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1. The Net Zero Moment
Four decades after sustainability first emerged as a concept, we are witnessing a critical ‘net zero moment’. First gradually, and now suddenly, companies are making ‘net zero’ pledges to reduce carbon emissions in line with the Paris Agreement. This represents a substantial and welcome upgrade of ambition regarding climate change, but poses the obvious challenge. In March, a survey by Standard Chartered found that 64 percent of senior corporate executives do not believe that net zero commitments are commercially viable, contradicting the longstanding ESG narrative that ecological sustainability is a ‘win-win’ – good for profit and planet.
The contradiction finally reveals that there have all along been two fundamentally different interpretations of ‘sustainability’. The win-win claim of sustainable business has always tacitly depended on the ecological ‘win’ being defined as ‘more sustainable than before’. In contrast, the net zero imperative emanates from the very different perspective that we need to achieve ‘enough sustainability before it is too late’.
I believe much of the ongoing confusion within the sustainability debate arises from individuals and organisations – and even individuals within the same organisation – working to conflicting interpretations of sustainability, without fully realising. Some regard sustainability as a relative concept by which it is sufficient merely to make progress – to ‘become more sustainable’ – while others view sustainability as an absolute concept that demands we be ‘sustainable enough in time’.
In turn, these different perspectives rest upon individuals’ generally implicit views on whether the world does or does not contain real thresholds and limits whose breach may have severe, even existential, consequences for humankind. Hence, though rarely discussed explicitly, the fundamental clash is between limits-denying and limits-accepting world views. (See Figure 1).
Figure 1: The sustainability debate in one chartA simple horizontal line changes everything. Modern society is overwhelmingly organised around an open-ended worldview with its appealing prospect of limitless growth, which in turn, shapes business and investment growth-oriented norms. Such open-ended progress presumes a threshold-free world.
In contrast, climate scientists and ecologists are steeped in an alternative worldview that admits the possibility of thresholds, which may trigger ‘race against time’ or ‘bend the curve’ situations. These constitute adaptive challenges with deadlines. In such situations, response strategies must be evaluated not on whether they are delivering ongoing improvement but on whether they are on track to achieve enough change in time. Such is the nature of deadlines.
The real significance of today’s net zero moment is that it amounts to shifting our perception of the global economy from a limits-denying to a limits-accepting frame. It is the recontextualisation of economic activity within one – of nine! – planetary boundaries identified by the Stockholm Resilience Centre. Though organisations and individuals are familiar with deadlines, the dizzying implication of this frame shift is that it effectively places the whole global economy on deadline.
At a personal level, the net zero moment prompts us to ask: which picture of the world am I assuming? Why? Figure 1 is effectively the Rorschach test of our times.
The pictures climate scientists and ecologists now urge us to see are those with horizontal lines representing critical thresholds (see Figures 2 and 3). In climate change and biodiversity, we have two global-scale races against time – a ‘bend the curve down’ challenge to keep global temperatures from rising too high and a ‘bend the curve up’ challenge to prevent ecosystem health from declining too far. 
Figure 2: Climate change is a ‘bend the curve down’ challenge. (Based on IPCC, 2018)
Figure 3: Biodiversity protection is a ‘bend the curve up’ challenge. (Based on IIASA, 2020 and WWF, 2020)Of course, limits are psychologically challenging, and some will argue that we laid such concerns to rest when economists prevailed in the 1970s Limits to Growth debate. Yet, today’s limits represent not the old fear of running out of inputs – food, energy, oil, etc. – but a new concern that our many outputs and impacts – emissions, waste streams, deforestation etc. – may destabilise planetary systems. Bluntly, today’s limits problem is less about ‘running out’, and more about ‘screwing it all up’.
In acknowledging limits, the concept of net zero now forces a reconciliation of what we mean by ecological ‘sustainability’. Climate scientists’ insistence that we achieve net zero emissions within short order stems from their interpretation of sustainability as ‘enough sustainability before it is too late’. In contrast, companies now enthusiastically announcing net zero pledges have been encouraged to think of sustainability as a win-win – resting upon a weaker sense of sustainability as ‘more sustainable than before’. The clear risk is that if the latter perception persists, the necessary but demanding actions required to fulfil net zero commitments will not transpire, reducing the whole endeavour to empty promises.
