By Matthew Biddle, originally published on UB School of Management's Website
Published November 21, 2022
Adam Goldfarb, CEL ’15, was invested in sustainability long before it was cool.
In 1988, when his father, Jeffrey, CEL ’00, formed his financial planning company, there were only a few small mutual funds engaged in environmental, social and governance (ESG) investing.
Fast forward to today, and ESG funds represent 10% of worldwide fund assets, according to Reuters. By 2025, Bloomberg projects ESG assets will exceed $35 trillion globally, which has everyone from businesspeople to policymakers taking notice. In May, the U.S. Securities and Exchange Commission (SEC) proposed tighter rules to prevent funds from profiting off this trend by misleading shareholders.
“For a long time, there was a myth that you couldn’t do well by screening your investments for sustainability issues,” says Goldfarb, financial advisor and chief sustainability officer at Goldfarb Financial. “Now you have the biggest money manager on the planet, BlackRock, telling companies, ‘You better shape up or we’re going somewhere else.’ They’re going to listen.”
With offices in Buffalo and New Orleans, Goldfarb Financial has built its brand on “capitalism doing good,” helping clients clean up their portfolios while enjoying strong returns. The firm is a Certified B Corp—a social enterprise verified by the nonprofit B Labs—that is routinely honored among other B Corps as “Best for the World” for its customers and overall impact.
“We’re putting our money where our mouth is—we’ve gone carbon negative and are constantly making improvements where we can,” says Goldfarb. “As sustainability becomes more mainstream, that’s going to give us an edge over our competition.”
For decades in the business world, sustainability was relegated to a recycling initiative or public relations exercise—if it made the conversation at all. Today, investors, customers and employees alike are demanding that companies take action and embed sustainability in their strategy and operations—or risk falling behind.
“You cannot operate an effective business today without focusing on sustainability in some way,” says Debabrata Talukdar, professor of marketing. “The business case for sustainability is like the business case for developing a better quality product—it’s an intrinsic part of business.”
Alexandra McPherson has been working on climate change issues for more than two decades. “The science was conclusive then,” says McPherson, who leverages this research, as principal of Niagara Share, to help partners improve their environmental and social footprint. “Now, we’re living in an age when we’re hitting projections for increased temperatures or extreme weather events at a much faster rate.”
McPherson and her husband, Ryan—UB’s chief sustainability officer—co-teach an elective in the School of Management’s Professional MBA program called “Sustainability as a Business Strategy.” For their millennial and Gen Z students, climate change isn’t just a scientific concept—it’s personal.
In a 2021 Pew Research survey, more than two-thirds of Americans ages 18 to 40 said reducing the effects of climate change should be the country’s top priority. Younger adults are also more likely than their older counterparts to take action themselves, particularly when they open their wallets.
“Over the last two years, there has been a $35 trillion wealth transfer from boomers to millennials, and that’s creating enormous demand for environmentally friendly products and services,” Alexandra says.
Ryan adds: “Millennials and Gen Z are very concerned, and they're spending their money that way. If your whole consumer base shifts and you’re not paying attention, you should prepare to become irrelevant.”
Millennials also represent the largest portion of the nation’s workforce, with Gen Z hot on their heels. According to a 2022 survey by Deloitte, more than 36% of these workers have rejected a job or assignment because it didn’t align with their values. Nearly half say they’ve put pressure on their employer to act on climate.
“If you’re looking for early talent, this is a critical issue,” Ryan says. “Look at Amazon—it got into climate as an issue because employees walked off the job in Seattle.”
Aditya Vedantam, assistant professor of operations management and strategy, has also seen this passion for sustainability from students in his “Sustainable Operations” course.
“In class, I talk about how businesses have historically taken a pollution prevention approach,” he says. “Companies now are thinking more and more about product stewardship. They are not just looking at their manufacturing emissions, they are looking at the entire supply chain, from their suppliers all the way to their end consumers.”
The COVID-19 pandemic exposed vulnerabilities in the world’s supply chains, and the climate crisis could wreak further havoc on how and where raw materials are produced. Vedantam says companies are increasingly scrutinizing their operations and supply chains to find efficiencies, demanding certain practices from vendors and transparently reporting those metrics to customers and investors.
