Taking stock of the war’s impact on sustainability

The harsh, tragic realities of war – and this week’s US-Iranian war of words – was not on the horizon when sustainability reporting and ESG value frameworks were drawn up.

Alignment of corporate and social aspirations for more sustainable economies did not factor in the kind of military engagement that has been raging in the Middle East. Nor the political rhetoric, if you can call it that, which has surrounded it.

And while social aspects addressed the impact of human conflict, when those stakeholder value remits were created, most of the focus around the prospect of multi-lateral war was on how defence stocks should be treated. This, across a broad spectrum ranging from a business activity that was tied only to conflict, to one that was ultimately all about keeping society safe.

How different things are now.

What the markets are saying

The conflict in the Middle East has had direct implications for many companies, governments and civilians. It has made many question not just why it’s happening in the way that it is, but what lasting change it may bring about – for better or worse.

Some of the impacts and related sustainability questions are obvious. The surge in energy prices has accelerated debate and action to diversify sources and bring forward elements of the clean energy transition to reduce dependency on oil, particularly that from the Middle East. The conflict itself is having a dire, direct environmental impact, with The Guardian reporting that the war has already had the carbon ‘cost’ of equivalent non-military activity by 84 countries.

This week, The Times covered a poll of financiers that pointed to ESG investors now prioritising health outcomes over the environment – which some might say just amounts to window dressing – but it also offers a clear signal of how money markets are responding.

For large firms in many sectors, the war’s immediate effects have already brought questions about how business will be reshaped, the airline industry and food being prominent examples.

But the lasting impact of the war on sustainable action also stands to be broader and deeper. This excellent but shocking graphically-illustrated long-read in The Economist quantifies the human toll of the Middle East conflict, with enormous estimates in places, in particular the number of Iranian lives lost, and people displaced.

It concludes: “Hundreds of thousands of people are now heading to countries ill-equipped to cope. Data from the UN suggest that more than 30,000 people in Iran have crossed into Afghanistan – according to the UNHCR, many are Afghans returning to a country they thought they had escaped. President Donald Trump has signalled that he wants to end the war. Even if he is successful, the upheaval will not end anytime soon.”

The point is well-made. The impact of the war on human beings will be profound and long-lasting, as it so often is.

But in a wider world, with many economies struggling and transitioning to new realities, in the long run, the tragedy of conflict will likely bring sustainable change, investment focus and corporate commitments into sharper focus.