Numerous private companies have become genuine partners and transformers in driving sustainable development and systems change, after 50 years of either obstructing progress or settling for “making things less bad.” A brief from IISD’s ‘Still Only One Earth’ series provides policy recommendations for encouraging other businesses to join them.

The brief titled, ‘The Evolution of Private Sector Action in Sustainable Development,’ written by Dina Hestad, explains that “unsustainability remains the norm” among private companies, despite notable sustainability pledges by large corporations in 2020. While considered the engine of economic growth for society, the private sector has “wreaked havoc on the ecological systems that support human life” and exacerbated social inequality.

Legally requiring a company’s board to balance purpose and profit can help transform our unsustainable systems.

Since the 1972 Stockholm Conference on the Human Environment, private actors have engaged in sustainability in three main ways. Some have actively blocked action on environmental and social issues, including by lobbying against environmental regulations and engaging in climate misinformation campaigns, earning the nickname “merchants of doubt.”

A second group of businesses has reached different conclusions about the value of the planet: good environmental stewardship positively affects consumer attitudes, and a healthy environment supports long-term profits. Efforts by companies with this perspective focus on reducing the negative environmental and social impacts of their operations, and generating green and sustainable growth, even pursuing something that Hestad explains may be impossible: completely decoupling economic growth from greenhouse gas (GHG) emissions. Initiatives relate to innovative financing for development, impact investment, public-private partnerships, and addressing environmental, social, and governance (ESG) risks, such as by reducing carbon emissions, decreasing deforestation, eliminating child labor, lowering social inequality, or limiting plastic pollution, “all while continuing to make a profit and grow the economy,” in the belief that growth itself can help solve the sustainability problem. 

The third path private entities have taken is to work to transform the systems that have led to climate change and unsustainability, particularly growth-based economic models. From this perspective, it is quite possible that greening current systems just “prolongs the inevitable decline of the natural and social systems that support human life on this planet.” Instead, the goal must be to transform the economic system towards one that is regenerative, equitable, and operates within planetary boundaries. 

Hestad introduces a term for ventures created with this goal: Sustainability-Oriented Hybrid Organizations (SOHOs). In these initiatives, money is not the goal but the means to increase the health of people and planet. Examples include a Panamanian-American forestry company and a housing cooperative in Spain. Certification schemes have emerged to set rules for SOHOs, with criteria such as legally requiring the board to “balance purpose and profit.”

Not every corporation needs to fit this model, Hestad writes. But in order for humanity to achieve the SDGs and live within planetary boundaries, “the economic system needs to shift away from profit at any cost, many corporations need to work for regenerative equity, and the remainder cannot knowingly or unknowingly continue to cause harm.”

The brief concludes with recommendations for supporting transformative business engagement, including to experiment with constructive engagement of members of the business community that have actively worked against progress, recognize the limits of “profit-driven” greening efforts, and facilitate the emergence of SOHOs, such as legal mechanisms that allow companies to balance profit and purpose instead of being required to pursue returns for shareholders. 

The ‘Still Only One Earth’ series is being published by the International Institute for Sustainable Development (IISD) in the lead-up to the 50th anniversary of the Stockholm Conference on the Human Environment. The briefs assess successes and shortcomings of five decades of global environmental policy, focusing on biodiversity, wildlife trade, sustainable energy, finance and technology, climate change, plastic pollution, poverty eradication, and measurement approaches, among other issues. [Still Only One Earth policy brief series] [Publication: The Evolution of Private Sector Action in Sustainable Development]