While the focus stays on the huge steps still to be made when it comes to sustainable development and corporate contribution, the significance of the collective journey undertaken by corporate sustainability must not be underestimated and can be better understood through the lens of impacts. Otto Scharmer’s ‘Ego to Eco’ systems-thinking framework helps illustrate this evolving approach to corporate impacts.
The Ego to Eco framework and Theory U
The Ego to Eco framework is a pillar of Theory U, a revolutionary social transformation approach by Otto Scharmer, evangelized through the MIT and Presencing Institute, which has been catalyzing a global movement for deep societal change in the past decade. Theory U helps us “cross the threshold needed to step into the field of the future” through a practical journey that taps into abilities and practices underexplored in previous leadership studies, offering applications at different levels of system, from the individual, to organizations, nations, and global systems. In line with the framework, alongside a pragmatic implementation-focused process, an inner journey also needs to take place when we want to connect with the future that is emerging. Here, knowledge is not enough, and systems are asked to access the inner space of their own consciousness by tapping into the ‘feeling’ dimension.
This journey takes us through a progressive awareness of our own position within the system, shifting the perspective from the initial natural focus on ourselves (Ego) to a clear revelation of our existence as part of our ecosystem (Eco).
Consequently, any attempt to lead meaningful system change cannot elude the profound awareness shift from Ego-system to Eco-system.
Who matters: shareholders vs stakeholders
Corporate sustainability aims to create positive long-term organizational impacts through environmental, social and governance practices (ESG). A pivotal point for corporate sustainability lays in defining and establishing the parameters and boundaries of our impacts. This step is often controversial, while equally critical in determining the course of our sustainability journey. Decisions around impacts answer fundamental questions about who matters and what matters for the organization. These are just some of the key questions to be answered, eventually leading to our definition of materiality, outlining which impacts are relevant and significant in our specific context.
The divergence between existing approaches and frameworks with regards to “who matters”, makes the orientation more challenging for organizations.
Some approaches, including the much-discussed position recently explored by the IFRS Foundation, take the perspective that stakeholders (and events) having a greater impact on the organization are those that matter the most. In this case, the interests of shareholders and investors are placed at the center of materiality considerations, revealing a focus on self (the organization). This happens when, for example, they focus on mitigating the risk of adverse impacts on the organization or creating positive reputational impacts that have an impact on the bottom line. Looked through the Ego to Eco lens, this perspective is clearly Ego-centric, leaving a major part of the story about the real impacts of the organization untold.
Conversely, when we adopt the universal multi-stakeholder approach suggested by GRI, the focus of our considerations on materiality shifts towards those most affected by our impacts. This perspective offers a broader and more holistic assessment, which helps to also scan and mitigate a wider range of risks.
Acknowledging the effect that our actions have on others requires a complete mindset switch. It requires tuning into the needs and voices of our stakeholders, embedding an openness approach where the organization sees itself as part of the ecosystem.
In this sense, the organization recognizes itself as part of the problem and, more importantly, as part of the solution, thus embodying the ecosystem awareness stage of an Ego to Eco journey, a requisite and starting point to tap into the full potential of future opportunities.
When considering these matters, an understandable priority is to balance between keeping our business sustainable and healthy on one side, while contributing to a sustainable future for a multiplicity of key stakeholders on the other. The concept of double materiality helps to account for both types of impacts.
Organizations can identify relatively easily specific communities and contexts affected by their activity.
A major challenge remains to not only account for isolated impacts, but also measure cumulative impacts throughout value chains and implement initiatives that can generate a virtual circle of positive impacts.
On a different note, we can consider our planet as our master ecosystem, with its complexity of natural and social interconnections and sub-ecosystems. When the planet comes into the picture, all players share the responsibility to keep it safe and healthy, because the planet is a silent, but heavily impacted universal stakeholder.
Greenwashing as an intermediate step towards deeper awareness
In the early days, the corporate world acknowledged the need to address ESG concerns but failed to go all the way out and look back at itself as part of the ecosystem. With a focus still on corporate self (Ego) greenwashing has been the manifestation of partial transformations, the reflection of a midpoint in the journey.
The list of applications and definitions of greenwashing has been expanding over the years. Companies and legislators have been chasing each other in progressive efforts towards defining the role of corporate sustainability. While there is abundant evidence that corporates have often taken deliberate action to hide their negative impacts behind the curtains of a public relations (PR) set presenting a compelling story, we have also witnessed the boomerang effect that these strategies have generated repeatedly during the past decades.
The truth is that identifying, understanding, and reversing one’s real impacts are three very different steps requiring time and maturity.
One flaw in the early days was that sustainability was not part of companies’ values. As long as sustainability was considered something to be addressed within the boundaries of PR and a PR crisis with an Ego-centric perspective, no substantial change could be achieved at impacts level.
A systemic shift was needed, and we have been witnessing it in the past few years. The new trend is to embed sustainability deeper and broader in company values and principles. The competitive pressure is also on, as new companies and brands enter the market with the historical advantage of starting afresh, investing directly in the latest practices and technology, accelerating the speed at which the entire market is now moving towards a sustainable consciousness.
Ecosystem awareness in corporate sustainability
In the pursuit of workable solutions able to generate real positive impacts, it cannot be denied that the corporate world is steadily going in the right direction and almost naturally undertaking the Ego-to-Eco journey, using stakeholder inclusiveness as a core strategy (and tool) to kickstart new stakeholder-centric visions and set new courses of action. This should not be taken for granted. In fact, if we look at society in general, a comparable consistent progress is not there to be witnessed: the immense societal divide scalped by populist politics during the past decade has built on the opposite values (i.e. prejudice and fear) to those required for building collaborative solutions suitable for a sustainable future (i.e. an open mind, an open heart and an open will, as explained in Theory U). So, we can duly congratulate the business and corporate world for wanting to embrace their responsibility and making some significant steps. Slowly, and partly (or mostly, as many would argue) driven by the need to comply with regulations, we are witnessing progress day by day.
The greenwashing approach is making way to a transformation rooted deeply in new business values. Initiatives such as B Corp and the Science Based Targets are the living proof of active commitment to tangible targets. Others like the Gold Standard, setting the criteria for maximum impact of business interventions, accompanied by support methodologies and certification such as those offered by SustainCERT, are helping businesses to re-define their understanding of real positive impact, while also keeping a tight focus on delivering measurable results.
The corporate world has finally woken up and finds itself in the middle of the sustainable consciousness revolution that spreads all around, from customers to regulators, from partners to employees, faced with the impelling need to learn and see itself as part of its rich ecosystem.
The importance of partnership is strongly emphasized at every major political table. Those most passionate about resolving the issues of our planet, including activists and specialists, are urged to start supporting the corporate world ‘s revolution, marching by its side and tap into the potential of collaboration in this shared ecosystem. Now is the time to reboot and let go of finger pointing, making space for constructive collaboration to join forces and change the future together.