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  • Scoop Market Mysteries 5-1-22

Scoop Market Mysteries 5-1-22

🔎 Market Mysteries: Why does it feel like corporate sustainability is only about emissions?

 Market Mysteries of the week

  Why does it feel like corporate sustainability is only about emissions?

Answer:

Corporations are focusing on other aspects of sustainability, like waste reduction, but

those other areas are much harder to measure, track, and address

than reducing their emissions.

Why is it so hard to measure sustainability?

It’s hard to measure what we haven’t yet defined.

Sustainability means different things to different people. Is it about carbon emissions and plastic waste, or does it include social impact issues as well? We’ve come to understand that all of these issues intersect, so

the definition of sustainability has broadened

. The United Nations has outlined seventeen

for participating countries to address, ranging from affordable clean energy to education access and gender equality. These don’t align as easily with business initiatives across industries, so the financial world has created other frameworks for evaluating holistic impacts and risks.

Investors have begun relying heavily on Environmental, Social, and Governance (

) ratings from institutions like MSCI or Sustainalytics. But as we’ve covered,

since the metrics are intended to assess non-financial risks to the company’s profits, not the company’s impact on the planet and society.

One of the main reasons ESG ratings lack reliability is because they’re based on inconsistent data from the companies. As we’ve highlighted before,

there’s little regulation or standardization around measuring or reporting sustainability metrics

like scope emissions, workforce diversity, or wage inequality. To further complicate the process, most companies rely on anecdotal and self-reported information to draw conclusions about their progress. Once we have a system of trust and accountability surrounding sustainability, then companies can demonstrate their actions and progress to better protect the planet.

Why do we hear so much about net-zero carbon emissions?

While not at all easy,

reducing emissions is one of the most straightforward components of sustainability

to measure, track, and solve at the moment. Regulators have already outlined

.

Once accounted for,

carbon emissions also have a relatively more straightforward and broadly-applicable set of solutions for reduction.

While not yet simple in execution,

transitioning to renewable energy sources is a clear long-term solution

most companies can implement.

Companies can also just throw money at the problem by purchasing carbon credits.

is a significant component of carbon-neutral strategies for companies like Microsoft, Amazon, L’Oreal, and others. The purchase of these financial instruments can essentially function as an investment in an environmentally-positive project like planting trees or carbon sequestration, which counteracts or offsets the companies’ emissions. Packaging up carbon-reduction investment into easily-purchasable instruments makes it easier for companies to address their emissions.

Companies like Salesforce are working to make other sustainable initiatives as accessible as carbon credits, introducing

. Salesforce is working with several global partners to catalog, protect, and restore coastal areas that are super effective at capturing carbon while also preserving biodiversity. Corporate research partnerships and R&D are paving the way to combat the global threat of climate change through cooperation.

Are any companies addressing environmental issues beyond emissions reduction?

Waste reduction is another substantial environmental concern, and

many companies are creating a closed loop for their products to ensure their items stay out of landfills.

Patagonia, Lululemon, and Ikea have created buy-back programs to extend the usable life of their products.

. Customers can sell back items for store credit, and then the companies resell the second-hand items, creating a whole new market for used or imperfect goods. This practice allows companies to sell factory seconds or display items to the secondhand market, ensuring every product gets used even if it can’t be sold in retail stores.

Some companies even go as far as taking back broken or damaged items that cannot be recycled.

Best Buy recently announced the extension of its

. This will help keep toxins out of the environment. About 25% of precious metals from e-waste are recovered to make new products. Patagonia

. Americans throw away 13 million tons of clothing each year, and

. These

companies hope the long-term benefits outweigh the additional costs

of taking responsibility for sustainably reusing or disposing of their products.

Is there anything I can do?

Get familiar with the companies you shop from and invest in.

Backing companies that are directly combatting the impact of their products and business practices on the planet will pressure others to do the same. Reaching our goals as a global community will require partnerships between people, companies, and their governments in this era of reckoning with the climate crisis.

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