BUS604: Innovation and Sustainability

Since the 1940's economic data has trumped all other data.

For the most part, corporate strategies have been dictated by profit margins and stock prices, and national policies have been dominated by GDP growth forecasts. Yet, as is well known now, profit or GDP tells decision-makers nothing about the health of a workforce or nation; it says little about the dependencies on other 'capitals'; and gives few clues of emerging trends, risks, or opportunities. 

Fragmented And Disconnected Data

The good news is that there has been a surge in sustainability data and measurement frameworks in recent decades. Investors, business, municipalities, governments, global institutions and communities are gathering information on environmental, social, and governance issues at an unprecedented scale.

But the proliferation of different indices, metrics, and frameworks brings new challenges. Decision makers now have a dizzying array of frameworks from which to choose. There are over 2,500 metrics by which to measure sustainable supply chains viii. MWM has found that a business deciding to track biodiversity has over 34 frameworks to choose from; the government tracking inequality can measure it 19 different ways.

The lack of coherence between different reporting frameworks is particularly apparent for government and corporate reporting frameworks, which crucially undermines a system-wide response to the world's most pressing issues. As shown by MWM research into water reporting in India (see $\rho 19$), metrics to track sustainable water management are highly fragmented. While for business the reporting frameworks focus on extraction levels, at the national level metrics focus on infrastructure and contextual use of water, while at the global scale the emphasis is on access. As such, it is difficult for decision makers at any level - corporate, national, or global - to see what is happening to the broader water ecosystem and its users, and to respond accordingly.

At large, although there is more data than ever before, decision makers are blind to risks as they compound, or the opportunities as they emerge.

There Are Over 2,500 Metrics By Which To Measure Sustainable Supply Chains

Rise In Number Of Ways To Measure Sustainable Development Nationally

Figure 1: Increase in national sustainable development reporting frameworks

Economic Composite Indicators measure SD in a single index, by "correcting" aggregates from the national accounts (examples: GPI, ISEW, SNI, MEW). Non-economic Composite Indicators are also single indices which are constructed by using mathematical weighting techniques (example: CIW, HDI). The philosophy behind the Sustainable Development Indicator (SDI) Sets is that SD is considered to be a multidimensional phenomenon which therefore requires a suite of indicators rather than a single number (examples: Eurostat's SDI set and sets for Switzerland, France, Australia, Germany, and the Netherlands).

Dangers Of Oversimplification

Clearly, not all data collection can be standardized to feed into a single set of global sustainability metrics. The indicators used for business operations or at community levels will not always neatly transpose onto those used by national statistical bodies. Information collated at the global level cannot always be disaggregated to the individual enterprise or community.

Similarly, in the area of protecting ecosystems and biodiversity, nature represents a new frontier of commodification. Increasingly, nature-human relationships are caught between the yardstick of the market and overly- simplistic systems of national accounting - expressed in arbitrary units and monetary values. There are limits to putting everything onto a single balance sheet, where social, economic, and environmental costs become conflated, abstracted, and often traded off against one another.

Ultimately, there is a clear role for qualitative reporting and 'stories' to complement formal reporting, to fill gaps of composite indicators where social and environmental progress is not amenable to crude systems of measurement.

The Opportunity For Alignment

However, what is unique about the SDG framework is not only that it is applicable to all countries - but that it is outcome focused. As such it provides a compass by which to align existing and emerging sustainability frameworks and accounting methodologies with a set of objectives in sight.

One of the ways to help strengthen national reporting with corporate actions and reporting is through the 'capitals' approach. At a national level, this is being most comprehensively addressed through the UN Economic Commission for Europe/OECD/Eurostat work on measuring sustainable development. There has also been significant work in individual areas such as natural capital through the World Bank WAVES programme and UN-SEEA work to incorporate natural capital valuation into national accounts.

At the same time, more and more businesses are now re-evaluating their 'value' according to different capitals via initiatives such as the International Integrated Reporting Council (IIRC) and the Natural Capital Coalition (NCC).

The value of the universal SDG framework is that it can provide an indication of the ultimate purpose and progress of accounting against different capitals. As such, the underlying priorities that shape what information different stakeholders are collecting, and for what reasons, can be shared across different levels of activity (Figure 2).