It’s hard to argue with the triple bottom line – the need for companies to focus on social and environmental concerns as well as profits. We’ve spent more than a century letting business exploit the planet’s natural resources and its people, treating them as “externalities” to the pursuit of profit.
It’s there in the miles-wide gyres of waste plastic circulating in the oceans and in the annual tick-up of parts per million of carbon dioxide in our atmosphere, retaining the sun’s heat, raising temperatures. It’s also there in the work-related death toll of 28 million people a year.
Finally, investors have started asking corporations to manage their pollution and their carbon emissions and their effects on employees’ health, and to supply evidence of their efforts. Those corporations are asking their suppliers, in turn, to show sustainable stewardship of people and planet.
Now the UK government is also doubling down on business through programmes including the Streamlined Energy and Carbon Reporting (SECR) framework and Energy Savings Opportunity Scheme (ESOS) which require companies to measure and report on energy use. These programmes will cover smaller and smaller businesses as the 27-year deadline for net zero emissions gets closer.
So far, so good.
But these government, shareholder and supply chain requests are all asking the same questions in a hundred different ways and asking for a hundred different responses. Environmental, Social and Governance (ESG) questionnaires, site audits and reporting schedules from various customers, fund managers and verification agencies rain down from all directions.
Many even require what looks like the same information but measured in different ways. I met a sustainability consultant who said he had seen nine separate ways of defining a workplace fatality. (“I would have thought you’re dead or you’re not,” he said.)
There is a baffling level of inefficiency in the current approach that is both distracting and wasteful. Some companies have whole departments working full time just to supply sustainability data to their various stakeholders.
There is a parallel on a smaller scale in the UK construction industry where contractors have been faced with repeated costly demands to provide evidence of their safety credentials by signing up to different assurance schemes (sometimes numbered in the tens), all recognised by different clients.
All this duplication of effort was unfair to small firms particularly. The redundancy was eventually reduced by the introduction of a set of “core criteria” for each of the compliance schemes, that allowed cross-recognition by clients.
Settling on a similar set of core standards for sustainability reporting would not just be good for business. Anyone who wants to see which businesses are greenwashing and which are genuinely trying to improve their performance, needs comparable data.
There have been limited steps towards this kind of transparency. The Global Reporting Initiative (GRI) framework for sustainability reporting is used by a majority of the world’s biggest corporations and recognised by governments and institutional investors. In setting requirements for reporting individual impacts, the GRI is tightening requirements to allow for easier comparison between organisations.
The GRI introduced standards on safety performance disclosure in sustainability reporting. GRI 403 now restricts companies to two prescribed formulae for reporting on high-consequence injuries and reportable injuries. Prior to this, disclosures were of limited value because the companies could each choose their own formula, making comparisons impossible.
In the E segment of ESG there are also promising signs. The International Sustainability Standards Board (ISSB)was formed at last year’s COP26 summit in Glasgow to build on previous efforts by the Sustainability and Accounting Standards Board (SASB) to provide environmental reporting benchmarks for different industries. At COP27 in Egypt this month the ISSB announced it is on course to publish a set of environmental disclosure standards next year. A positive indication of how much of an impact the initiative might have is that the Carbon Disclosure Project (CDP), whose framework is used by almost 19,000 businesses globally to report their emissions, said that its metrics will align with the ISSB standards.
These are good starting points, but there needs to be a greater collective acceptance by all the parties demanding ESG metrics from companies that the current duplication of effort benefits no one. Rather it diverts resources towards bureaucracy and that could have gone to reducing environmental impacts and improving labour standards.
Guest blog written by writer, editor and speaker, Louis Wustemann