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Purpose Plus Profit: Heritage Trees and ESG

Two heritage trees (trees with a circumference of 100 inches or more) were illegally cut down earlier this year. Residents of the DC area may be familiar with these stories and the public outcry that ensued should come as no surprise. Tears were shed, and voices were raised, so much so that the DC Council unanimously passed emergency legislation that allows the city to issue stop-work orders to prevent the removal of these trees. While some may blame the ‘tree huggers’ for this outcry, heritage trees provide tangible benefits: they absorb a larger percentage of carbon dioxide from the atmosphere, reduce more stormwater runoff, provide more shade which reduces cooling costs, and enhance biodiversity by providing natural habitats.

The legislation has clearly been ineffective in deterring builders from illegally cutting down heritage trees thus far. The fines, which start at $30,000, did not seem to even discourage the builders from violating the law in these instances. In fact, one developer reportedly said, “I don't care. Everybody does it, all developers do it. We pay the fines, nobody cares.” So what can be done to prevent this illegal activity beyond the emergency legislation? Those familiar with the DOJ’s Evaluation of Corporate Compliance Programs, might suggest increasing the fines, or levying additional penalties more ‘commensurate with the violations.’ Others may propose charging the building owner or foreman individually in the spirit of the DOJ’s renewed focus on prosecuting individuals.

But those suggestions ‘miss the forest for the trees’: how can we change the behavior of these builders (and corporations more generally) from prioritizing financial gain at the expense of the environment and community in which they operate? And how can we help them understand the long-term benefits of that change in behavior?

The builders seemed focused on building bigger houses (and the bigger profits that could be gained) by removing these trees. But they were willingly blind to the tangible destruction and related media attention these decisions could (and did) draw. Potential homeowners, particularly younger generations, may be more inclined to buy from environmentally conscious builders, even at a premium. In fact, a 2021 survey conducted by the IBM Institute for Business Value found that 55% of consumers report sustainability is very or extremely important to them when choosing a brand.[1]

That same survey found that 71% of employees and those seeking employment say that environmentally sustainable companies are more attractive employers. In the age where environmental, social and governance (ESG) initiatives continue to gain momentum, companies must adapt and acknowledge the value of ESG programs in order to remain competitive in attracting and retaining talent. 

A corporate culture that communicates purpose-driven business goals and weighs decisions based on their impact on the local community and environment will undoubtedly create more sustainable long-term value for all stakeholders: purpose plus profits results in greater growth and resiliency. And while driving profits at the expense of other stakeholders may have worked in the past, companies cannot escape the rising consumer demand to understand the purpose and impact of the brands they buy. This demand is compounded by our ever-interconnected world in which a seemingly insignificant business decision is magnified by the extensive reach of social media. One profit-driven decision could result in a viral reaction that damages a company’s reputation irreparably – look no further than the many social media companies that have testified before Congress. 

Imagine if the builders understood the value of these heritage trees to their community stakeholders: preserving the trees likely would have resulted in reduced profits in the short-term, but instead of trying to salvage their reputations, the builders could be looking for ways to enhance them. Corporations must adapt their cultures accordingly to avoid facing a similar fate.

 
 
 


[1] https://thecsrjournal.in/ibm-employees-work-environmentally-sustainable-companies-pandemic/

Tags

risk, compliance, esg

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