10.4 Assessing Sustainability Made Difficult by Multidimensionality

Another factor contributing to the ongoing confusion surrounding the term “sustainability” and its interpretation is that it is a highly generic term. It was first established in the form of the Brundtland definition at the 1990 Rio Earth Summit to define overarching environmental and societal goals. The Swiss government understands sustainable development as follows: “Sustainable development enables the basic needs of all people to be met and ensures a good quality of life everywhere in the world, both now and in the future. Sustainable development takes into account the three dimensions – environmental responsibility, social solidarity and economic performance – in an equal, balanced and integrated manner and takes into account the carrying capacity limits of global ecosystems.”¹

In 2015, the global community established 17 internationally recognized Sustainable Development Goals (SDGs) for nations, further substantiated through 169 specific targets. The Federal Council uses the SDGs as a reference framework for implementing Switzerland’s sustainability strategy. The 17 SDGs have increasingly been used in the business context as a framework – likely due to the lack of any other globally recognized definition of sustainability – to indicate which global sustainability goals a company or investment product supports. Users apply their own operationalizations, meaning they determine, at their own discretion, when a business activity promotes one of the 17 sustainability goals.

Since the concept of sustainability consists of multiple dimensions, each measured in different units, an overarching sustainability assessment requires these dimensions to be weighted individually. This weighting cannot be determined without taking values into account. For example, weightings will vary depending on the cultural and legal context. As a result, there is no single correct assessment of the sustainability of a company, country, or any other organization. The differing weightings, which depend on the underlying objectives of the sustainability assessment, also explain the differences in sustainability assessments or ratings of companies, countries, or other organizations. Though often criticized, these differences are understandable from this perspective.

The fact that there are goal conflicts between various sustainability dimensions makes it even harder to come up with a consistent and definitive definition of sustainability. For example, investing in good working conditions might reduce the funds available for investing in environmentally friendly production processes. These factors also make it necessary to weigh up different goals based on specific values.

When rating providers or banks reach different conclusions about which companies are particularly sustainable and therefore belong in a sustainable fund, this is partly due to the varying emphasis placed on different sustainability topics and partly to the differing investor motivations that are prioritized. For example, some focus on values, aiming for the cleanest possible portfolio, while others emphasize impact, opting for broader investments (including in less sustainable companies) but with active engagement. Clear communication about the goals of a sustainable financial product and how those goals are achieved is therefore crucial – and a key approach to preventing greenwashing.