Guest Commentary by Bill Baue, Contributor and Curator, The Murninghan Post
The TakeAway: Corporate sustainability ratings and reports don’t really tell us if a company is sustainable, but sustainability footprinting takes a step in the right direction.
I challenge you: name a corporate sustainability rating that earns its title—namely, by rating a company’s actual sustainability. Or a corporate sustainability report that reports whether a company is really sustainable. In other words, do they tell us if the company is doing its part to ensure future generations can meet their needs (to riff on Brundtland) and to preserve a planet similar to the one where we developed our civilization (to riff on Hansen)?
Many ratings and reports tell us how much carbon a company emits, or water it uses, to cite two prominent issues. Great! Phase Three of SustainAbility’s Rate the Raters project rightly commends raters who clearly identify their objectives, and the goal of pushing for incremental advances in corporate environmental, social, and governance (ESG) performance is laudable (and may even be profitable, as many raters seek to show.)
But this approach falls short of a more necessary and transformative goal: telling us whether these emissions and water use are sustainable – in the thermodynamic, biological sense (to riff on Hawken) – for the company and the world surrounding it. Will its shrinking carbon footprint do its part in stomping down global emissions below 350 parts per million? Does its water footprint across all facilities allow aquifers to replenish sufficiently for locals to continue to clean their clothes and quench their thirst perpetually?
The terms footprint and do its part introduce three key concepts missing from most sustainability ratings and reports: context, impact and proportionality.
In the popular vernacular, the term footprint has become synonymous with measuring extent – the amount of carbon emitted or water used – but embedded in the underlying concept of the ecological footprint is the notion of gauging effect as well. Coined by William Rees and Mathis Wackernagel in the early 1990s, ecological footprinting “compares human demand with planet Earth’s ecological capacity to regenerate”.
Corporate sustainability ratings and reports do a pretty good job on task #1 (measuring extent), but essentially ignore task #2 (extrapolating effect). Odd, because the Global Reporting Initiative G3 Reporting Guidelines call for a first step of Defining Content that reports Sustainability Context.
“This will involve discussing the performance of the organization in the context of the limits and demands placed on environmental or social resources at the sectoral, local, regional, or global level,” says GRI. “For example, this could mean that in addition to reporting on trends in eco-efficiency, an organization might also present its absolute pollution loading in relation to the capacity of the regional ecosystem to absorb the pollutant.”
If this were finance, we’d see a ledger with revenues, but no costs.
“It’s like bookkeeping for our finances: if we don’t know how much we earn and how much we spend, it’s hard to know whether we go bankrupt or not, and the same thing is true for our ecology,” Wackernagel says. “If you don’t have basic tools to understand the resources we use compared to what is available, it’s hard to avoid ecological bankruptcy.”
Ironically, Wackernagel applies the footprinting methodolgy to nations on the one hand and individuals on the other, but skips the intermediary step of companies—perhaps the most powerful actors with influence to tip the balance away from – or further toward – what Wackernagel’s Global Footprint Network calls “overshoot.”
It’s high time to right this oversight, by applying a footprint approach to corporate sustainability rating and reporting. Call it corporate sustainability footprinting, or simply sustainability footprinting, to gauge company contributions to achieving (or scuttling) sustainability.
To determine a company’s sustainability footprint, we need to return to the do its part question. Or, to use the wonky term, proportionality: what is the company’s proportional responsibility? If we consider humanity collectively responsible for achieving sustainability, then a company represents a slice of that pie: the number of employees divided by overall population (more precisely, employees spend only part of their days working for a company, so we’d need to account for that.) Another angle: a company’s proportional contribution to gross domestic product (I know, I know, GDP is a terrible yardstick for capturing the full spectrum of productivity – more on that below – but the point here is to approximate a portion.)
These are two approaches taken by Mark McElroy, who developed the Social Footprint methodology that takes a context-based approach that Ben & Jerry’s and Cabot Creamery have used for several years to measure their sustainability footprints.
“Context-based metrics are the first serious attempt, in my view, to create a methodology that will actually help us deliver sustainable performance,” Ben & Jerry’s Social Mission Coordinator Andy Barker told me. “I see the metric as the first step toward really taking the challenge of sustainability, properly defined, seriously.”
Nobel Laureates Joseph Stiglitz and Amartya Sen agree.
“[T]he time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people’s well-being. And measures of well-being should be put in a context of sustainability,” say Stiglitz and Sen in a September 2009 report commissioned by French President Nicholas Sarkozy to envision an alternative to GDP for measuring economic well-being. “At a minimum, in order to measure sustainability, what we need are indicators that inform us about the change in the quantities of the different factors that matter for future well-being. Put differently, sustainability requires the simultaneous preservation or increase in several ‘stocks’: quantities and qualities of natural resources, and of human, social and physical capital.”
And there’s the rub. How do we determine the quantities and qualities of natural, human, social, and physical capital stocks needed to achieve sustainability (McElroy calls them thresholds)? 350 represents one threshold, the UN Millennium Development Goals advance others. But generally speaking, the world lacks commonly agreed thresholds across the broad spectrum of factors that determine sustainability.
One exception: Oxfam America’s Private Sector Department is developing a Poverty Footprinting Methodology that looks at how business improverishes people – and asks how it can enrich them instead. Taking more of a qualitative than a quantitative approach, Poverty Footprinting examines the impact of five private sector areas (Macro-Economy, Value Chains, Natural Resources Use, Product Development & Marketing, and Policies & Institutions) on five dimensions of poverty (Standard of Living, Health & Well-Being, Diversity & Gender Equality, Empowerment, and Security & Stability). In other words, Poverty Footprinting applies to the social dimension the same approach taken with environmental issues such as carbon and water, weighing impact against resilience.
I’ve wondered why GRI doesn’t enforce – or even provide guidance for – taking this impacts and outcomes approach to reporting Sustainability Context. GRI Cofounder Bob Massie patiently explained to me that, early on, GRI chose to advance a reporting standard, akin to GAAP, and not to advance norms for achieving sustainability. So perhaps we need another multi-stakeholder initiative to create consensus definitions of thresholds for measuring sustainability footprints. Or perhaps GRI’s G4 revision process will introduce guidelines for how to measure and report Sustainability Context.
And perhaps Phase Four of SustainAbility’s Rate the Raters research series, as it explores “how ratings need to evolve to add greater value,” will map out how sustainability raters can start, well, rating sustainability. Indeed, one could argue that there is no greater value than steering our business-as-usual trajectory of ecological, social, and economic bankruptcy toward a truly sustainable path.