Where are we now?
I recently read a book, The MultiCapital Scorecard by Martin Thomas and Mark McElroy, which opened me up thinking of organizational performance in new ways. It speaks broadly about the shift away from organizations being evaluated on their financial vitality, toward brand reputation and corporate social responsibility. The most shocking stat was that 80% of a business’ stock value is now determined by the company’s intangible assets. Indeed, we live in a transitional era, and it’s for good reason!
As a global community, we are consuming natural resources at 1.5 times the earth’s ability to supply these critical goods. The effects of this overconsumption is increasingly becoming evident through social injustices and environmental degradation. Luckily, there are many individuals, organizations, and policy makers who are conscientious of these interconnections and are starting to do something about it.
Several supportive claims are made in the book about the changing attitudes of investors and stakeholders of major corporations. The overall theme is that people are demanding organizations to place equal weight on their social, environmental, and economic impacts. I personally see these demands as the single greatest opportunity for integrating sustainability principles into the DNA of capitalism.
What barriers stand in our way?
Let’s not fool ourselves, the climate problems we face are imminent and unprecedented. Developing the best policies and practices that lead us toward sustainability is going to take some time to figure out and implement. That said, the most important thing is that we stop ignoring the issues and start making progress wherever we can. As the authors state many times in the book, “it is better to measure performance against debatable sustainability norms than no sustainability norms at all.”
Initially, there are two major challenges that organizations must undertake:
- They must acknowledge they’ve been operating in an unsustainable manner, and there are many ways to improve.
- They must recognize financial reports are way too narrow a framework to address stakeholder concerns, and that it must expand to include non-financial performance metrics.
The next step is to begin a context-based dialogue with your stakeholders about how to best move the organization forward. Rethinking organizational performance is no easy task, so having some kind of industry standards to compare against can be helpful in this process. If “sustainability” is what we are after then perhaps we need to start asking these types of questions:
- What is an appropriate level of resource consumption?
- How much waste production is too much?
- Are we becoming less unsustainable?
- Have we identified all areas of significant impact from our operations?
- Do we need to adjust our standards of performance?
Encouraging a culture that continually improves policies and practices to fundamentally reduce our unsustainable behavior seems a simple concept, but in essence goes against the foundations of capitalism. We must overcome these age old philosophies by placing greater significance on the triple bottom line.
How do we get started?
Context-based performance metrics need to be relevant to all stakeholders (e.g. investors, employees, community members, the environment, etc.), so we must start by engaging in constructive dialogues with these groups. Together, we can best define the organization’s most important impact areas. It is then up to the leaders of the organization to determine how they will evaluate themselves (i.e. sustainability norms) and disclose that information to stakeholders.
Each impact area should take into consideration both a local and global context while setting sustainability norms. Where some norms, such as “100% renewable energy”, may be obvious, other ones will be the result of stakeholder input and creative thought processes. These norms are the benchmarks for which an organization can rate their sustainability performance over time.
The MultiCapital Scorecard is a performance measurement system intended to guide an organization’s decision-makers toward sustainability. As they get closer to achieving each goal they should earn progress points to recognize and reward performance along the way. The authors of this book have made the scorecard a free resource and encourage others to incorporate it into their strategic planning. For a more detailed review of the scorecard and the value it can bring to your organization, contact Traverse Advising for a complementary informational session.