Why companies need context-based sustainability metrics
<p>Without context, most of what passes for mainstream sustainability reporting fails to express sustainability performance in any authentic way.</p>
Earlier this month, the Governance & Accountability Institute reported that 72 percent of companies listed on the S&P 500 index publish sustainability reports. As recently as 2011, only 19 percent of those companies produced sustainability reports.
The production of sustainability reports by corporations always has been a priority for sustainable investors, and on the face of it the rapid increase in such reporting is a positive development. But when one considers the concept of planetary boundaries — limits "within which humanity can continue to develop and thrive for generations to come," according to the Stockholm Resilience Centre — it becomes clear that business activity continues to contribute to an unsustainable depletion of the world's resources.
A seminar addressing planetary boundaries and how to measure corporate sustainability performance against them recently took place at the Slow Living Summit in Brattleboro, Vt. Moderated by corporate sustainability architect (and former SocialFunds.com writer) Bill Baue, panelists at the seminar discussed the concept of context-based sustainability metrics.
A number of standardized platforms for corporate sustainability reporting currently exist, most notably the Global Reporting Initiative. But in 2012, Mark McElroy, executive director of the Center for Sustainable Organizations, told SocialFunds.com that the GRI's standard fails to account for a context in which performance can be accurately linked to targets that must be met to achieve sustainable business practices.
"Most of what passes for mainstream sustainability measurement reporting fails to express sustainability performance in any literal or authentic way," McElroy said. "While I applaud the fact that so many companies are focusing on this and putting out reports, few of these reports actually express sustainability performance."
Using a company's use of water resources as an example, he continued, "much of what we see today simply tells how much water a company uses from one year to the next. But there's no connection in measurements like that to the actual state of water resources in the place where a company is doing business. You have to be able to compare the rate of water use by a company to the rate of available water supplies."
Panelist Jed Davis, sustainability director of the Vermont-based Cabot Creamery dairy cooperative, spoke at length about his organization's efforts to base its optimal water use within the context of local water resources and their proper allocation.
"It's really important to understand what is happening out there around us, not just what we're doing," Davis said.
One challenge addressed in the seminar was the current practice of linking sustainable-resource use to gross domestic product. By that standard, the larger the company is, the greater its share of resources to be used. It's reasonable to question whether linking resource use to GDP is in itself sustainable; as Baue pointed out, alternatives that more accurately might measure quality of life actively are being considered.
"We're still early on in the methodology of how to do this," he said.
Also on the panel was Mike Bellamente, executive director of Climate Counts, a New Hampshire-based nonprofit that rates the world's largest corporations on their climate impacts. In 2013, working with McElroy and Baue, Climate Counts revised its methodology to account for context. In the resulting study, the organization attempted "to analyze the operational emissions of 100 global corporations between 2005 and 2012 to determine their performance against a science-based targets that seek to limit climate change to 2 degrees Celsius."
Bellamente told attendees that the analysis revealed that 49 of 100 companies were sustainable within planetary limits, and 22 "showed evidence of decoupling," he said. That is, they continued their economic growth while reducing their carbon emissions.
Also on the panel was Cary Gaunt, professor at the Marlboro College Sustainability MBA program. Gaunt offered a more aspirational vision of sustainability. "How do we move beyond merely sustaining to flourishing?" she asked. "How do we operationalize it?"
As an example, Gaunt referred to the work of the Living Futures Initiative, an organization which describes its Living Building Challenge as "the built environment's most rigorous and ambitious performance standard."
"By embracing the psychology of the endgame, we strive to identify the most direct path to a future in which all life can thrive," the organization states.
Echoing that aspiration, Gaunt asked, "How do we give back more than we take so all can flourish?"