Emerging Frontiers of Undetected Risk: The Psychoanalysis of Sustainability

The long-term success of any progressive movement such as sustainability depends not only on its sheer political power, but also on its ability to continuously modernize its language, re-energize its narrative and sense of mission. Without a capacity for self-renewal, the most ardent convictions inevitably flame out, creating an energy vacuum that pulls the movement toward a premature and whimpering descent from Grace. Although sustainability is still passing through its uneasy infancy, the movement is already conforming to this grim prognosis, mainly because the loosely coordinated factions within the movement continue to misjudge and mishandle their toughest existential challenges.

The most glaring misjudgment manifests itself in sustainability’s lapse into an acronym-rich bureaucracy that rehashes derivative insights disconnected from changes in the marketplace. Sustainability burst into existence as an impassioned voice of protest energized by a heightened awareness of looming risks, a sober acknowledgement of the destructive potential of Western civilization’s organizing principles. After its ambitious beginnings, the movement is running out of steam, and it is starting to resemble and reenact the change-resistant institutional dysfunctions it presumably still hopes to alleviate. Against the backdrop of obsolete ideas enshrined by sclerotic institutions, sustainability is adopting the bureaucratic ritualism of the very institutions it seeks to displace or rescue from irrelevance. The voice of protest is blending with the cacophony of prejudice and deceit.

As ideology co-opts and metabolizes genuine protest, it propels sustainability toward a miscarriage of its potential, if not the deliberate abortion of its noblest aspirations. We are witnessing the exhaustion of the progressive imagination, an uneasy capitulation to the cynicism that sustains the unsustainable status quo. This surrender reflects the state of sustainability more faithfully and poignantly than the naive narratives and diversionary headlines celebrating the growth in the number of signatories to the UN-backed Principles of Responsible Investment (PRI). Yet, the illusion of progress continues to vindicate our willful ignorance. So, we remain blind to the large-scale, recidivist and remorseless betrayals of public trust and common good.

Granted, sustainability  still offers a clear and healthier ideological alternative, but the movement often weakens its own brand and defeats and denigrates its own destiny.  Just as the discredited ideological orthodoxies that preceded it (e.g., the belief in the infinite redemptive power of free markets), sustainability has evolved into a new genre of dogmatic self-delusion. Primal expressions of outrage have yielded the spotlight to polite “message platforms”. Sycophancy has replaced subversion as the dominant strategy in our dialog with illegitimate institutions.

The power elites it purports to challenge have learned to tolerate sustainability because they realize that it does not challenge them all that much. In fact, in subtle and generally unacknowledged ways, it serves their interests. It functions as an off-balance-sheet subsidiary of obsolete organizing principles. In brief, the commodification of the sustainability movement has produced an emasculated opposition to our culture’s most self-destructive fixations. As all token oppositions, today’s co-opted sustainability mostly provides a finely orchestrated pretext for lip service and appeasement. Thus, in contrast to the loftier intentions of its youth, today’s sustainability haunts us as a castrated spirit, a hungry ghost seeking nourishment in dead ideas.

Sustainability’s alignment with its own Dark Side (think of the Jungian Shadow) has already produced symptoms that accentuate the need for a new wave of irreverent and unapologetic disruptions. Without these disruptions, the status quo will continue to enable, even facilitate, individual and institutional behaviors that elevate systemic risk.

Next, I will focus more specifically on facts and larger truths often scrubbed from the public discourse on sustainability.

Revolutions come and go.  They start; they create a new stasis; then, they falter in their own ways. Often, they create new falsehoods, new perversions that betray ideals as mercilessly as did preceding ideologies. That’s why, the success of the sustainability revolution — and any particular revolution — doesn’t matter nearly as much as the sustenance of the revolutionary spirit.

In the sustainability movement today, this spirit is gasping for air. The passing generation of sustainability pioneers succeeded in many ways, but it failed to inspire a new generation of sincere mavericks who would nurture the torch of Olympian fire. Because of this failure, I characterize today’s sustainability movement as a stillborn idea, a noble and imperious impulse seduced into complacency and compromise.

