He spoke on “The Elusive ‘Business Case’ for Sustainability.”

Pucker said the business case is currently the dominant narrative, which is to blame for the existing gap. That’s due in part to the International Chamber of Commerce’s influence in shifting the focus from environmental regulations—which began under former U.S. President Richard M. Nixon and his creation of the Environmental Protection Agency (EPA)—in the early 1970’s to voluntary corporate action.

“According to this line of thinking, sustainability was best delivered by companies that committed to four types of action,” the professor said. The four actions are report, certification, technological advances, and win-win solutions led by mostly academics.

Pucker spoke about wins across industries. In fashion, the win-win is circularity, which has the potential to decouple revenue growth from resource use. The theory for investing in repair, recycle and reuse is that fashion firms can emulate the success of businesses such as aluminum and paper. That would turn “worthless output into valuable inputs,” reducing the need for raw materials in fashion production.

But he also noted a caveat, that win-win solutions are often oversold. Why? “Reporting isn’t the same as disclosure, and disclosure doesn’t assure change,” Pucker said.

After 25 years of carbon emissions reporting, the professor said that less than half of public companies today report on any emissions that are tied to Scope 3. EPA defines Scope 3, also known as value chain emissions, as the result of activities not owned or controlled by the reporting firm, but have an indirect impact on the reporting company’s value chain. According to Pucker, the companies that don’t report on Scope 3 emissions are “neglecting almost all of their contribution to climate change.”

In the fashion space, on average, companies who report note that 95 percent to 99 percent of their emissions are in Scope 3. Of the companies that do report on their full emissions profile, there’s no evidence that the disclosure means consumers or investors will change their behavior, he noted.

The professor said the scenario may be worse for certifications in the fashion sector. “Certifications are certainly confused, not a vet for sustainable behavior.” He cited to limitations of certifications, such as the Higg Index, which the Norwegian Consumer Protection Authority stopped using due to alleged misleading of consumers with “outdated data that lack the proper context.” In addition, there’s been a slow adoption of technological solutions in fashion supply chains. Even for sustainability investments, there’s been difficulty in getting CFOs to approve inititatives due to the lack of immediate returns.

Another problem is that win-win solutions have been “vastly” oversold. One example Pucker cites is circularity, which he said is “rife with exaggerations and accounting errors.” One oft-cited misonception is that circularity could liberate $500 billion in economic growth by reusing and recycling apparel and textiles. But where does that number come from? A 2017 report from the Ellen MacArthur Foundation claims that circular fashion can deliver better economic, social and environmental outcomes to the tune of a half-trillion dollars, Pucker said, noting that a subsequent, critical review of circular fashion found that the $500 billion estimate “is overstated by more than 95 percent due to errors in the math.”

Despite that, the $500 billion number is now repeatedly quoted over and over, which Pucker said helps to explain the “conceptual gap between the theory of the business case for sustainability and the on-the-ground challenge of making a business case.”

So what are some possible solutions for change? Commitment to long-term collaborative systems is one option. The fashion sector isn’t conducive to investments in decarbonization. With production separated from consumption, the social and environmental impacts “most often go unseen. At the same time, with a distributed and outsourced supply chain, there’s less incentive to invest in sustainability for supplier factories because of the focus on maintaining flexibility.”

But a long-term commitment for investment can both benefit the supplier community and help with decarbonization. Puma was one example cited by Pucker, which he said has reduced its carbon emissions by one-third while doubling its revenues over the last six years. Long-term supplier partnerships, backed by responsible purchasing practices, order volumes and education have also contributed to decarbonization.

Other considerations for brands include the withdrawal from trade memberships that lobby against climate change regulations. Nike did just that back in 2009, when it resigned from the board of the U.S. Chamber of Commerce due to its stance on climate change.

The professor had one more recommendation: “Brands ought to underpromise and overdeliver.” Pucker said a recent study from a “big-ticket consulting firm” revealed that two-thirds of brands are not on a path to deliver on the 2030 sustainability decarbonization targets.