System change is a large opportunity for the corporate and financial sectors. It soon will be an essential component of the most advanced corporate sustainability and responsible investing strategies.

These fields have become mainstream over the past 20 years. The global sustainable/responsible investing (SRI) market is about $40 trillion. Corporate sustainability and SRI have provided many benefits to business and society. However, in spite of this good work, environmental and social conditions are declining rapidly in many areas. The invasion of Ukraine, climate change, political division and many other issues pose large and growing challenges. New sustainability approaches are needed to protect business, investors and society.

Current corporate sustainability and SRI strategies largely are focused on helping companies to reduce negative impacts and address climate change and other problems. But these problems are symptoms. They cannot be resolved unless root causes are addressed. Flawed economic and political systems unintentionally compel businesses to degrade the environment and society. Companies often can increase profits by lowering negative impacts up to a point. Beyond this point, costs usually go up. If they continue to mitigate, they will put themselves out of business. This is a system problem, not a company problem.

Reductionist systems are the root causes of climate change and all other problems addressed by the United Nations Sustainable Development Goals (SDGs). Improving them — which requires system change — is the most important action needed to achieve the SDGs and sustainability.

System change is a critical business issue. Throughout history, all flawed human systems changed, usually by collapsing. Current systems compel companies to profit by harming the environment and society. This is not sustainable. System change is inevitable. Given rapidly growing global problems, it probably will occur soon.

The corporate and financial sectors have strong incentives to help evolve systems in ways that make responsible behavior the most profitable strategy. As the human economy expands in the finite Earth system, negative corporate impacts return more quickly to harm companies, often in the form of market rejection, lawsuits and reputation damage. Reducing impacts protects investors and companies. But most negative impacts only can be eliminated through system change.

The popular purpose-driven business approach models the higher-level thinking needed to evolve systems into sustainable forms. Under this approach, companies expand their focus from narrowly benefiting shareholders to broadly benefiting society. This is logical because they ultimately cannot prosper by degrading the environmental and social systems that enable business existence.

Read the full article about systems change by Frank Dixon at GreenBiz.