Sustainability may be the new black, but there’s much more to it than that.

Until recently, Environmental, Social and Governance (ESG), also known as “sustainability” reporting, was primarily something most companies did to bolster their reputations. However, this dynamic has been changing rapidly since the investment community tapped into the value of ESG data with record inflows to ESG investment funds in 2020. Major asset managers such as BlackRock are using their ownership stake to pressure companies to improve their ESG disclosures. It’s no longer about good marketing—it’s smart business that can quite literally change the world.

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According to a survey from EY and the Institute of International Finance (IIF), over 90% of bank chief risk officers (CROs) say climate change is the top emerging risk over the next five years, up from 17% just 18 months ago. So, it’s no surprise that barely 37% of CROs believed that this risk had yet captured the attention of their board.  Few board directors understand climate change or are prepared to manage climate risk for their companies.

This gap between the level of risk and level of attention is being played out across companies in all sectors.  And this gap has implications.  Witness the case of ExxonMobil. After years of slow playing climate risk, the board lost a critical vote at the annual general meeting on May 26 when BlackRock and other institutional investors sided with an activist shareholder resolution.  The result added three climate activists to their board.

Other companies are racing to get ahead of this trend.  As of this writing, 20% of the world’s largest companies have set “net zero” targets.  Net zero are emissions goals whereby the greenhouse gas emissions entering the atmosphere are balanced by the emissions removed from atmosphere, thus netting zero.   These emissions goals carry a deadline – some are ten years out; others are twenty years or longer.

No matter how the goals are formatted, it will be very hard to make the math work out.  Pundits are already predicting the coming backlash to these ubiquitous claims and a new term is entering the lexicon – “goalwashing.” Are these goals a marketing play or real sustainability commitments?

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Battling climate change is serious business. Investors and leading CEOs are calling for stronger climate action.  Governments are responding with new mandates and new disclosure standards are being developed.  All these actions will reach a peak this November at the COP26 meeting in Glasgow, Scotland.  This is the conference of the countries that have signed the Paris Climate Accord, which includes all countries now that the US rejoined the agreement in January.

The spotlight on climate will shine a light on company claims and their actions to back them up.  And if they fall short of their net zero goals the backlash from consumers and shareholders will erase value from their balance sheet.

But it does not have to be this way. At its core, carbon is a data problem.  Every transaction that flows through a company has a carbon footprint.  In other words, there are emission factors for everything a company does from corporate travel to supply chain purchasing.  With intelligent data and software, companies can account for their carbon footprint and make strategic decisions to achieve their net zero commitments — they can treat carbon accounting like financial accounting. And the process usually returns significant value in risk/cost reduction and new business opportunities.

Marketing teams can and do play a critical role in advancing sustainability efforts. Wise companies fuel their marketing claims with deep collaboration from sustainability, IT and finance tied together with top-level corporate strategy. The climate crisis is too important to greenwash or goalwash. Marketing can help lead the way by driving for ambitious goals and ensuring that the data is there to prove it.

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