“For a firm to succeed in the long run, it needs to ensure the viability of the natural resources it uses. Companies that don’t will find themselves at a disadvantage sooner or later,” Vedantam says. “There’s also a profit angle here because more consumers are looking to buy Fair Trade or certified organic products, so companies that engage in sustainable development will see increased value.”
On the regulatory side, companies don’t want to be caught flat-footed by new laws that affect their operations.
In March, the SEC proposed new rules that would require companies to disclose their greenhouse gas (GHG) emissions, climate-related risks and what they’re doing to reduce their carbon footprint. If these rules are enacted, companies like M&T Bank that already report these metrics will be ahead of the curve.
In M&T’s latest ESG report, it noted both successes (reducing direct GHG emissions by 21% since 2019) and goals (to be carbon neutral by 2035). Stephanie Tisdale, PMBA ’20, is a senior vice president and strategic initiatives expert at M&T. She sees sustainability woven throughout the bank, from the Think Green employee resource group she co-founded, to the experts embedded in various departments who help others understand “when being greener can be more rewarding from a business perspective.”
“Sustainability is no longer optional—and you don’t have to be a chief sustainability officer to make a difference,” says Tisdale, who also serves as board president of the Western New York Sustainable Business Roundtable, a collaborative of organizations working to integrate sustainability to benefit the triple bottom line: people, planet and profit. “By choosing a more sustainable option, your employees will be happier, it benefits your customers, and therefore you bring in more business—how can you say no to that?”
Lately, Vedantam says, regulatory action has focused on extended producer responsibility (EPR), which makes manufacturers pay for the eventual disposal of their products. For example, a 2018 New York State law created a pharmaceutical industry-funded drug take-back program to protect waterways and public health. Three states have passed EPR laws on plastic packaging, and New York is considering becoming the fourth.
“Historically, companies had no regulatory reasons to worry about the plastics in their products,” Vedantam says. “But now companies like Coca-Cola and Pepsi are looking at biodegradable plastics to try to preempt these regulations and mitigate their environmental impact.”
Perhaps the biggest driver behind corporate America’s push into sustainability is investors. As director of strategy and marketing for CleanCapital, Carly Battin, MBA ’09, knows that better than most.
A clean energy investment platform, CleanCapital helps investors accelerate the flow of capital into the solar and energy storage markets. After just six years in operation, the New York City-based company is approaching $1 billion in acquisitions and owns 300 solar projects across the U.S. (including the Steel Solar site in Lackawanna, New York, that supplies green power to UB).
“There are certainly strong moral and ethical arguments for sustainability, but more than that, it’s what investors are demanding,” Battin says. “If you try to raise money now, one of the top questions investors will ask is, ‘Have you done your ESG screening?’ Sustainability is very much a part of the conversation.”
With that screening, investors hope to avoid major scandals that tarnish a brand’s reputation, Alexandra McPherson says, pointing to Johnson & Johnson, which lost billions in litigation that alleged its baby powder contained asbestos and caused ovarian cancer.
“The world’s investment houses are looking at these problems in their due diligence,” she says. “They understand that companies aligned around ESG best practices perform better financially, and they see the costs when companies don’t react to concerns around consumer safety, climate change, environmental racism, and diversity, equity and inclusion.”
On the flip side, investors also recognize the opportunity that sustainability presents, giving rise to countless startups and even new industries. CleanCapital and the renewable energy sector is, of course, one example; hybrid and electric vehicles are another.
In the late ’90s, Toyota and Honda were the first to invest heavily in this space and began capturing market share at a rapid pace, according to marketing professor Debabrata Talukdar. Last year, hybrid and electric vehicle sales reached record highs—and even the once-gas-guzzling Hummer was revived as an EV.
“‘Doing well by doing good’ is a catchy phrase, but the caveat was always that there needs to be a market for that good,” Talukdar says. “Society has evolved, and people are willing to pay more for sustainable, durable products.
“If you want to do business today, you need to look at your entire supply chain—from the source of your raw materials to your finished products, and look for strategic opportunities to incorporate sustainability,” Talukdar continues. “And, once you are in the game as a company, your competitors will do it too—and if you don’t continue pushing things forward, you’ll fall behind.”
8. Decent Work and Economic Growth
11. Sustainable Cities and Communities
16. Peace, Justice and Strong Institutions