Ella, the chief sustainability officer of a multinational corporation, was hired to lead the organization toward ambitious net-zero emissions goals that the CEO is intent on delivering – despite political indications that it’s no longer a priority. Ella joined the company believing in its stated commitment to environmental responsibility. However, she discovers a troubling reality: key company stakeholders are prioritizing short-term profits over long-term sustainability, sabotaging both the CEO’s mandate and her work.

Ella is experiencing moral injury – a “first cousin” to trauma. Moral injury, as a concept, was first introduced in the 1990s by psychiatrist Jonathan Shay, who defined it as profound psychological distress resulting from actions that violate one’s moral or ethical code, particularly in high-stakes situations involving betrayal by authority figures.

In the “AfterShock era” [the polycrisis period following what Alvin Toffler described as “future shock“], characterized by rapid technological advancements and societal shifts, organizations are thrust into environments of intense change, volatility and ethical ambiguity. For employees like Ella, the emotional and psychological toll of this shift is profound. As decision-making becomes erratic and public commitments ring hollow, moral injury emerges as a silent but powerful force shaping both her experience and how she performs her work.

How moral injury restructures work

Moral injury isn’t a label anyone wakes up with, and it doesn’t just sit in Ella’s mind – it reshapes how she performs her role, how she interacts with others and whether she believes in the work at all.

She experiences decision paralysis and second-guesses herself constantly. The ethical contradictions in leadership create a fog of uncertainty, making even routine decisions feel fraught.

Innovation suffocates. Where she once pushed for new sustainability solutions, she now self-censors, knowing they’ll be blocked by leadership. The company doesn’t just lose her engagement – it loses her creativity. She becomes so demotivated that she becomes helpless and angry. She’s likely to move to whistleblowing mode, burn out or quit.

Mistrust becomes contagious. She stops believing leadership’s messaging, and soon, so do her colleagues. Moral injury spreads like an emotional contagion, affecting teams beyond her own.

The risk for organizations

Unchecked moral injury doesn’t just affect one employee; it changes the culture, decision-making, communication, trust and the ethical foundation of the entire company. Employees become risk-averse, unwilling to challenge the status quo. Talented people leave, often quietly, draining institutional knowledge. The work itself degrades – products, policies and strategies become hollow, shaped more by survivalism than purpose.

This is why moral injury is not just a human issue; it is an operational crisis.

What it means for leaders

The chances are that you recognize Ella either in yourself or in others that you’ve worked with. If you’re feeling overwhelmed with this realization, you’re not alone.

As a CEO, executive or senior leader, you might be experiencing helplessness: “This is too big to fix. We’ll never get there.” Frustration, too: “Even when we try, external forces make it impossible to get this right.” Or, “Let’s hire someone else to do this who understands our business.”

These reactions are natural, but they’re also signals. They point to the ethical weight of leadership in today’s world. If you’re feeling this way, it doesn’t mean you’re failing – it means you want to find a solution.

But here’s the hard truth: leaders who ignore this discomfort risk making moral injury worse, not just for employees, but for themselves.

The cost of doing nothing

In our AfterShock era, we need systems thinking where we go beyond all the crises.

Across these domains, individuals experience a profound sense of powerlessness, ethical compromise and inaction fatigue, eroding their sense of moral integrity. This makes addressing moral injury not just a matter of individual well-being but a critical component of long-term organizational survival and ethical leadership.

By genuinely aligning values and actions, organizations can transform the hidden sabotage of moral injury into a catalyst for growth, integrity and long-term success. These traits are not just beneficial but essential by 2030. The alternatives – burnout, presenteeism, attrition and diminished innovation – will persist, eroding trust, morale and organizational resilience.

Caroline Stokes is a leadership strategist, author and certified executive coach. She is based in Vancouver. 

The post The true cost of moral injury at work appeared first on Corporate Knights.

In January 2005, the British weekly The Economist ran a themed issue titled “The Good Company.” It was devoted to the question of corporate social responsibility, an ethos in rapid ascension at the time, which the lead editorial lamented as profoundly misguided. The illustration on the magazine’s cover was of an office building adorned with angels’ wings; on the building’s long shadow, the wings had transformed into satanic horns. 

It’s a question as old as the corporation itself: to what extent companies should be responsible to the societies they operate in, and how to balance those interests against the more foundational drive for profit. With globalization and a rapidly warming climate, the question is existential. While most companies have undertaken visible efforts to improve their environmental, social and governance (ESG) performance, stories of actual transformation are surprisingly rare. 

Better than backward-looking glossy reports are forward-looking plans.

 – Laura Draucker, Senior Director of Corporate Climate Action, Ceres

In an oft-cited 1995 paper, John Kotter, professor of leadership at the Harvard Business School, concluded that most attempts at corporate transformation fail. A subsequent study, also published in the Harvard Business Review, found that only 28 of the 128 global companies that attempted transformation between 2016 and 2020 actually accomplished it. This makes those success stories particularly interesting.

