Rebuilding Companies to Meet the Needs of the Planet

I have spent my career working in the fashion industry. Along the way, I began to understand how the fashion industry is driving climate change. Recently, I learned from the United Nations that the industry accounts for 10% of global carbon dioxide emissions and is responsible for 5% of the plastic fiber produced globally, which is polluting the oceans. In addition, the fashion industry is dumping toxic dyes into our rivers and streams and is responsible for the tons of fast clothing that are overfilling landfills. The industry consumes around 4% of the Earth’s freshwater and produces 20% of total wastewater worldwide.

Unfortunately, in addition to generating environmental damage, the fashion industry is also implicated in several types of human rights issues. Many of the workers who make our clothes are considered ‘modern slaves’ as they do not earn a living wage and do not have safe or healthy working conditions. The problem is fed by the growth of cheap, fast fashion, which entices people to purchase much more than they need because of the low prices and continuous influx of merchandise. As I became more conscious of the impact of the fashion industry on the environment, my family and I made many changes in our personal lives to reduce our own impact.

I know individuals must do their part, but I have become achingly aware that we urgently need companies to do the same. Given the scale of climate change and all the recent climate catastrophes, the priority must be to safeguard people and the planet, which involves systematic changes within companies. Companies can and must play a crucial role in driving change and positively shaping our future.    

According to PricewaterhouseCoopers’ 26th Annual Global CEO Survey in 2023, which included 4,410 CEOs from 105 countries, 40% of global CEOs think their companies will not be economically viable in 10 years if things do not change and have realized they cannot continue with ‘business as usual.’ A 2023 IBM study of 3,000 CEOs from 30 countries, was distressing, unfortunate, and contradictory in that it concluded that environmental sustainability is now CEOs’ 5th priority (39%) vs. it being the 3rd priority (48%) in 2022. These statistics are evidence of how severely CEOs have lost focus on sustainability amidst an escalating existential crisis.

We have a lot of work to do to ensure more responsible, accountable, and sustainable operations in companies. Below are some guidelines to help.

Embrace Corporate Sustainability 

Sustainability needs to be embedded in the company culture. Companies need to minimize waste generation and foster responsible consumption by integrating sustainability in supply chains, production processes, and product design. Sustainable practices, which minimize environmental impact and promote efficient use of resources, need to be identified and adopted. By embracing renewable energy and implementing circular economy business models, companies can contribute proactively to conserving natural resources and mitigating climate change.

CEOs and executive teams must undergo a mind-shift and truly believe in sustainability to “walk the talk” and communicate with their stakeholders. If they do not, the stakeholders, and maybe more importantly, the employees, will not embrace the changes, so the changes will not become embedded. 

One way to ensure companies take sustainability seriously is to link all employees’ KPIs (key performance indicators) and bonuses to sustainability goals, including those of CEOs and the leadership team. In the IBM study, 50% of CEOs said they have compensation linked to a sustainability goal, which is a considerable increase compared to 15% in 2022, but inadequate to the scale of the problems compounding due to the climate crisis.

Foster Stakeholder Engagement

Rebuilding companies requires a fundamental shift from a shareholder-centric model to a stakeholder-centric model. This means that companies must address all stakeholders’ interests and actively collaborate with customers, employees, local communities, suppliers, investors, and the environment. To do so, there must be an open dialogue, an openness to change, and inclusive decision-making processes. Through these mechanisms, companies can build trust and loyalty and attract and retain employees and consumers, making the company more resilient and sustainable.

Embrace Ethical Leadership and Sustainable Corporate Governance 

Leaders in all companies should have a solid commitment to integrity, transparency, accountability, and responsible decision-making. Companies should ensure that their corporate values include respect, fairness, social justice, and environmental stewardship. 

Sustainable Corporate Governance is the company’s practices, processes, and responsibilities, which consider their activities’ social, environmental, and economic impacts. 

These include the diversity of the Board of Directors and their commitment to sustainability and the evaluation of potential risks associated with environmental, social, or governance factors and strategies to mitigate them. Additionally, clear and comprehensive sustainability reporting to all stakeholders should take place.

Transparent Measures and Reporting

For stakeholders to know how effectively a company is ‘rebuilding,’ they must measure and report on their sustainability KPIs and future goals with transparency and consistency. All companies should measure their carbon footprint and reduce greenhouse gas emissions. Establishing solid environmental, social, and governance (ESG) KPIs allows companies to track their progress, identify areas for improvement, and be held accountable in the future for achieving their goals.

Invest in Research and Innovation

For companies to be resilient, they must research, develop, and invest in new sustainable technologies, processes, and business models. Embracing a circular economy model is essential as we must protect our natural resources and eliminate waste. Most companies will not be able to do this on their own. Collaboration with research institutions, universities, competitive companies, and start-ups will foster the cross-pollination of ideas. Companies need to support open-source initiatives so that their learnings, knowledge, and breakthroughs benefit society.

In conclusion, rebuilding companies will require a systematic transformation and a significant mind-shift for leaders so that they integrate sustainability, stakeholder engagement, ethical leadership, research and innovation, and transparent reporting. In adopting new strategies, companies can and will be the catalysts for positive change. They will contribute to preserving our environment, promoting social equality, and creating a sustainable future for us all while attracting investors and making a profit. 

I now know many fashion companies have started their sustainability journey. I hope others are inspired to join them in meeting the needs of people and the planet.

Octavia Overholser is a consultant in Sustainable Business Transformation & Resilience and a member of World Sensorium / Conservancy’s board of advisors.

Sources

2023 Chief Executive Officer Study: Decision-making in the age of AI

26th Annual Global CEO Survey | PwC

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