By Amy Irvine, Concordia Intern
Demand for transparent environmental, social, and governance (ESG) practices is on the rise across the globe, and companies are scrambling to respond. This phenomenon—driven by growing concern around accountability—is much more than a simple reporting exercise, and the private sector is firmly on the front lines of the effort. A challenge, however, lies in the multitude of ESG reporting practices and the fundamental questions of how one defines sustainability, who it impacts, and how shareholders are factored into the equation.
Definitions matter in the ESG space. For organizations such as Measurement Matters, sustainability is a holistic concept that looks at the impact of actions across social, environmental, and economic elements. For a global company like Walmart, there needs to be a long-term plan, placing nature and humanity at the center of business practices. On paper, these definitions are a good starting point—they cover the essential areas of change needed to promote sustainable development. But we are living in a time in which sustainability has oftentimes been hijacked by marketers persuading consumers that organizations are environmentally friendly. So what does it mean to be truly sustainable and how do companies get there?
The modern roots of today’s global sustainability movement can be traced back to 1983 when the United Nations tapped former Norwegian Prime Minister Gro Harlem Brundtland to lead the World Commission on Environment and Development in an effort to harmonize ecology with economic and social prosperity. The Brundtland Commission released its final report, Our Common Future, and famously defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” This definition has continued to guide the holistic development of sustainability and the approach of businesses when examining whether their own practices are adhering to this principle.
There is a broad recognition that ‘business as usual’ cannot continue if we are to achieve the UN Sustainable Development Goals. There’s a similarly accepted adage: You can’t fix what you can’t measure. Across all sectors, experts have weighed in on the best practices to measure and achieve sustainable development, resulting in the emergence of a plethora of Sustainable Reporting Tools. One of the most prominent reporting frameworks available to assist businesses is that of the Global Reporting Initiative (GRI). Despite the successes of these guidelines, they allow discretion in terms of what information they disclose on the basis of subjective belief that the information is material. This allows companies to pick and choose any data they divulge, limiting any transparency around the standards.
Other frameworks include that of Boston Consulting Group, an organization that has been a key proponent of embracing collaboration for “total societal impact” in their approach to sustainability. Their selection as the Consultancy Partner of the 26th UN Climate Change Conference of the Parties (COP26) highlights the wave of initiatives that are coming to light in an effort to transform business practices and drive collective action towards sustainability.
With such a vast range of sustainability reporting tools, it can be difficult to compare practical results and the effectiveness of frameworks across the board. Each provides different information and standards, so there lacks consistency when assessing ESG practices. On the other hand, however, their own strengths and values are suited to unique business needs. It is not an easy balance to navigate, but whilst it is important to recognize that each company has its own impact and processes, it is equally important to recognize that a major limitation to measuring ESG practices is a lack of consistency around the metrics used.
As a result, it’s challenging to get a holistic view of an industry or value chain and to track meaningful positive impact, or to compare individual companies within industries. This lack of accountability creates space for clever corporate positioning and regulatory inconsistencies. In this case, standardization may be a key missing piece to assist with regulating sustainability across businesses and enabling greater transparency around available data. A standardized measurement system requires collaboration, but also a willingness to commit to principles put forward by the global community.
For sustainability to thrive, it’s crucial that businesses meet their sustainability goals. A report by The Carbon Majors Database in 2017 found that just 100 companies were responsible for around 71% of all industrial emissions since human-driven climate change was officially recognized, in 1988. On paper, businesses may be willing to preach sustainability, but real environmental leadership is now required.
A clear commitment to ESG practices is essential for private sector actors to mitigate risks and thrive commercially. It should not just be approached for morality or marketing purposes, but for bottom-line results, as well. Clear measurements and a standardized evaluation tool lie at the heart of this transformation.