Genuine transformation is rare – and rewarding

When it comes to green transformations, U.S. carpet manufacturer Interface, established in 1973, is often referenced as a pioneer. Its founder, Ray Anderson, was quick to corner the U.S. and ultimately global market in carpet tiles: a vastly more popular alternative to broadlooms in the dawning era of open-concept offices.

But two decades in, with Interface already a billion-dollar operation, Anderson had an environmental epiphany. He subjected his company to a radical course correction in which all virgin materials were to be replaced by recycled products – an unprecedented move at the time, particularly in the world of construction. Under this new regime, Interface doubled its sales and profits. 

But strong leadership alone is no guarantee of success. In her book The Evolution of a Corporate Idealist: When Girl Meets Oil, Christine Bader documents her nine-year tenure at BP, and the contradiction between then-CEO John Browne’s vision for the company – environmentally friendlier and respectful of the communities it operated in – and the realities on the ground.  

Laura Draucker, senior director at Ceres, a Boston-based non-profit that advocates for sustainability leadership, works with companies to develop transition plans. She says the impetus to boost a company’s sustainability performance generally comes from investors concerned about risk assessments – in other words, that inaction will affect the bottom line.

It’s a legitimate fear, with new directives like the Corporate Sustainability Reporting Directive forcing companies to report much more extensively on their ESG performance – and risk penalties and reputational damage if they do not. 

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But Draucker says the further step – convincing corporate leaders that sustainability should be not just a matter of compliance but a core element of the overall business strategy – is much trickier. 

“Better than backward-looking glossy reports are forward-looking plans,” she says, adding that this full embrace requires a longer time horizon and continuity of vision.

She cites consumer goods giant Unilever – the company behind brands like Ben & Jerry’s ice cream and Dove beauty products – as an example of how quickly scales can tip. Once considered a model of ethical corporate behaviour, Unilever staged a sudden turnaround in April 2024, announcing that it was watering down its commitments to reduce plastic use and to pay its suppliers a living wage. In justifying the move, then CEO Hein Schumacher said that public interest in environmental and social issues are “cyclical” and that climate concerns had been overtaken by the more pressing reality of war.

Ownership is a decisive factor in corporate responsibility

According to Dirk Matten, professor at York University’s Schulich School of Business, the most  decisive factor in a company’s commitment to sustainability is its ownership.

Family-owned companies that have committed to ethical business practices from the outset typically remain steadfast. The majority owner of Tata Motors, to which Land Rover and Jaguar belong, is an Indian family-owned foundation that invests much of its profits in that country’s welfare state. Community engagement is core to the company’s DNA.

Likewise, large institutional investors can wield huge influence, as demonstrated by The People’s Pension fund’s recent decision to pull US$36 billion out of State Street after the U.S. asset manager announced it was walking back on its ESG commitments. Corporate metamorphosis is rooted in intention, and it has to run deep.

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Naomi Buck is a Toronto-based writer.

The post How some companies are embracing radical change to succeed in the green economy appeared first on Corporate Knights.

Today, 72% of S&P 500 companies include environmental, social and governance (ESG) metrics in determining executives’ pay, says the Semler Brossy Consulting Group. Of the 2024 Corporate Knights Global 100 companies, 79% have sustainability pay links.

But the ESG backlash south of the border continues to grow. In the U.S., a report from Pleiades Strategy finds that Republican lawmakers in 37 states introduced 165 pieces of legislation in 2023 to discourage companies and investors “from considering commonplace risk factors in making responsible, risk-adjusted investment decisions.” The good news, according to Pleiades: only 22 laws and six resolutions passed in 2023, and “the bills that became law were often heavily revised to weaken core provisions and minimize costs.”

Defenders of ESG metrics were put on the back foot again when the Financial Times quoted an asset manager calling companies’ ESG targets “fluffy.” The story charged that “investors are worried the [ESG] metrics are being gamed to increase payouts.” Its examples include Southwest Airlines, where a disastrous 2022 holiday season that saw cancellation of 16,000 flights didn’t stop senior executives from garnering bonuses, and CBRE, a real estate firm whose CEO failed to meet key financial objectives but still earned US$4 million in bonuses by achieving five other strategic goals, such as improving team diversity and boosting employee engagement.

One executive of Boston-based State Street Global Advisors told the Times they were skeptical of using ESG metrics to determine executive compensation: “Oftentimes they are very subjective, fluffy and easily gamed.” 

So does tying compensation to ESG targets work? A study released last summer by researchers at Stanford University found that firms that link executive bonuses to emission-specific metrics do decrease their carbon dioxide emissions. They also tend to see improvements in their ESG performance, as measured by third-party ratings. The study found no evidence so far that this practice affects organizations’ financial performance or share price.

A similar study released in 2023 by two business professors at Concordia and Carleton universities took a bolder tack, asking whether ESG-based bonuses result in S&P 500 executives receiving excess pay. Using artificial intelligence to identify normal pay ranges and outliers, the researchers found that use of ESG-based bonuses produced a 32% reduction in excess annual cash bonuses, “implying ESG incentives are an effective corporate governance tool.”