In truth, this moment has been long-awaited, because it has been increasingly clear that our predominant response to the sustainability crisis over the last 3 decades – the voluntary market-based approach of ESG, ‘impact investing’ and sustainable business in general – has not been able to bend environmental trajectories as much as hoped. This inevitable clash of sustainability interpretations now forces the ESG community into a difficult, but potentially catalysing, reflection of two fundamental issues: (i) the credibility of its ‘win-win’ narrative and (ii) the sustainability of ‘economic growth’.
2. ‘Win-Win’ in the Time of Net Zero
While win-win has been a beneficial narrative in certain respects, the issue is whether it remains so. Since its emergence in the early 1990s, belief in win-win has stimulated much action and awareness on sustainability issues. Moreover, hundreds of studies appear to confirm the idea – the latest rough consensus is that ‘acting sustainably’ may be slightly positive for financial performance or, at worst, neutral.
But what has got lost in the whole exercise is what is being regarded as ‘acting sustainably’! Alas, the environmental ‘win’ of the win-win formulation has overwhelmingly been some form of ‘more sustainable than before’ not ‘enough sustainability in time’. One does not need to review hundreds of studies to confirm the point because it is only from 2016 that the first few companies began to set ‘science-based’ ecological targets, proclaiming them more rigorous than prior practices based on self-selected emissions targets, decoupling measures or similar.
Science-based targets and net zero commitments work back from real-world limits to identify proportionate reduction efforts, such that if everyone did their bit, we might avoid breaching tipping points. In other words, it is only very recently that companies have started to orient their sustainability efforts – at least, their climate efforts – to align with scientists’ view of what is required.
The financial preoccupation of the win-win literature has obscured the fact that the independent variable of ecological sustainability has generally been fairly meagre. The whole effort was triggered by the hope, and has proceeded under the assumption, that ‘some sustainability’ would be ‘enough sustainability’, but what global environmental trajectories now indicate and what the need for net zero commitments underscores is that this is no longer a tenable assumption.
It was always recognized that the win-win narrative might become a self-fulfilling prophecy in that it would stimulate businesses to identify profitable opportunities in previously neglected ‘green’ niches, which would catalyse further profitable innovations, and then combinations of innovations, and so on. Certainly, this beneficial dynamic seems to have been triggered and will now continue.
However, perversely, win-win has also become a self-fulfilling prophecy in an unhelpful way by diluting the meaning of sustainability. To the extent the overall signal from studies is that ‘sustainability’ is neutral to slightly positive for financial performance, what we have effectively done is work back from inviolable profit to define sustainability to mean something like ‘more sustainable than before without compromising financial performance’. The ‘win’ that the win-win construct has privileged is the financial one of ‘not making a loss’ not the environmental one of ‘not breaching planetary thresholds’.
Hence, the overarching trajectory of the last three decades of sustainable investing has been the gradual inversion of intention from an initial ‘socially responsible’ or ethical stance – (‘how can we use finance to make a sustainable world even if it lowers returns?’) – to enthusiasm for win-win – (‘you know, some of this might be profitable, too’) – to today's ‘ESG integration’ – (‘how can we exploit the idea of sustainability to enhance returns?’).
Net zero reverses all this. Net zero privileges planetary boundaries over profit expectations. Thus, the adoption of such commitments marks a profound frame shift that we are not in an open-ended world, but in a world of natural thresholds. Net zero introduces into the boardroom new pictures of the world bearing horizontal lines.
The conventional win-win narrative is unlikely to withstand this change of perspective because ‘enough sustainability’ constitutes a massive shift of the goalposts. This is the profound meaning of the ‘net zero moment’. As corporations adopt commitments based on what needs to be done, there is a forceful crystallisation of the huge gap that still exists between what scientists view as necessary and what businesses feel their conventions permit. The emergency nature of the situation is only now really sinking in around many board tables, possibly to stunned silence. ‘Oh. They mean that much sustainability…’
The challenge for sustainable business
How should the sustainable business community proceed in this new world? Members of this community may now be a critical voice for advancing human sustainability, just not in the way they may think.
The risk is that as the financial demands of net zero commitments sink in, companies that have made pledges will dilute their commitments, while the vast majority of companies will make no commitment at all. Given what is at stake and the non-binding nature of voluntary actions, the clear sustainability imperative is that science-based commitments are quickly shored up with science-based policies covering pledgers and non-pledgers alike. And the greatest support the ESG community can provide to help build the consensus required for such policies is to ease off its longstanding ‘win-win’ narrative – for what was initially an inspiring catalyst is now becoming an obstructive narrative of wishful thinking and denial.
