Reading Between the Triple Bottom Line
Alex Polzin’s class teaches MSES students how to read between the lines of ESG reports to ensure self-accolades match reality.
Alex Polzin takes out a recent sustainability report from a forest products company and flips it open to a full page that details what a Life Cycle Assessment (LCA) is. The page is loaded with all the buzzwords a reader might expect from a report dealing with ESG (environment, social, and governance) factors.
There’s just one problem.
“Not only doesn’t it have the outputs of a LCA, it doesn’t even state that the company is using the tool,” said Polzin, who teaches Carbon Accounting and Corporate Sustainability Reporting in Northwestern's Master of Science in Energy and Sustainability (MSES) program. “Should the company still be lauded for its initial forays into reporting if it just describes what an LCA is?”
That is the type of skeptical questioning Polzin, MSES deputy director, teaches his students. MSES is a program jointly offered by Northwestern Engineering and the Paula M. Trienens Institute for Sustainability and Energy.
The term “ESG” came into public awareness as concern about corporations’ impact on the environment increased. It comes from a 2005 United Nations initiative and was first used in a report entitled “Who Cares Wins.” Broadly, ESG factors are supposed to reduce risk, enhance corporate reputation, and create value for stakeholders by aligning business operations with societal and environmental responsibilities.
But in recent years, a backlash against the concept muddled the clarity on exactly what ESG is.
Critics of ESG argue that it prioritizes social and environmental goals over financial performance, potentially sacrificing shareholder value. Some claim it can lead to "greenwashing," where companies exaggerate their sustainability efforts without making meaningful changes.
Additionally, opponents assert that ESG initiatives may be driven by political agendas or corporate virtue-signaling, rather than genuine long-term benefits for businesses or society.
Polzin explains ESG to his students as a ”pretty unwieldy umbrella term” that touches everything from how a company reduces emissions, the operational and supply chain risk from severe weather events, hiring practices, to what he calls “general corporate do-goodery” of overt displays of corporate social responsibility.
“The backlash against ESG misses the point that a firm’s relationship with the environment and society present both risks and opportunities for stakeholders,” he said. “In the words of The Brundtland Report, ‘These are not separate crises’ — particularly in times of climate change when there is renewed focus on the role of businesses within society.”
Polzin's course aims to equip students with the skills to critically analyze corporate sustainability reports and embark on impactful careers in energy and sustainability promoting environmental stewardship and corporate responsibility. The course is divided into three modules:
- Carbon accounting focuses on calculating emissions in a variety of scenarios.
- Carbon credits gives a primer on the carbon markets.
- Corporate sustainability reporting provides an expanded view of how companies report on energy, water, waste, and biodiversity materiality to their business.
One of the course’s main goals is to help students look critically at sustainability reports, to find areas where companies are being less than genuine when promoting their environmental credentials, and identify actions that materially and meaningfully improve their business and the environment.
Sadly, Polzin said, some companies — such as the forest products company — attempt to paint a picture far different from the reality of their actual commitment to sustainability initiatives.
“A company’s sustainability direction largely emanates from the decisions a company makes prior to investing in reporting,” he said. “Reporting without strategic buy-in readily runs the risk of greenwashing.”
Practical experience is at the heart of the course, which culminates in a Life Cycle Assessment project led by Craig Arnold.
“Our industry right now is establishing the critical baseline data upon which to build targets and decisions. Reporting is at the forefront of the discussion, and standards are actively being established,” Polzin said. “I am excited for my students to participate in and help shape this conversation.”