However, they did spot sectors where boards and shareholders should remain on high alert: companies in environmentally sensitive industries such as mining or oil and gas, where management teams were determined to have greater influence on the board. They may “need to put additional checks and balances in place to better monitor, control and advise management on the use of these incentives, especially with respect to the selection of ESG performance metrics,” said Sprott School of Business’s Leanne Keddie and Concordia’s Michel Magnan.

A recent report from Harvard Law Review suggested some best practices for companies treading the ESG path: take time to develop meaningful performance data; adopt targets that are “material, durable, and auditable”; and test your ESG operating goals for a year or two before linking them to pay, to ensure their relevance and hone your methodology.

In Canada, the Institute of Corporate Directors has actively promoted ESG-linked executive pay for more than a decade. “Successful incentive programs require robust planning and metrics and verification systems,” says Gigi Dawe, the institute’s VP of policy and research. “There’s lots of new information out there to help set standards, so I think we are going to get better at it.” 

The post Are CEOs gaming ESG bonuses? appeared first on Corporate Knights.

The list of companies that qualified for this royal “seal of approval” includes Amazon, Bank of America, Credit Suisse, HP, IBM, PepsiCo and Unilever. All of the recipient companies hold leadership positions within their industries and have credible transition roadmaps underpinned by globally recognized, scientific metrics for achieving net-zero emissions by 2050 or earlier.

The Terra Carta Seal, launching in Glasgow November 3, comes out of the Prince of Wales’s recent Terra Carta initiative, a recovery plan for the private sector that prioritizes nature. 

The name Terra Carta (“Earth Charter”) derives from the Magna Carta, a charter of rights developed by King John and his barons 800 years ago that marked the first step in limiting monarchical power in England. The Prince of Wales believes we’ve reached a similar turning point in the battle against climate catastrophe, praising these organizations “who have made a serious and action-orientated commitment to prioritise the transition to a sustainable future while putting Nature, People and Planet at the heart of the way they operate.”

The Canadian firms on the list are Cogeco, Stantec and Telus. Adding to that Canadian content, Corporate Knights played a role in vetting and offering counsel on the companies under consideration. SMI used the Corporate Knights Global 100 ranking as the starting point for its list in combination with SMI’s active task force members. Corporate Knights researchers helped evaluate individual companies’ qualifications.

Prince Charles, a long-time environmental crusader, provided opening remarks at the Global 100’s virtual launch last January. “We talked in the back room on Zoom,” says Corporate Knights co-founder and chief executive Toby Heaps. That’s where His Royal Highness asked Heaps if Corporate Knights could use its experience in ranking – and reading between the lines on companies’ sustainability commitments – to help establish an authoritative list of companies to receive the Terra Carta Seal. “There are no perfect companies” when it comes to sustainability, says Heaps. “But we have a pretty good red-flag detector.” 

Heaps hopes the program will help other business leaders push harder for more sustainable futures. “We need to see businesses flow money into climate solutions,” he says. “The solutions are ready. This is the kind of thing that can get a CEO’s attention.”

The Terra Carta Seal is awarded to companies that have documented plans to halve their greenhouse gas emissions by 2035 or achieve net-zero by 2050. They have also committed to adopting standardized reporting metrics.

“The real opportunity is to see what this group of companies can do together.”

–Steve Fleck, executive vice-president, Stantec

Stantec, an Edmonton-based engineering and construction firm, was the highest-ranked North American company on this year’s Global 100. Vancouver-based telecom Telus has reduced its greenhouse gas emissions by 31% since 2010 and has purchase agreements that power all its activities in Alberta with renewable electricity. Cogeco, a Montreal-based cable and internet supplier, has committed to reducing its Scope 1 and 2 emissions by 65% by 2030. All three companies have had their emissions-reduction plans approved by the Science Based Targets initiative as meeting the goals of the Paris Agreement.

Two days before the announcement of the Terra Carta Seal, the executive team at Stantec learned they had made the cut. “It’s quite an honour but not a surprise,” says executive vice-president Steve Fleck. “Sustainability is part of Stantec – it’s in the water.” 

Fleck believes the honour will be good for business. He says Stantec got into sustainability early through its clients in public–private partnerships, such as the 2007 Kelowna-Vernon hospital project in British Columbia. “There were specific energy criteria we had to meet,” he says. The company knew it would be held responsible if those standards weren’t met – but it also discovered opportunities to win when contractors exceed expectations. 

Today Stantec is regularly involved in building net-zero buildings, retrofitting older structures, enhancing coastal resilience for shoreline communities, and helping mining and oil firms shrink their carbon footprints. “It’s a big change from a few years ago,” says Fleck, “when some of these companies would have been leading the climate denial issue.”

Stantec looks forward to participating in the activist executive network Prince Charles hopes to build through the Terra Carta Seal. “The real opportunity is to see what this group of companies can do together,” Fleck says. “In many ways, private-sector entities are moving forward more efficiently and quickly than governments can do. So I have a lot of time for this institution.”

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