Beth Goody/theispot.com
Monitoring the right metrics can help companies closely track changes in their markets and the broader operating environment, enabling them to identify opportunities early and reduce their exposure to material risks. As extreme weather events and other environmental changes accelerate, business leaders must factor these developments into their organizations’ goals and strategies — which means paying attention to key indicators tracked by natural scientists.
It should go without saying that significant long-term shifts in the planetary environment will have significant repercussions for the business environment. But outside of a few sectors where businesses are already exposed to greater environmental risks, such as those linked to climate change, these changes may be seen as too volatile and uncertain to plan for. The current U.S. administration’s hostility toward climate science and international efforts to mitigate global warming may further direct some business leaders’ attention away from this area of risk and opportunity. However, for those who remain dedicated to comprehensive strategic foresight, now is an opportune time to raise awareness of a publicly available set of KPIs that can help leaders monitor and plan for the broader business context: the Earth system boundaries (ESBs).
Recently extended to encompass not only the physical limits within which human life can be sustained on Earth but also the way planetary changes may disproportionally affect some groups and drive negative societal outcomes, the ESBs can be a valuable tool for business. Here, we provide a succinct outline of the ESBs and use examples to show how they can inform strategic foresight.
The Earth’s KPIs, and Why Companies Should Care
In a 2009 paper in the journal Nature, natural scientists identified nine planetary boundaries, each of which quantified the environmentally safe limits of human impact on a set of Earth system processes. These are not KPIs that we seek to achieve: Crossing planetary boundaries increases risks for humanity, and, indeed, by 2023, six of the nine planetary boundaries were already beyond safe thresholds. That same year, scientists published a new paper in Nature proposing a set of ESBs to help monitor both safety (the resilience and stability of the Earth system) and justice — that is, to minimize the significant harm to which Earth system change can expose humans to risks such as individual loss of life, malnutrition, displacement, and inadequate access to environmental resources. Because the ESBs underlie global economic and societal systems, their status is highly relevant to companies seeking long-term resilience.
The eight ESBs include climate; the area of largely intact natural ecosystems in the biosphere; the functional integrity of all ecosystems; surface water flows; groundwater levels; nitrogen nutrient cycles; phosphorus nutrient cycles; and atmosphere, particularly aerosol loading. Currently, only atmosphere and climate change remain within safe boundaries. However, although the average global temperature has not yet reached the unsafe level of 1.5 degrees Celsius above pre-industrial levels, vulnerable populations already face significant climate risk at the current 1.2 C increase.
Traditionally, many businesses have set sustainability targets that may yield incremental improvements minimizing harm rather than achieving positive impacts. As more planetary boundaries are being crossed and stakeholder expectations are rising, these incremental approaches are proving to be insufficient. ESBs offer businesses a strategic framework to align corporate sustainability efforts with scientifically defined limits of Earth’s systems.
ESBs Informing Strategic Foresight
ESBs can inform and guide sustainability strategy and practice in three ways. The following examples of companies that are already using them demonstrate how ESBs can inform strategic thinking to help leaders proactively manage risks, prioritize action areas, and bolster brand value.
1. Build a shared understanding of sustainability challenges. Sustainability is meaningful only at a systems level: Even if a business is completely sustainable at the company level (that is, using all resources at a sustainable rate and in a just way), its exposure to an unsustainable society still makes it vulnerable to the risks created by that unsustainable system. By engaging with the ESBs, understanding how their own actions affect Earth systems, and reducing pressure on those systems, companies can extend their efforts from relevance at the company level to relevance at the societal level, as described in accords like the Paris Agreement and the United Nations Sustainable Development Goals.
Vaude, a German manufacturer of outdoor clothing and equipment, uses the ESBs and their forerunner, the nine planetary boundaries, to build a shared vision internally and guide its strategy. Sustainability, including ensuring fair working conditions and protecting the environment, is core to its strategy and brand promise. Vaude was an early proponent and adopter of the ESBs — no other framework could provide the same holistic view of environmental issues beyond climate. Vaude’s sustainability leaders find the framework useful to explain environmental issues and material impacts to colleagues outside the sustainability department. Take the planetary boundary of “novel entities,” which encompasses the synthetic chemicals and materials entering and polluting waterways through sources like synthetic fibers containing microplastics. These impacts can be more easily understood with the ESB framework, and now Vaude is working to reduce microplastics in its materials. Initially, Vaude tried to measure its exact impact against the boundaries but found this challenging. So instead, Vaude developed a high-level understanding of how its operations affect the boundaries, explained the issues internally to raise awareness, and made a clear commitment to reduce the company’s impacts. It expects to gain more precise measurements as science-based approaches improve and data becomes more readily available.
