The term “sustainability” crept into the business lexicon slowly, by way of the environmental movement. It no longer means covering operating costs with profits, the definition I learned at Harvard Business School six years ago. Instead, it’s morphed into a blurry term that fits into whatever suitcase you want it to — a catchall for everything “socially good,” whatever that means.
The term has been used by various groups — with various meanings — for three decades. The Sierra Club first introduced it in the 1970s, during the dawn of the environmental movement. At the time, activists were speaking out against mining, water pollution, and other environmental threats. They defined “sustainability” as an approach to preserving natural resources by creating national parks and enacting legislation that would penalize polluters. In the 1980s, companies like The Body Shop used sustainability to describe their commitment to environmental and human rights, and a corporate focus that expanded beyond profits. For the next 20 years, the term was used by a small group of companies, like Ben and Jerry’s and Eileen Fisher, whose founders tried to incorporate their social values into their business models.
Over the past five years, sustainability has become even more popular, as multinational corporations open new sustainability divisions and chief executive officers at the World Economic Forum wax poetic about its importance. The term has been co-opted, perhaps because Americans, especially Millennials, not only want to buy products that do the job, but also align with their values (like soap that can clean a car without harming the environment). Today 2,500 multinational corporations from 58 sectors participate in the Dow Jones Sustainability Index, which assesses each corporation’s sustainability using variables such as labor and environmental practices. This index is one of over 25 sustainability indices worldwide, each one with a unique set of criteria — measuring governments’, multilateral organizations’ and non-governmental organizations’ level of sustainability, or their so-called social good.
This phenomenon is bad for a number of reasons. First of all, it misdirects resources. According to a 2012 Bloomberg LP-sponsored study, institutional investors are now using “sustainable” investing strategies in more than $3.7 trillion of investments — a 22 percent increase in two years. In theory, this should be a good development. But if there is no consensus on what sustainability means, then how can the institutional investors and their clients — who are not necessarily operations experts — be sure that the funds are being directed to truly sustainable businesses? Investors are relying on vastly different definitions of “sustainable” — everything from a coal company whose drivers turn off their truck engines while refueling, to an urban quinoa farm depending on rain-collected water and composted fertilizer.
Secondly, “sustainability” applied blindly can dupe consumers. Consumers may have one perception of what sustainability means and therefore buy a product that has sustainable in their messaging. But when was the last time a Unilever marketing manager spent time on the Lipton tea farm to understand a farmer’s needs? How much does the farmer need to get paid in order to support her family? Does Lipton use pesticide that pollutes her community’s groundwater?