The issue is not that the win-win story has not stimulated action or that there have not been many genuine win-win projects, with more on the way. Instead, as it sinks in that we are in a race against time that requires net zero commitments for climate, and comparable actions for biodiversity, the learning is that win-win cannot scale to deliver enough change, fast enough.
For example, a December 2020 McKinsey report more plausibly identifies that only about half of what is required to decarbonise Europe is likely to be win-win. The other half requires costly policy intervention. Hence, just to use this study as a rough guide, half the solution is not an appealing win-win, so much as the mother of all whip-rounds to now pay up for what we have not previously been paying for. This inconvenient half cannot simply be ignored because systemic problems like climate change need to be wholly solved, not just half-solved. So, sustainability is on offer, it just costs something.
All this places the ESG community in an awkward position regarding the narrative they have built a movement upon. The growing unintended consequence of sustainable-business-as-usual is that its enthusiastic propagation of the win-win narrative is suppressing the difficult, but necessary, acceptance of the severity of the situation, which might be the critical impetus for meaningful policies and faster adaptive change.
The problem is that ESG’s core proposition reinforces modern culture’s bias against policy and regulatory solutions. To spell out: the more the ‘win-win’ message is promoted, the more reassured people are that ‘markets are the solution’, the greater the reinforcement of underlying market-favouring, anti-regulatory norms, and so the harder it becomes to implement meaningful policies, or, equivalently, the easier it is for policy opponents to mobilise existing anti-regulatory sentiment to block new policy.
We must now break this powerful reinforcing loop and give up the too-good-to-be-true win-win narrative so that we can accelerate changes that may be costly, but which are well within our capabilities. To reframe the challenge as an opportunity, the most decisive contribution the sustainable business community might now make is to advocate strongly for science-based climate and biodiversity policies. Given the anti-regulatory bias of cultural norms, this will take vigorous and sustained effort, not just the occasional press release. It will need to be actively lobbied for, with an commitment and intensity commensurate with the fact that policy changes are half the solution.
In picking up this challenge, the ESG community might only be joining other constituencies that have long argued for stronger environmental policies, but they may constitute a disproportionately influential ‘swing voice’ in representing organisations that have sought to make voluntary market-based strategies work, only to now recognise the limitations. The fact that this will require a difficult reversal of past messaging – from client promises to public pronouncements – will only give their voice greater credibility and force. It could be the change of mind that tips the balance of our whole sustainability discourse.
3. ‘Economic Growth’ in the Time of Net Zero
The second major consequence of the limits-accepting worldview that net zero ushers in is the light it casts on economic growth, around which there remains much complacency. As a market-based movement, sustainable business implicitly supports the idea that economic growth is beneficial for our ecological challenges because it enables technological development and provides funds for costly abatement. But this is to miss the physics for the finance. Here again, a simple horizontal line transforms our understanding, by recontextualising economic thinking.
Since the early 1990s, the confident view of mainstream economics, via the so-called Environmental Kuznets Curve (EKC), has been that economic growth is not only not a problem for environmental issues, but the solution (see left-hand side of Figure 4). The hypothesis is that while early stages of economic growth might damage the environment, as societies became wealthier, they develop means to remedy the damage. The EKC’s prescription: ‘if you are in an ecological crisis, grow your way out’.
The EKC has since been challenged on several fronts, but its overarching weakness is that it denies the possibility of irreversible biophysical thresholds. While that might be justifiable when thinking about local pollution, upon which it was originally premised, it is less appropriate for global, whole-system, problems. Thus, Figure 4 is another Rorschach test for our times. Which view do you see? Why?
Figure 4: The growth debate in one chartThe implications of the horizontal line are profound. In a world of irreversible biophysical limits, today’s wealth generation may trigger global-scale ecological breakdown along the way that renders our hypothetical ability to fix problems subsequently a moot point.
To emphasise the point, consider that even ‘green’ solutions, such as electric vehicles, have a profile of generating upfront energy or material use in return for later environmental ‘savings’. An electric vehicle may only ‘break even’ in carbon terms after as much as 9 years of driving. But this common profile of green solutions means that at some point we will reach – may already have reached? – a time when even the economic activity required to develop a long-term sustainable economy might lead us to transgress thresholds!
