Happy new year!
This post may look like finger pointing… but I’m not, I promise. Its intended commentary is on the system as a whole, and not any single firm or individual. With that disclaimer out of the way…
I’m gonna talk about Compliance
Why Compliance in a post-run prose about Greenwashing? I would argue that Greenwashing is defined by Compliance. The ability for a company to say they’re green is ultimately rooted in Certificates, Marks, pats on the back by an independent third party.
So when people complain about Greenwashing, do they blame the company? Or blame the ones who say they’re green? Or the governments for “not doing enough”?
The Rise…and Rise of the Compliance Industry
Having seen headlines evolve over the year around sustainability, the sustainability story over the last decade unfolded something like this:
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The tension of a fringe idea, with mainstream governments and financial turning their nose up on in. Activism, hippies, outsiders they’re called until….
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The eventual acceptance by the government. Noting here, that it is democratic consequence that is often less about the actual problem, and more about losing votes. NB: Not-really-democratic China is an exception, though I would argue they leapt ahead to the point below (money to be made) while having a more acute appreciation of the TRUE societal impact by being the worlds manufacturing workshop.
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The eventual acceptance by mainstream industry - acknowledging theres a competitive differentiator to achieve, and money to be made.
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With acceptance and regulation come compliance and standards, a way for said companies to position themselves as leaders in the area being regulated. While noble in intent and commendable in effort - it is the perpetual story of human nature to eventually settle into a game of cat and mouse - compliance and it’s checkboxes are playing grounds for human ingenuity to exploit loopholes.
Compliance is flawed by design
Auditing has been around for a long time, especially with concern around the financial sector (accounting, etc); ultimately serving to protect investors, employees and society as a whole. But the ongoing, albeit possibly lower, financial fraud means that the cat will never catch all the mice, and that the system will always be flawed.
Cryptocurrency is a similar example of immense fraud and demonstration of such human nature, though in this case, the Cat was still in its infancy, and the mouse was charged with an ideology that by design was anti-regulation and shot the cat before it could be born.
But what happens when the loopholes aren’t about a guy getting richer, but the world getting sicker? The stakes are higher this time around.
So my cynical truism: Fringe ideas are no longer fringe when it becomes compliance; compliance will always be exploited.
I have written extensively about my general feelings about the shift to intangibility and the downsides that come with it. And indeed, in an industry designed to fight against human nature, there is a considerable loss of meaning to mourn.
Risks of Compliance and Greenwashing
This would hardly be a novel idea, but with an immature systems and highly complex problems, Compliance can serve to enable and protect incumbent companies - allows for Creativity without the destruction (referring to creative destruction).
For example, companies with inherently non-green business models writing lengthy sustainability report, but completely ignore the fact that they are a fast fashion company. Best effort to be green? sure. Right thing for the world? questionable.
Other models, such as carbon trading also help ameliorate the woes of major emitters, but also offers another channel to game.
Layers of industries build to play and intensify the “game”. Automation of ESG reporting; complicated-simple platforms for carbon tracking; all serve to address and entrench complaince standards that may not truly tackle the root cause of it all.
Suboptimal, but nonetheless a best effort.
It must be said - that I am not completely critiquing such industries - I appreciate that transitions and disruption takes time, and the overnight destruction of companies and business is, in my view, never a socially responsible solution. Especially so in the absence of the ability to offer alternative real world products to society (e.g. oil and gas). Moreover…
Compliance is a Natural Consequence
In truth, I think the transition from problem, regulation to compliance, and compliance to action by companies is a natural stage in the progression of the world. I also believe that without such compliance in place, the world we be far worse-off.
I think, in a very macro-long term view, that auditing and compliance helps improve the quality of data collected by government. For example, I would imagine that the quality of economic data in the world’s largest economies today are far more accurate and honest than they were in the wild wild west (or east). Financial, liquidity, employment indicators influence critical decisions that can dictate the pace of growth or recession - with real world implications.
And I would further imagine that better data, leads to better policies…right…right? :|
Ultimately, protecting society from short term frauds with the trade-off of a weakened ability for creative destruction is a balance…as many things are.
On Green Jobs for Greenwashed industries.
I have merely lukewarm feelings when I see announcements on “green job” creation. Finance, consulting, and services drive the majority of green jobs (a natural consequence in the city I live ) - and I have expressed my views on the precision of the impact they be trying to achieve. Right direction, for sure; but the devils lies in the execution.
In reality, the changemakers are field technicians, working in the heat of the sun or the bitter winds offshore; Power plant operators running 24 hour shifts; the scientists, pursuing the intellectual unknowns of technology (though paper-publishing machine of academia is not without its flaws); biocrop farmers toiling in the fields - perhaps knowingly or unknowingly contributing to his prayers for fields floodless, droughts milder.
Overcoming incumbent physical technology for change in the material world is an uphill battle. Bringing ecosystems, partners together restructure the whole system to solve the worlds largest material problems demands the best talent. Yet, it is the intangible sectors that exhibit the best financial attractiveness in the war for talent.
I do not comment of fairness of it all; tis’ but the system we live in, and my late night commentary on it.