The contribution of business is crucial to sustainability, as is explicitly recognized in both the preamble and several of the provisions of the UN Sustainable Development Goals. In spite of the sustainability language increasingly employed by thought leaders in the corporate world, the business world as a whole is still on a unsustainable ‘business as usual’ path.
The grand challenge of our time is to find out how to secure the social foundation of humanity now and in the future, while staying within the planetary boundaries. Without the contribution of business, we are unlikely to be able to meet this challenge. With humanity already transgressing or at the risk of transgressing four of the nine planetary boundaries, a proactive approach towards sustainability is needed to achieve the necessary transformation.
Business as usual is a very certain path towards a very uncertain future. SMART intends to find out how business can be shifted away from this unsustainable path.
State-of-the-art research has shown that short-termism in business contributes to a dearth of innovation which undermines the potential for business to contribute to sustainability. The regulatory complexity within which European businesses function today does not enable a shift towards development-friendly, environmentally and socially sustainable business and finance. In spite of efforts by the EU and increasing stakeholder focus on the need for a shift away from the current, unsustainable path, unsustainable trends persist.
The current regulatory framework facilitates a short-term maximisation of profits based on externalisation of environmental and social costs. This short-termism is also detrimental to a sustainable economic development of business and financial stability of our economies. Initiatives to promote the necessary shift are to a great extent based on encouraging investors, businesses and consumers to be more long-term and sustainability-focused in their decision-making, which so far has shown to be insufficient.
SMART makes its innovative contribution by examining the role, both current and potential, of businesses in meeting these grand challenges in a systemic and comprehensive way. Understanding the significance and the limits of the law and the interaction between the law and social norms, market norms and other economic and material factors is a prerequisite for identifying efficient and effective reforms. This will allow SMART to determine where the policies or regulatory framework fail, either because of their design or lack of enforcement. Or if there are other factors which influence the decisions of the market actors, what they are, and how they can be tweaked to contribute to sustainability.