The real danger is not the green activities, which we must prioritise even with their upfront impacts, but that ‘green growth’ licenses growth in general, with the result that most growth is not green at all. Determining the green/non-green mix of the global economy is a considerable task, but the signal from incremental growth is discouraging: a March 2021 UNEP analysis of pandemic-recovery fiscal stimuluses identified that only 18 percent of $14.6 trillion planned spending could be considered ‘green’, despite clamour for green growth and to build back better. Against fast-approaching thresholds, eighty percent of new stimulus is not green and most building back is not better.
The challenge for sustainable business
The challenge for the sustainable business community is that, as a market-based movement, it has generally not questioned ‘economic growth’. Sustainable business certainly espouses a preference for green growth, but that merely reinforces growth-favouring norms, with the consequence of waving through mostly non-green growth, at a time when environmental buffers are diminishing.
We are missing the physics for the finance. A major cause of our sustainability problems is that the economic values we steer by are so decontextualised from the underlying natural world that a core aspect of the sustainability challenge is to see through the blindness that economic and financial conventions induce.
Our ecological problems are rooted in matter and energy flows not financial flows. Our situation has arisen because we have transformed the matter and energy of the world at a much faster rate than the natural world can absorb. Given the entropic toll of every transformation, it is our underexamined urge to keep transforming – even with good intention – that is the core driver of our ecological crisis. But, in what sustainability researcher Pasi Heikkurinen has termed our ‘transformation paradox’, our instinctive response to problems caused by past excess transformation of the world’s matter and energy is to keep transforming! Our increasingly urgent ambition to build a green economy masks the deeper point that we remain firmly upon a transformation treadmill. We say ‘greener’, the Earth just registers ‘more’.
In races against time, possibly the most precious commodity is more time. How can we buy time for our sustainability crisis? By slowing down those parts of the economy making no contribution to a greener future economy.
The sustainable business community has generally shied away from notions of de-growth, post-growth and similar, yet at the highest level these ideas embody the wisdom that ‘sometimes you have to slow down to let the wind catch up’. We have outrun Nature’s ability to renew and regenerate. As Steven Chu, Nobel Prize winning physicist, told world leaders at the recent virtual climate summit: ‘you have to design an economy based on no growth or even shrinking growth.’
Critically, the de-growth or post-growth that advocates have in mind is not the sporadic recessions that upset our prevailing growth mindset, but rather an intentional, radical transformation and re-conception of prosperity and welfare, complete with transitional justice. In a sense, from where we find ourselves today, de-growth is the necessary first step to the ultimate end which is really ‘balance’ – a coming back into balance or homeostasis with the natural systems upon which we depend. As a culture, we seem to have growth down pat – with metrics and incentives galore – but we have a much less developed sense of balance.
4. Would the Real ‘Sustainability’ Please Now Stand Up?
With today’s clash between the demands of net zero and the hopes of win-win, we have reached the decisive moment. Contrary to early hopes that a win-win narrative might stimulate sufficient voluntary action to constitute ‘enough sustainability’, the learning has emphatically been that win-win cannot scale to deliver enough ecological improvement, fast enough. This difficult truth can no longer be ignored.
The challenge for all organisations aspiring to be sustainable – from governments to businesses to non-profits – is to clarify for themselves and their various stakeholders what definition of sustainability they intend to work to. Are they ‘more sustainable than before’ organisations or are they organisations committed to creating a world that is ‘sustainable enough before it is too late’?
The ramifications are enormous. To persist with the former definition, which has been the tacit default for the sustainable business movement, is to propagate an increasingly untenable win-win narrative that suppresses the recognition of the emergency situation we now face. It also perpetuates complacency about economic growth at a time when most growth is not green at all and ecological thresholds are fast approaching. In contrast, to adopt the latter definition is to accept we now must do everything possible to catalyse science-based policies and behavioural change, and work back from there to new definitions of ‘growth’ and ‘profit’.
Moreover, the situation is not static. In a race against time, every moment of inaction, or even of insufficient action, is effectively a costly delay. We are fast approaching the time when ‘more sustainable than before’ is ‘not sustainable at all’.
Duncan Austin has had a 25-year career as a sustainability researcher and investor. He writes as an independent. This article is an excerpt from a longer essay, Win-Win in the Time of Net Zero: A Tale of Two Sustainabilities, available here. Thanks to Matt Tweed for illustrations.
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