I remember attending my first ARCS gathering at the Yale School of Forestry a decade ago.  I listened to the presentation of a number of papers, was schooled by Andy Hoffman on the perils of license to operate for Coke in India, and helped myself to a generous helping of HBS case studies.

I tread quietly.  After all, this was a meeting of distinguished academics and I was an interloper.  My career was spent as an operator, mostly at Timberland (where I served as COO). I had just started teaching.

My only contribution came toward the end of the forum.  During a session that lauded companies for their increased investment in sustainability. I referenced my experience at Timberland.  The company was publicly traded and family-controlled with a CEO authentically committed to sustainability.  And yet, out of a workforce of 6,000, we only had 5 FTEs devoted to sustainability. I tried to spotlight the considerable gap between intention and action.

I am still trying.  Now, ten years later, I teach the Coke case (still not nearly as well as Andy) and work to bridge the gap between theory and practice.

That is the focus of the attached article “Overselling Sustainability Reporting: Don’t Confuse Output with Impact.”  After years as a card carrying member of Sustainability Inc, a federation of consultants, NGOs, executives and academics, I conclude that measurement, reporting and market mechanisms are oversold. I even wonder if research on the efficacy of measurement and the endless refinement of non financial reporting are distractions from the much needed work of systems change.

Many disagree.

A decade ago, Yvon Chouinard  the famed CEO of Patagonia concluded in HBR that “sustainability would soon be how business is done.” He and his co authors based their conclusion on improving quantification of ecosystem services, comparability enabled by value chain indices and research linking high ESG companies to high equity returns.  Chouinard and his coauthors highlighted the many efforts to dollarize ecosystem services (including efforts by The Nature Conservancy + PWC, the UN Millennium Ecosystem Assessment, The World Bank, and Puma / KERING + TruCost and their EP&L).  These efforts, according to the article, would “pave the way for companies to internalize their externalities.”

Since publication of Chouinard’s article, enthusiasm for measurement, reporting and ESG investing has accelerated.  Sir Ronald Cohen (founder of PE firm APAX) is now funding a team at Harvard working on the Impacted Weighted Accounts project to advance the precision of nonfinancial accounting.  Close to 90% of the S&P 500 now produce sustainability reports and a preponderance of academic research touts the link between ESG and equity returns. More than $25t of global assets are now invested “sustainably,” with projections for that number to double in just four years. Earlier this week, BlackRock CEO Larry Fink noted, “We’re going to see a vast change in the public company arena worldwide. They are going to move forward. We’re not going to need really governmental change or regulatory change.”

And yet, notwithstanding all of the noted “progress” and optimism, social and environmental problems continue to mount.


For one, reporting is not a good proxy for progress. Sustainability reports are full of holes, inaccuracies, and well-chosen case studies.  Dollarization is a fool’s errand, disconnected from operating practice, reliant on interpolation, and unrelated to natural thresholds and allocations.  It is also not clear that precise and audited sustainability reporting would make a difference (it has not for executive compensation) as investors’ time horizons do not often account for long-term or systemic risks.  According to a fellow traveler and operator Auden Schendler, SVP of Sustainability at Aspen Skiing Company, “measurement and reporting have become ends to themselves, instead of a means to improve environmental or social outcomes. It’s as if a person committed to a diet and fanatically started counting calories, but continued to eat the same number of Twinkies and cheeseburgers.”

At the same time, what is billed as an ESG investment is exaggerated.  Two-thirds of what is dubbed sustainable investment is comprised of negative screen funds.  Excluding tobacco from a fund will not have any impact on climate change.  The final third of ESG investment also is wrought with classification challenges. According to the WSJ, 8 of the largest 10 US ESG funds were invested in oil and gas companies. Finally, almost all of the academic research to date has been focused on establishing the link between ESG investment and equity returns, with very little inquiry into how ESG investing affects workers or the environment.  A recent study by researchers at MIT found little evidence that ESG investment leads to improved social or environmental outcomes.

After decades of trying, it should be clear that measurement and the market will not ameliorate worsening social and environmental challenges. The British economist Sir Paul Collier summed up the situation well when he said that capitalism “doesn’t work on autopilot. Periodically throughout its 250- year history, capitalism has derailed. And when that happens, it’s been up to public policy to get it back on the rails—public policy and the efforts of private citizens, of firms and families.”  Integrating this wisdom means we would be well served by redirecting our energies toward civic engagement, policy advocacy and systems change.

If you are able to read the article, I welcome your feedback.