Set ambitious but realistic environmental goals
In the years since the 2021 round of global climate negotiations, more than 2,600 companies have set aggressive targets to reduce carbon emissions. However, setting appropriately ambitious sustainability goals in an uncertain business landscape is an exceedingly difficult task. Meanwhile, activist stakeholders are watching company performance on these issues closely, demanding corporate transparency and faulting companies that fail to follow through on their pledges. In an article for MIT Sloan Management Review, Kate Isaacs, Jason Jay, Jeremy Gregory, and Elsa Olivetti, the authors share the question at the heart of their research: how should this tension be managed, both intentionally and productively, to drive tangible progress and increase stakeholder trust over time? They define a series of critical steps to managing this delicate balance:
1. Engage stakeholders to determine the highest-priority areas for sustainability goals.
2. Develop an aspirational vision of success that is informed by the science of sustainability and stakeholder expectations.
3. Set midlevel goals to gain early traction on the high-level vision.
4. Build momentum with willing stakeholders and expand the goal horizon toward the vision.
5. Scale efforts to lead systems change.
“Ultimately, sustainability is a team sport,” the write. “The challenge that company leaders face is to set provisional/achievable corporate goals that grow organizational capabilities to reach toward the needs of the planet and its people.”
Leveraging management flight simulators for environmental sustainability
“Almost every large corporation is committed to achieving net zero carbon emissions by 2050 but lacks a roadmap to get there,” says John Sterman. Sterman and colleagues offer a suite of well-honed strategies to enable better climate action strategies, including a free global climate policy simulator called En-ROADS, developed in partnership with the nonprofit think tank Climate Interactive (founded by MIT alumni). Through En-ROADS workshops conducted around the world, as well as Executive Education courses like Strategies for Sustainable Business and Business Sustainability Strategy that engage participants in the tool, Sterman and his colleagues have helped more than 230,000 people visualize specific climate actions.
"There's a fundamental alignment between a healthy environment, a healthy society, and a healthy economy," Sterman says. “Unfortunately, a lot of businesses still see the issue as a trade-off. How can we help people understand that fundamental alignment? That's where simulation models can play a big role."
How to choose carbon offsets that actually cut emissions
To avoid the worst harm from climate change, global greenhouse gas emissions must fall by nearly half by 2030 and then drop to net zero by midcentury, according to the United Nations Climate Action initiative. In response, hundreds of organizations and countries have jumped on the net zero bandwagon. That’s good news, says John Sterman, “but because the goals are net zero and not just plain zero, they allow or even require carbon offsets.”
Unfortunately, many of the offsets being sold today are based on dubious assumptions and can make climate change worse. In an op-ed in MarketWatch, Sterman described a simple framework that companies and consumers can use to ensure that any offset they buy actually cuts emissions. To truly cut emissions, offsets must be AVID+: Additional, Verifiable, Immediate, Durable, and help meet other societal goals (the “+”).
- Additional: Offsets must reduce emissions that would not otherwise be cut. The investment must reduce emissions below what they would be without your action.
- Verifiable: You must be able to verify that emissions actually fall.
- Immediate: There is a time value of carbon, e.g., your flight today dumps carbon dioxide into the atmosphere right now, worsening climate change from this day forth, while saplings planted today won’t grow large enough to offset today’s emissions for decades.
- Durable: Carbon dioxide emissions stay in the atmosphere for a century or more, so you must offset an equivalent amount of emissions for at least that long.
- + (Plus): Offsets should multisolve — they should advance other goals such as job creation, poverty reduction, health care, and social justice, in addition to their climate benefits.
Why impact investors are embracing systems change
It is no longer unusual for investors to want to buy shares of companies that are making progress on environment, social, or governance issues. However, much impact investing focuses primarily on supporting technologies or companies individually, which creates an isolated impact.
According to Jason Jay, director of the Sustainability Initiative at MIT Sloan, what’s needed is systemic investing — an approach that embraces systems transformation, deploys capital with a broader intent, and replaces a project-by-project mentality with new methodologies, structures, capabilities, and decision-making frameworks. At the heart of the systemic investment logic is a different way of framing and understanding the nature of change needed to respond to the most persistent and pressing challenges.
Discover how you and your company can achieve sustainability through innovation and behavioral change in our Executive Education courses Strategies for Sustainable Business and Business Sustainability Strategy.