Fostering a Fair Debate on Sustainability

In Conversation with Steven Tebbe.

Steven Tebbe is a global thought-leader on environmental, security, and transportation issues and currently the Chief Executive Officer of the Global Footprint Network, a leading science-backed NGO. Over the past 15 years, Steven led the development of disclosure standards to enhance corporations’ transparency and responsibility for sustainable business practices, notably as CEO of CDP Europe, as well as Senior Advisor in the EU standard-setting process EFRAG. Prior to those roles, Steven has held various senior management positions at Mercedes-Benz, Airbus, and the Berkshire Hathaway subsidiary NetJets.

Tusker Club – Your experience making the case for sustainability has led you to work with governments, the private sector, and now civil society. What do you take away from this unique exposure?

Steven Tebbe – In many instances, I was fortunate to be in the right place at the right time. I led CDP in Europe when market-based mechanisms helped trigger policy responses. As a leading non-financial information disclosure platform, CDP was instrumental in facilitating support for the Paris Agreement at COP21 and paved the way for game-changing legislation at the EU level.

Over the past 10 years, sustainability has become a mainstream conversation, but also a more crowded space, where leaders need to focus on what will empower them to lead change. As a science-backed NGO, the Global Footprint Network’s (GFN) mission is to educate and inform, providing a common, factual and objective platform to facilitate strategic discussions on sustainability.

I joined GFN over a year ago, but its credibility is decades in the making, relying on a unique model developed by world-class scientists, regularly peer-reviewed to ensure its relevance, and assessing over 10 000 data points per country.  

TC – What differences do you see in the way different sectors address sustainability governance?  

ST – Let me start by saying that organisations are led by people. People with integrity are eager to join the conversation on sustainability. The challenge is they have different incentives and ‘optimise over different time horizons’ if you will.  

Without being oversimplistic, politicians seek re-election, hoping to lead change once in office. But job creation trumps environmental preservation in voters’ interests. Investors seek financial returns. So do CEOs, who need to satisfy shareholders during their tenure, which is, on average, shorter than before. Even NGOs factor in fundraising needs, focusing primarily on ‘stories that sell’ beyond evidence-based advocacy. Except for rare cases, such as non-listed family businesses, few organisations have clear incentives to focus on the long term. More abstractly, the inability to consider externalities in decision-making is capitalism’s historical failure.

The inability to consider externalities in decision-making is capitalism’s historical failure.

Hence, reporting standards play a key role in rebalancing decisions by providing non-financial information to investors and stakeholders who can reallocate (financial and human) assets to virtuous companies (the whole concept behind the ‘triple bottom line’). Implications are also political, as prioritising solely financial interests for most organisations may compromise their representation and legitimacy across various stakeholder groups. This, in turn, may eventually hinder their license to operate. 

TC – The underlying theory of change that information on sustainability risks and opportunities will create a virtuous cycle transforming the ecosystem relies on strong assumptions. Is it enough?  

ST – ESG is also a matter of ethical choices. This is where policy frameworks come into play. We don’t need them to regulate the whole system, but to set the rules of the game. Institutional approaches are conservative by design, but they can help repair the historical failure of not accounting for the externalities that companies create with their once blind-sided blessing.

For the longest time, we have ruled and behaved as if natural resources were infinite, falling prey to some sort of collective cognitive bias. It is now clear that we overconsume resources, which GFN conveys by identifying ‘Earth Overshoot Day’, which took place on August 2 this year, marking the date when humanity had exhausted nature’s budget for 2023.  

It is also the reason why I think we need to reframe ESG, oftentimes represented as three overlapping circles, by restructuring it into a pyramid with ‘environment’ at the foundation, ‘social’ in the middle tier, and ‘governance’ at the top. Accounting for environmental constraints is an absolute must for effective optimisation. This extends beyond considerations for social and governance issues, which are more obviously dependent on the social contracts of societies or organisations.

TC – How is this approach perceived? 

ST – GFN adopts a principled approach, which doesn’t start with a values-based or moralistic discussion and is therefore more effective. It is reflected in our straightforward definition of sustainability as (i) consuming fewer natural resources than what can be regenerated, and (ii) polluting less than what can be assimilated. We can all agree on that, regardless of the social contract that we promote.

When it comes to sustainable pathways, things get trickier. By GFN’s definition of sustainability, we can either limit population, reduce consumption, or foster technological innovation. Besides being politically incorrect, the first lever challenges the social contract of developed countries, which relies on a pyramid to fund pensions for ageing populations. The second lever is often claimed by advocates who risk alienating others by pitting value systems against each other. Innovation may appear as the least painful compromise, but it also shies away from uncomfortable discussions on inequalities within and between countries. Climate change negotiations provide examples aplenty.  

Therefore, the way forward is dialogue. Fairer and principled dialogue, reframing environmental stakes to help leaders align diverging interests. The role of civil society is precisely to facilitate such dialogue by providing objective measures to ground it and forums to convene key stakeholders. I believe that if challenges are properly framed, considering contextual incentives and constraints, leaders will know what to do to be more sustainable.

If challenges are properly framed, leaders will know what to do to be more sustainable.

Let me give an example: countries can look at sustainable environment management as a security issue. Wars, migrations, trade, or supply chain integrity are directly linked to environmental events, such as floods, droughts, or any natural disaster that disturbs livelihoods. Leveraging our experience with the Earth Overshoot Day, we at GFN have designed the ‘Country Deficit Day’, which measures how long a country can survive without imports. To us, the link with natural resources management is obvious. But it is framed in a way that no leader can disregard after COVID or Ukraine.

TC – What advice would you give CEOs who wish to ramp up their sustainability governance efforts?  

ST – My advice to CEOs, or any leader really, would be to understand and document how much their activity depends on natural resources and how it affects natural ecosystems in return. This is the thinking behind ‘double materiality’, fostered by ground-breaking EU regulations.

Looking at financial materiality only, a risk-based view that considers the outside-in impact of externalities on one’s activities, is like driving a car without ever looking back. Looking at impact materiality, which accounts for the impact that organisations have on their ecosystem, will help correct the historical market-failure that disregarded externalities in value creation.

In other words, to drive safe and far, leaders need to look forward but keep an eye on the rear-view mirror.

Interview by Baptiste Raymond, 12/2023.