2. Bring together scattered or siloed sustainability efforts. The ESBs provide a holistic, science-based view of social and environmental sustainability. In contrast, earlier global frameworks, such as the planetary boundaries, have been particularly focused on environmental issues; others, like the UN Sustainable Development Goals, have been more aspirational. The ESBs can complement other frameworks to provide a more cohesive picture.
Holcim, a Swiss multinational that manufactures sustainable building solutions, such as low-carbon cement and concrete, energy-efficient roofing, and recycled aggregates, uses the ESBs to consolidate its sustainability efforts. Sustainability is at the core of its strategy, with a focus on climate, circularity, nature, and people. Moving beyond isolated initiatives, the ESBs and original set of planetary boundaries allowed Holcim to identify three other key impacts its operations were having on nature: fresh water use, biodiversity, and land-system change. The ESBs acted as a cross-check for its materiality assessment and provided a science-based foundation for prioritizing issues. It aims to relieve pressure on fresh water, for example, by using treated wastewater for its operations, and to enhance biodiversity in its operating sites to reduce its impact on land-system change.
Holcim partnered with the International Union for Conservation of Nature to develop measurement and reporting systems for biodiversity and has extensive data on water and biodiversity for its direct operations. It is also developing measurement processes based on geolocation technology to obtain data on suppliers’ impacts and advance its nature strategy along the supply chain. Holcim’s sustainability efforts are driven by the strategic foresight of its top leaders and the actions it’s taking to help it stay ahead of regulatory and investor pressure.
3. Provide a scientific basis for strategizing. Other frameworks rarely consider science-based interconnections between issues. Yet the climate impacts of each of the eight ESBs are deeply interconnected with one another. For example, biofuels, known for their lower carbon emissions compared with fossil fuels, can put pressure on the other boundaries, depending on their source and the production method used. If more land is required to produce biofuels, this will put additional pressure on the biodiversity planetary boundary, and the additional farming could require more fresh water and fertilizer use (influencing nitrogen flows). It is also essential to consider social and environmental issues in unison, because ensuring that people’s basic needs are met and protecting all from significant harm will exert greater pressure on some planetary boundaries.
Ørsted, a Danish multinational energy company operating in Europe, North America, and the Asia-Pacific that employs over 8,000 people, uses ESBs as a scientific basis for strategizing. Over the past decade, Ørsted has transitioned from fossil fuel exploration and production to only renewable energy development. Ørsted’s strategy is to address climate change and the natural ecosystem in an integrated fashion. Climate change alters ecosystems, making them uninhabitable for some species and resulting in climate-related extinctions, whereas biodiversity underpins ecosystems’ functioning, enabling them to act as carbon sinks and mitigate rising emissions. Ørsted aims to achieve net-positive biodiversity impacts across all of its renewable energy projects commissioned from 2030 onward. It is piloting over 20 biodiversity projects, developing its own measurement framework, and experimenting with environmental DNA monitoring and AI-powered solutions to collect species-level data and track progress.
Focusing its efforts on climate and nature together makes sense from both a scientific and a business perspective. By managing ecosystem health where it operates, Ørsted is preemptively protecting itself from physical and reputational risks associated with land use, as well as helping to manage increasing stakeholder pressure to tackle biodiversity. As a next step, and aligned with the ESBs, Ørsted is integrating community considerations into its strategy, recognizing that solutions for climate and ecosystems must also ensure social justice and address the needs of local communities, particularly the more vulnerable ones that will be disproportionately affected by climate change.
Setting an actionable and measurable strategy aligned with the ESBs requires downscaling them to a business level or, in other words, determining what share of the safe and just operating space for humanity can be allocated to each economic actor. Downscaling the ESBs to individual actors allows a sustainability effort to be described as “science-based.” But it is complex, and there is currently no standardized or commonly accepted approach. The global nongovernmental Science Based Targets Network plans to work with the Earth Commission (an international team comprising natural and social scientists) to develop a consistent approach for businesses to translate their impacts to the global ESB framework.
Academic research has identified 11 different sharing approaches for downscaling the safe operating space to the country, city, industry, company, and product levels. Depending on the sharing approach, the results may differ, which highlights the need to establish common practices. As science-based methods for measuring climate impact continue to progress and data becomes more available, businesses will be able to develop actionable strategies that function within the safe and just operating space. They should not delay action until every indicator is measured and verified. With several ESBs already crossed, urgent and decisive efforts are essential to return to the safe and just operating space. Businesses have no time to lose.