11/02/2015 8:04 AM IST | Updated 15/07/2016 8:24 AM IST

Economics Of Environmentalism: Moving Beyond Tick-Box Compliance

Here is a brutal reality. The only thing currently sustainable about the normative paradigm of sustainability is the "green" colour of cash. This is not at all that bad because monetary valuations are usually taken more seriously, as my environmental policy professor at graduate school once explained with some disdain. The philosophical underpinning of sustainability is something known as "inter-generational equity" according to the iconic Brundtland Report, published in 1987 (a huge conversation starter!). The short-termism of financial markets and global capitalism does not render sustainability sustainable.

Sustainability ultimately is about better communities and livability; the clean air that we breathe at the end of the day. Sustainability as a concept is a triple helix, with Ecology, Economy and Society as its three strands. Sustainability has transformed from its normative origins into a platform for communicating the corporate brand. Activist investors do ask for the social return on investment on their impact bonds but these do-gooders are a trickle in the avalanche of asset classes that global capital changes hands in everyday. Sustainability reports are prepared as per the Global Reporting Initiative (GRI) framework to demonstrate sustainability performance to ecologically aware Gen Y retail investors. It is not for the displaced community in Lanjigarh, Odisha but for the analysts at Citi. The pull is from the masters of the market.

The latest flavour of the season in sustainability and corporate citizenship circles is the circular economy and sharing economy. Good old human sharing values and cradle-to-cradle thinking synced to create the latest cool intellectual fad.

The majority of sustainability-related investments by private sector companies are designed to meet the local environmental, health and safety and social sector legislative requirements of the land. Sometimes, even voluntary best practice is beyond the ambit of the C Suite Level executive as the Randian view of shareholder value capture dominates. Green-field industrial projects often require International Financial Corporation (IFC) funding or some form of institutional lender support such as the Japan International Cooperation Agency (JICA) or any Exim Bank. These financial institutions need the project proponent to adhere to Equator Principles and IFC Performance Standards throughout the project lifecycle to address environmental and social concerns. The decision-making ability for a change is with the environmental and social expert panel at IFC offices at Delhi and DC rather than the CFO. Environment, health, safety and security (EHSS) standards have to move beyond the tick-box due-diligence check-list to a long-term governance-led mechanism. The finance teams have to understand the nuances of the economics of environmentalism for them to be truly invested in the process.

Sustainability can only take root if this ethical paradigm can be understood by the CFO over a casual water-cooler chat. It is time for sustainability to move beyond greenwashing and be a profit centre strategic business unit (SBU) from a cost centre. Locking value from sustainability initiatives can take place if triple bottom-line thinking could dominate the thinking in strategic planning of small & medium enterprises (SMEs).