“Political language”, George Orwell wrote, is designed “to give an appearance of solidity to pure wind.[i]

But I do not need to tell you that, because you probably work in “corporate sustainability” and thus know from direct experience what Orwell is talking about.  The meaning of “corporate sustainability” has always been pretty windy, and yet new phrases and modifiers appear regularly.  One that is currently popular is “material corporate sustainability”.  What is that?

The idea of materiality comes from the world of accounting and finance, where it means corporate information whose omission or misstatement could influence the decision-making of its users, such as managers and investors.  In other words, information about a company is “material” if it would affect understanding about the firm’s future profits.

What about the second part of the new phrase?  Can we tighten up the meaning of “corporate sustainability”?  I presume that by “sustainability” we intend to convey something about the wellbeing of our planet and people, and not the ability of corporations to generate ongoing profits.  If so, then I propose that “corporate sustainability” should be defined as the extent to which a corporation produces harmful side effects.  Why side effects?  Because these “externalities”, in the jargon of economics, are the source of the biggest threats to our planet and people: climate change, loss of genetic diversity, nitrogen & phosphorus disruption, land system change, etc.[ii][iii].  The cost of this harm is largely “external” to the corporation; that is it does not appear on its accounts and it does not affect corporate profits.

But if “material” describes actions that affect profits and “corporate sustainability” refers to actions that do not, then what, in the name of Orwell, is meant by “material corporate sustainability”?

An inspection of the guidance by the Sustainable Accounting Standards Board (SASB) reveals how the term is being applied in practice.  Here is an idiosyncratic sample of the topics and measures that they propose are both material and related to corporate sustainability[iv].

  • Access and affordability: “Amount of Medicare Disproportionate Share Hospital (DSH) adjustment payments received”
  • Air Quality: “Number of incidents of non-compliance associated with air quality permits, standards, and regulations.”
  • Business Ethics: “Total amount of monetary losses as a result of legal proceedings associated with bribery or corruption.”
  • Business Model Resilience: “Description of climate change risk exposure analysis, degree of systematic portfolio exposure, and strategies for mitigating risks”
  • Competitive Behavior: “Description of approach to ensuring intellectual property (IP) protection”
  • Employee Health and Safety: “Lost time incident rate (LTIR)”
  • GHG Emissions: “Payload fuel economy; Gross global Scope 1 emissions.”
  • Management of Legal or Regulatory Environment: “Amount of subsidies received through government programs”
  • Physical Impact of Climate Change: “Number of lodging facilities located in 100-year flood zones”
  • Product Quality & Safety: “Amount of defect- and safety-related rework costs”

Many of these items seem like they could be material to investors or consumers, but do they capture elements of corporate sustainability?  That is, do they measure the unconsidered side effects of business activity?  In some cases they do, such as “Gross global scope 1 emissions”, but most describe a hodgepodge of actions and policies.  Some seem to capture the cost of regulation needed to advance sustainability: “monetary losses as a result of legal proceedings” and “incidents of non-compliance”.  Others seem to capture attributes with uncertain connections to sustainability, such as IP protection, payments from Medicare, or use of government subsidies.  At least one measure captures the effect of the changing climate on the firm (i.e. “climate change risk exposure analysis”).  Quite a few seem to capture just good business management: I would hope that corporate executives would be concerned about payload fuel economy, or employee accidents, or rework costs, or the risk of floods washing away the company’s hotels.

Based on my perusal of these SASB measures, it appears to me that a working definition of “material corporate sustainability” could be activities that affect profits and seem wholesome.  To me, that sounds windy enough to match Orwell’s description of political speech.

One might object, at this point, that the very popularity of the idea of “material corporate sustainability” must prove that I am wrong, and the term has a more definite meaning.  According to recent reports, half of the largest 1200 firms in the United States use materiality guidance from the Sustainable Accounting Standards Board.  According to SASB itself, funds with over $50 trillion in management use their materiality guidance in choosing investments[v].  Reportedly, the Security and Exchange Commission is considering incorporating SASB measures into policy.  Scholars too have endorsed the term by incorporating it in their research.   If it is as empty as I argue, then what explains its popularity?

My sense is that the very vagueness of “material corporate sustainability” provides the answer.  Like all good political language, it is appealing and full of promise.  For those of us concerned about sustainability, it seems to enable a way forward by “leveraging the private sector”.  For investors, it seems to provide more information about how companies are being run.  For policymakers, it offers a way to reassure the public that something is being done.  And for all of us, it pulls at our deepest hopes: wouldn’t it be wonderful if it were profitable to fix the planet’s problems?

If the meaning of “material corporate sustainability” is ambiguous, but using it makes us feel better, will it do any real harm?  I think it may.  Political speech, Orwell warns, can be very dangerous, because it short-circuits logical thought and moral feeling.  He notes that a “comfortable English professor…cannot say outright, ‘I believe in killing off your opponents when you can get good results by doing so’”, but he/she can say: “we must, I think, agree that a certain curtailment of the right to political opposition is an unavoidable concomitant of transitional periods”.  So too with the concept of “material corporate sustainability”.  If an expert were to stand before us and claim that “greed will fix the planet”,  we would laugh.  And yet, I suspect we would applaud if that expert said this: “SASB materiality analysis is an important first step in moving beyond broad-brush ESG scores to focus on specific social issues that carry meaningful economic effects in specific industries.[vi]

I worry that terms like “material corporate sustainability” could so bedazzle us that we lose track of the cause of our problems and what must be done to solve them[vii].  Let us remember that our sustainability problems are caused by cases where profit and planet are misaligned.  To fix our problems, we must impose regulations that bring them back into alignment.  In my opinion, words and phrases that imply that our problems already can be fixed at a profit, impede rather than advance, our goal.

Orwell advocated jeering loudly at the use of empty political language and thereby helping to fix political problems by “starting at the verbal end”.  In this essay, I have tried to follow his lead.  What say you all, shall we resign “material corporate sustainability” to the dustbin?


[i] https://www.orwellfoundation.com/the-orwell-foundation/orwell/essays-and-other-works/politics-and-the-english-language/

[ii] Rockström, J; Steffen, WL; et al. (24 September 2009), “A safe operating space for humanity”, Nature, 461 (7263): 472–475,

[iii] At the system level, “sustainability” has a precise definition involving the maintenance of human welfare over time.  Most researchers believe that key to this objective is the correcting of misaligned incentives that cause individuals, both human and corporate, to create too much harm and too little benefit.  These “market distortions” include monopoly power, asymmetric information, and externalities.  Most of our global problems are caused by externalities.

[iv] https://materiality.sasb.org/

[v] SASB. 2017. SASB Conceptual Framework. San Francisco, CA.: Sustainability Accounting Standards Board San Francisco, CA

[vi] Porter, Michael, George Serafeim, and Mark Kramer. “Where ESG fails.” Institutional Investor 16 (2019).

[vii] I am not the first to note the incoherence of “material corporate sustainability”, and some authorities have proposed to rescue the notion by expanding its scope.  Where existing “material corporate sustainability” measures the effect of the planet on the firm, the new “double materiality” also measures the effect of the firm on the planet.  I think this an improvement, but worry that the use of “materiality” will cause confusion and sloppy thinking.