The Big Sustainability Wave

Why should we be optimistic that those in positions of power will move history in the direction of environmental and social stewardship and good governance?

To answer the question we should first look at who has the power. I would list power centers roughly in this order:
Finance
Business
The People
Government
(Of course in certain cases one might want to include the Military, or the Mafia, or Religious Institutions, but for the sake of simplicity let's stick with these four.)

The climate discussions in Rio in 2012 made it clear that it was business, more than government, that had the will, the power and the money to lead change. Perhaps this has to do with the fact that Business is widely seen as the major culprit in this area; perhaps it has to do with a new generation of enlightened business leaders.

The UN Global Compact has a useful list of "eight principal society-based and market-based  drivers":

1. Civil Society Expectations
2. Natural Resource Scarcity
3. Government Policies
4. Enlightened Business Leaders
5. Requirements from Business Partners
6. Customer Preferences and Expectations
7. Employee Demands/Motivations
8. Investor Requests

This last one is critical. I put Finance in the number one position in my power hierarchy, and it is hard to imagine much of a shift in Business if Finance (which over the centuries has moved from a role of support to Business to a role of ownership of Business) dictates a race to quarterly profits above all else. Finance, as we have seen, is too big to fail.

But even Finance is shifting. The UN - supported Principles for Responsible Investment (PRI) initiative now has 1260 signatories representing 45 trillion dollars of assets under management, including Goldman Sachs Asset Management, JP Morgan Asset Management and Morgan Stanley Investment Management.

In financial circles today you hear phrases like "triple bottom line" (financial, social and environmental results, not just financial) or "the three Ps" (which stands for people, planet and profit). CalPERS, which manages retirement portfolios for 1.6 million California public sector pensioners, says in its "Investment Beliefs" statement "long-term value creation requires effective management of three forms of capital: financial, physical and human". It goes on to say they may engage investee companies on their governance and sustainability, looking specifically at governance, risk management, human capital and environmental practices.

Is there cause for optimism? Certainly, a wave has begun that threatens contagion, perhaps very slowly, perhaps not, throughout the investor community and down through business and throughout global supply chains.

Now is the time to ensure that wave is an aligned wave based on common principles, not a fragmented collection of initiatives at odds with each other and lacking momentum.