The advocacy of sustainability that still grabs headlines today is an effete narrative, an exhausted Will with a low sperm count and crippling arthritic pain. Frail and disenchanted, sustainability has become a majority-owned subsidiary of consumer capitalism, an unwitting victim of a rigged deal with Mephistopheles. In this humbled state, sustainability functions as an intricately engineered mechanism for easing our anxieties by urging us to seek solace in our creature comforts.

True, some die-hard advocates of real change occasionally attempt to reverse sustainability’s degradation into self-inflicted irrelevance.  But these desperate measures suffer from tactical and strategic miscalculation, the fool’s errand of fighting and re-fighting past battles long after the battlefield has undergone dramatic changes, and long after institutional inertia has thoroughly co-opted the language of protest and reform.

The study of undetected risk constitutes a fundamentally reductionist enterprise. It necessarily reduces the object of its inquiry (e.g., risk, uncertainty, etc.) in roughly the same sense that a cartographer reduces a territory to a map. No representation can fully capture the reality it represents. No scientific or theoretical breakthrough can provide the final answer, the unshakable truth that requires no further modification or elucidation.

Every discovery of new wrinkles of risk opens up the next vista, the next wilderness not yet tamed by language, ideology or wishful thought. All revolutions merely punctuate a process, a ceaseless search for improvements in the human condition. Yet, we continue to maintain the illusion that the sustainability revolution constitutes an event, a fait accompli that the society should simply metabolize and move on. This view now figures as the most glaring symptom of the exhaustion of the progressive imagination.

The weakened will of the sustainability movement has greatly slowed the study of extra-financial risk. Having produced abundant food for constructive thought since its inception, sustainability has entered the regurgitative phase of its development. Today, efforts to improve systemic sustainability rely largely on pre-formulated constructs that identify and characterize domains of human activity in which the erosion of institutional integrity can elevate systemic risk. Instead of developing these constructs further, we are now turning them into bumper stickers and checklists.

The reduction of sustainability to a checklist arguably started with the formal postulation of the three grand pillars of the discipline: environmental, social and governance risk, also known as ESG. Under each of these master-categories of extra-financial risk, researchers have developed formal taxonomies of quantitative or binary risk metrics. The taxonomies are essentially lists of sins, of which a particular company may be guilty or innocent (e.g., dual-class shares, combined CEO/Chair positions, “overboarded” directors, and executive compensation disconnected from measures of corporate performance, to name just a few examples.)

No doubt, these metrics provide valuable insights into corporate character. The weakness of these taxonomies lies not in what they cover but in the broad domains material risk they overlook. For example, most ESG models do not incorporate the risk of misleading or fraudulent corporate accounting. Even as the SEC has received credit for its recently renewed focus on accounting fraud, we seldom pause to ask whether even the most meticulous compliance with current laws and rules would give investors a full and fair assessment of the value of underlying assets.

In fact, it’s an open secret in the accounting profession and among corporate CFOs that compliance with current GAAP and FASB rules would still produce a materially distorted estimate of asset values. In this way, we are reducing accounting risk about as much as the table manners of passengers on the Titanic reduced the risk of drowning.

Also, consider an example from the governance area. Corporate practices such as combined CEO/Chair positions and dual-class shares often dominate public discourse. But governance experts have long pointed out that the token separation of CEO/Chair positions would only produce a negligible impact on corporate governance under the current regime, which still provides perfectly legal mechanisms for the disenfranchisement of minority shareholders.

Many other risks with indisputably broad systemic repercussions remain conspicuously absent from the narrative of the sustainability movement, even as it habitually congratulates itself for its more holistic and healthy approach to shared risks and desired rewards. For example, ESG models tell us nothing about risks stemming from the “technological singularity”. This concept has become most closely associated with the work of Ray Kurzweil. It refers to the inevitable moment of truth at which the rising wave of steepening growth rates across our technology-fueled societies will bring the human civilization to an “event horizon” that renders our best forecasting methods utterly impotent.

Sincere participants in the sustainability movement should acknowledge that the social injustices that sparked the meme of sustainability have mostly deepened, and they continue to deepen. Likewise, the sustainability movement needs to deepen and reinforce its convictions. It needs to raise its voice and sharpen its political acumen. Otherwise, sustainability will become another poignant addition to the long list of noble ideas co-opted by their detractors and betrayed by their creators.

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