New Musings on Business Sustainability from a Guru in the Field: Part 2

Part 1 of this blog series introduced Andy Hoffman's article in the Stanford Social Innovation Review, The Next Phase of Business Sustainability. Impact investors who consider environmental, social, and governance (ESG) factors in their investment criteria were a large focus of the article. The sector reached $8.72 trillion of professionally managed assets in the US in 2016, or one-fifth of all investment under professional management. It’s not just the hippies and religious-based moral funds that are taking an ESG approach these days. Some of the largest investment firms—like BlackRock, Vanguard, and State Street—cast votes in opposition to ExxonMobil management and called for the company to disclose its climate change impacts. At the behest of shareholders, Duke Energy announced that it would be releasing a report detailing the utility's efforts to mitigate climate change risks and plan future generation investments.

Recent cases highlight this movement, such as investors and corporations shunning gun-related companies after the school shooting incident in Parkland, Florida. Delta Airlines decided to cancel fare discounts for National Rifle Association (NRA) members, which led to the state of Georgia threatening to nullify a sales tax exemption for the company. This chain of events underscores the tenuous relationship between business and government in promoting social and political agendas.

How Can We Make a Difference?

The article included a spirited discussion on the benefits of capitalism to address sustainability. While some contend that other economic systems are better suited for such a pursuit, Hoffman disagrees. He believes that capitalism can adjust and change based on the needs of the people it serves. He likes to challenge his students to see who considers themselves to be “bright green” and see the free market as the solution, or “dark green” and view the free market as the enemy. Both perspectives are valuable in order to start from the current state of the market and to create new market models as needed.

There is some discussion of energy, my bailiwick. It is not enough to stick some wind turbines and solar panels on the ground and call that sustainable. We must incorporate the whole grid, encompassing generation, transmission, distribution, use, and mobility. There are examples of this integration in things like distributed energy resources, demand-side management, smart appliances, and smart meters. At the same time, jobs in the clean energy sector have exceeded those in oil drilling. People want to work in a field where they can have a say in the direction the world is moving before they retire or die.

Mobility Changes Lead the Way

EVs have the potential to change the grid, leveling the electricity demand curve by charging at night and providing storage capacity during the day for intermittent energy sources like wind and solar. Research is under way to allow consumers to rent their batteries to utilities while their car is parked. Although the future of Tesla is unclear at this point, it undoubtedly proved that major auto manufacturers were wrong about the viability of EVs and changed the sector fundamentally. In addition, automated cars may result in fewer cars on the road (at least in urban centers) as people purchase mobility services rather than own cars. Fewer cars on the road means repurposing unneeded roads, parking lots, garages, and service stations. However, there have been recent studies that have shown ride-hailing services like Uber and Lyft actually increase traffic in some cases if people use them rather than public transit, walking, or biking.

In the final blog in this series, I examine the ways that companies operationalize sustainability and how the current political climate affects its progress.