But Are We Actually “Sustainable”?

Author: Heidi Barends, Head: Sustainable Finance, Absa Corporate and Investment Banking (CIB)

‘We do not inherit the Earth from our ancestors, we borrow it from our children’ – Indian Proverb

While Environmental, Social and Governance (ESG) discussions are taking their rightful place and are now front-of-mind for policy makers, governments and executives in major corporates, there are still big questions which need to be answered when it comes to how sustainability is being defined in regulation, strategy and sustainable fund raising. Clarifying this is going to be key to ensure that we responsibly borrow this world from our children. 

The ESG and sustainability agenda has made remarkable strides in recent years. Climate change is a key discussion point, the UN Sustainable Development Goals (SDGs) feature in most integrated reports, and Sustainability Executives have become common in many large corporates and multinationals. Amidst these strides, governments and regulators are also introducing enhanced ESG regulation globally and locally. The question, however, still remains: will these changes be enough for future generations? 

The current accepted definition of Sustainability is where we are potentially falling short. 

One challenge is that sustainability is reported in a piece-meal, siloed manner. In many industries, a product is viewed as sustainable, when the ‘in-use’ portion of the product emits less carbon or uses less water, with little consideration for construction, fabrication, manufacturing and ultimately management of the product’s end of life. Manufacturing and disposal often have the biggest environmental and social impact. For example, while battery electric vehicles (EVs) themselves do not emit carbon in-use, the sustainable recycling of batteries has not been considered and disposed batteries can cause soil and water pollution that has a knock-on effect to surrounding communities.

This issue is perfectly highlighted in current trends in the renewable energy sector. Take for example wind turbines which provide renewable energy. The responsible recycling of wind blades once they reach the end of their useful lives has widely not been considered and could lead to a land fill challenge in years to come. This is the current view of sustainability, which does not take a “Cradle-to-Grave” approach to the use of our valuable resources. 

A non-Cradle-to-Grave approach to sustainability creates further inconsistencies. 

For examples, two retailers with vastly different approaches to shopping bags can both tout their sustainability credentials. The first may introduce reusable shopping bags that, while reducing single-use-plastic, are non-recyclable as they are made of composite materials. The other may use plastic bags, which use less resources in manufacturing and are at least theoretically recyclable. Regulations currently allow both parties to celebrate their sustainable packaging, because a universal Cradle-to-Grave approach is not being applied.  

Climate change has brought emissions into the foreground of the sustainability conversation. The other elements of water, soil health, biodiversity, education, healthcare, access to other essential services, and human rights, to mention just a few, are discounted or forgotten, providing one-sided solutions that reduce emissions but may have vast unintended consequences in the future. 

Beyond the Cradle-to-Grave approach, Micheal Braungart and William McDonough introduced the Cradle-to-Cradle approach, which provides solutions and approaches to view sustainability even more holistically. 

The value of Cradle-to-Cradle resides in the novelty of ideas and action that it proposes:

• To ban the belief that human industry has to damage the natural world, given a system where production is based on the expropriation of natural resources that are transformed through an industrial process.
• To study nature and use it as a model for creating things: “A tree produces thousands of blossoms in order to create another tree, yet we do not consider its abundance wasteful but safe, beautiful, and highly effective; hence, “waste equals food” is the first principle the book sets forth.”

The approach recognises that waste is simply a failure of design and encourages the creation of closed-loop systems that allow materials to be continuously up-cycled and reused. By incorporating this approach, the environmental and social impact of the manufacturing and disposal of products can be reduced, ultimately creating a more sustainable future for our children.

These ideas and models must not only be integrated into the next phase of regulation, but also in the development of Sustainable Funding Models. While globally developed taxonomies have introduced the concept of ‘doing no significant harm’, the next iteration must go further to encourage and eventually mandate, at a minimum, a Cradle-to-Grave definition of sustainability, and eventually a Cradle-to-Cradle approach. This will then feed into sustainable funding models provided by financial institutions. 

As a leading developer of ESG funding solutions on the African continent, Absa is cognisant of the fact that it is not only important to be a responsible lender, but also a sustainable one. We recognise that sustainability is continually evolving and have worked on a number of exciting projects over the last 2 years. As the market matures, we look forward to pioneering new solutions for our clients in this space.