The paradoxes that prevent companies from achieving their sustainability goals

How do palm oil companies implement their zero-deforestation commitments (ZDC)? Many pledged to achieve them by 2020, but few did – and it’s not just a case of missing corporate sustainability targets.    

New research from Janina Grabs (Esade) and Rachael D. Garrett (Cambridge University) has examined zero-deforestation in the Indonesian palm oil sector, which is simultaneously a leading driver of deforestation and key to the country’s economic development.     

The findings, published in the Journal of Business Ethics, reveal sustainability paradoxes that are preventing firms committed to zero deforestation from achieving their environmental and social sustainability goals.  

The results are relevant in similar goal-based governance contexts, say the authors, and raise important questions about the viability of net-zero goals.    

From rule-based to goal-based

International governance of the 21st century has seen a marked shift away from the clear state obligations laid out in international agreements and protocols, and the private sector has followed suit. 

Historically, rule-based governance focused on third-party certification schemes, multi-stakeholder standards and industry-wide codes of conduct, otherwise known as Voluntary Sustainability Standards (VSS). Private companies chose to be voluntarily bound by the rules within these frameworks by gaining certification (such as Fairtrade) or becoming a member of the groups setting the standards.  

Now, corporate social responsibility and sustainable development are being driven by goal setting from companies keen to make progress with ambitious sustainability commitments.  

Corporate policies and supplier codes of conduct have emerged as an alternative to sector-wide standards, and their goals are driven by society pressure and business negotiation rather than a result of multi-stakeholder collaboration. In addition, unambiguous targets such as ‘zero deforestation’ allow no room for compromise, leading to conflict at the point of implementation. 

The sustainability paradoxes

Achieving key outcomes such as supply chain traceability requires close cooperation within the supply chain and across the sector. While there is some degree of enthusiasm and competition around reaching targets, how binding the goals are perceived to be depends on the level of reputational risk involved. Companies enjoy a significant amount of leeway in how they pursue their goals. 

This leads to two paradoxes for companies: performing and organizing. Performing paradoxes relate to the goals they pursue. Organizing paradoxes relate to how these goals are pursued — in particular, whether to cooperate or compete.  

Grabs and Garrett explored these paradoxes through a study of the implementation of zero-deforestation commitments in the palm oil sector of Indonesia. They spoke to 62 sectoral stakeholders, including companies along the supply chain, as well as NGOs, supporting organizations and industry experts.  

Performing paradoxes: what goals should be pursued?

At a performance level, paradoxes were found between environmental sustainability (full supply chain traceability, strong accountability for the supply chain), social sustainability (smallholder inclusion, community development) and economic sustainability (high profit rates, competitiveness).  

While these paradoxes can also exist in rule-based private governance, they are more likely to be identified and discussed during the rule formulation process. Though this may not remove them completely, it offers a clearer path for companies to follow. Without this level of formal governance, some voices will be under-represented and unheard until the point of implementation.  

In their Indonesian palm oil case study, Grabs and Garret found that few social NGOs participated in working groups to advocate for communities or smallholder farmers. Unsurprisingly, they identified smallholder inclusion and grievance management as key issues.  

Organizing paradoxes: how should the goals be pursued?

Reaching performance goals often requires close cooperation along the supply chain and within the sector. This presents an organizing paradox between two modes of interaction: cooperation and competition.  

Cooperation requires competitors to share information and costs, align practices and cooperate along the supply chain. Competition, on the other hand, means protecting commercially sensitive information, gaining advantages over competitors and avoiding anti-trust enforcement.  

While some companies have attempted to navigate these tensions in creative ways, others have used them to justify a lack of action. Some companies even displayed defensive, destabilizing responses that created new paradoxical tensions and undermined the proposed measures.  

This misalignment led to the wide divergence in the levels of goal attainment in 2020 targets. 

Urgent action

Whether companies are facing genuine limitations preventing them from achieving their goals, or are using paradoxical tensions to strategically postpone action, defining best practices for constructive approaches to reach both environmental and social sustainability goals should be a matter of urgency for the sustainability community.  

“The sustainability community should try to reconcile key sustainability paradoxes by delineating best practices for constructive approaches between environmental and social sustainability goals, rather than inadvertently enabling firms to hide behind paradoxes and avoid implementing ZDCs by imposing simultaneous, irreconcilable demands”, the authors state. 

In a different study examining corporate commitments as a form of goal-based sustainability governance, Grabs illustrated that high levels of motivation, company credibility and the involvement of critical stakeholders are of particularly high importance for on-the-ground success. 

Whether companies choose to commit to leadership in the quest for sustainability or are lagging in their endeavors, Grabs and Garrett have a clear message: ignore paradoxical demands at your peril.