Why does sustainability reporting have to be so complicated? It often feels like we’re striving for half measures or incremental improvements. Surely we can do better.
What if there was a unifying metric that allowed companies to measure their influence on well-being throughout their value chain? And only if and when companies performed to a high well-being standard would the rewards, financial and otherwise, follow.
[Join TSSS on March 4th as the author of “The Economics of Happiness”, Mark Anielski shares his views on the Future of Capitalism and how well-being is emerging as the new bottom line for business. For those outside of Toronto please join TSSS and CSRwire for a new Webinar Series, Capitalism 2.0: A Deeper Dive that will explore the world that will follow today's Capitalism. Register Here]
Throw Caution to the Wind – Momentarily
For those of you who are committed to the metrics embedded within Capitalism 1.0; GDP, Earnings, Quarterly Reporting, Revenue and Profits – I ask you to throw caution to the wind momentarily and consider the possibility that while these metrics may have served us well in the past, they are no longer working for us today.
The world has changed – environmental and social impacts along with wealth and income concentration (which is leading to a rapidly shrinking middle class) can no longer be ignored. Our planet is becoming unstable both environmentally and socially and global conflict is becoming ever more likely. Waiting and hoping is no longer a viable option if we hope to survive and thrive.
Imagine a world where companies build their competitive advantage by creating more overall well-being and inclusive prosperity than their competitors. Imagine the upward spiral of positive innovation and outcomes that such a ‘well-being’ metric would create. Imagine what the world would look like if this became the key variable for success in the marketplace.
A Clear Signal
If companies underperformed on this new metric, it would be a clear signal to consumers, lenders and investors alike that this company was a laggard in the marketplace. To investors and lenders this would mean that the company was failing to address risks and to consumers it would mean that this company was creating more illness, poverty and environmental harm than its competitors – not exactly the message that companies want their customers to receive.
But that’s just the beginning…a poor score on the well-being metric would reverberate up and down the company’s value chain.
If a company paid its employees a poverty wage forcing taxpayers to pick up the difference in the form of food stamps and housing benefits – it would be incorporated into its score.
If a lender made loans to a company that created vast amounts of ecosystem destruction that affected both human and animal populations – it would be incorporated into its score.
You get the idea. A company’s actions would be monitored to truly assess how it interacts with all aspects of its sphere of influence and ultimately whether the company is creating or detracting from overall well-being.
The Tricky Part: How To Move The Ball Forward?
Incredible work is being done by established organizations like GRI, SASB, The Carbon Disclosure Project, Bob Willard and The Natural Step’s Gold-Standard Benchmark for Sustainable Business, The B Team, B Corps and many others. For a moment, let’s consider some additional ideas to move the ball forward.
Banks and Insurance Companies
Imagine if we could tie lending and insurance to the well-being metric. For example, if a company’s well-being score was below a particular threshold it would need to pay a steep premium to borrow and a similar additional cost to be insured. And if this didn’t change its behaviour and its well-being score continued to be negative, then its premiums would rise further. To ensure consistency on this initiative, governments around the world could nudge their banks and insurance companies to conform. This is the kind of idea that should be brought forward and placed on the agenda of the next G20 annual meeting.
If Walmart Can Do It
For those who think that it’s just too complicated to engage banks, insurance companies and governments, I urge you to consider that over the past few years Walmart has ‘gently nudged’ its entire supplier network to align with its supplier scorecard. If Walmart can do it then surely the banks and insurance companies can be ‘guided’ by governments to lend according to a company’s well-being score.
Consumers Will Get Their Vote
If the threat of increased borrowing and insurance costs isn’t enough to convince companies that well-being is a serious issue for long term viability, well-being scores would also offer consumers a clear view of performance to influence their votes in the marketplace.
Government Has a Role to Play
And while were at it, let’s get regulators involved. If you want to engage in a new project and you have a high well-being score then your new initiatives and projects would get fast tracked to the front of the line and the fees would be reduced or even waived. Laggards would pick up the fees of the forward thinking companies; that is, if their project ever gets the green light to continue.
The Path Toward Well-Being
For those working in the sustainability reporting field, now is the time to define a unifying metric that brings everyone together with shared purpose. Einstein spent decades trying to find a unifying theory that explained everything – our unity goal is much simpler. We only need to agree upon a unifying metric that defines and measures a company’s overall impact on people’s well-being.
In our recent paper, A Journey towards Capitalism 2.0 Michael Townsend and I explored seven guiding principles for what we believe to be the basis of a sustainable economy. Less focus on growth and more on well-being (our first guiding principle) might just be the trigger that builds momentum for the six that follow:
- Less focus on growth and more on well-being
- Eliminate speculative bubbles – create long-term real wealth
- Encourage real vs. Phantom wealth
- Embrace holistic systems thinking; aligned with the circular economy
- Reduce wealth concentration (co-op model)
- Based on collaboration and co-operation
- Founded on new institutions and greater systemic resilience
We CAN define a metric that does more than simply shave off some of the harm that companies cause. We CAN agree on principles that put us on a upward spiral of well-being. We CAN include in our measures of well-being social and environmental variables including local job creation, access to great health care, reasonably priced higher education, safe communities and exceptional air and water quality. Simply put, we CAN do better than the metrics of the past. In fact, we MUST do better.
For those of you who still think that we must sit back and let the market decide, let me remind you that the current system simply isn’t working. Our planet is becoming increasingly unstable both environmentally and socially. The best time for change was 10 years ago – the next best time is today.
Brad Zarnett is the Founder and Director of the Toronto Sustainability Speaker Series (TSSS) which is widely recognized as Canada’s premier forum for dialogue and problem solving among sustainability professionals. Each year over 1000 sustainability change agents attend TSSS events to exchange ideas, network and be inspired by leading companies that have integrated sustainability into their business practices.