Will Multi-Capital Corporate Reporting Take Off in 2016?
Companies are increasingly looking for better ways to report on sustainability performance, driven by customer and investor demands.
Last month’s COP 21 climate talks in Paris saw more than 100 companies including Ikea, Coca-Cola Enterprises, Walmart, Kellogg and Dell commit to set and report on “science-based emissions targets,” in line with what scientists say is necessary to keep global warming below the threshold of 2 degrees Celsius.
And by the end of 2016 a free, global sustainability reporting knowledge platform — the Reporting Exchange — will be available in open beta format. The platform, being developed by the World Business Council for Sustainable Development, the Climate Disclosure Standards Board and Ecodesk, is a response to changes in what consumers, investors and other stakeholders expect and demand from corporations, its developers say.
“We’ve seen that the changing expectations of corporate performance and transparency have catalyzed activity around corporate sustainability reporting creating an increasingly complex and fragmented reporting landscape which is difficult for business to navigate,” Rodney Irwin, managing director of the Redefining Value Program, told Environmental Leader.
Along these lines, a United Nations Environment Program report published in November, Raising the Bar – Advancing Environmental Disclosure in Sustainability Reporting, recommended “all companies should apply a context-based approach to sustainability reporting” and that “reporting standards/guidance bodies such as GRI, IIRC, SASB, CDP, etc. should integrate Sustainability Context more explicitly into their frameworks, for example by applying the concept of carrying capacities to multiple capitals-based frameworks.”
But, says Mark W. McElroy, co-founding principal at Thomas & McElroy and executive director of the Center for Sustainable Organizations, a truly multicapital-based corporate measurement and reporting system has been missing from the picture — until now.
McElroy and Martin Thomas, also a co-founding principal at Thomas & McElroy and a call4change consultant, have developed a scorecard to measure corporate performance called the MultiCapital Scorecard. They write about the scorecard in the Harvard Business Review and say it takes into account capitals that affect the social bottom line (human, social and relationship, and constructed capitals), the economic bottom line (internal and external economic capitals) and the environmental bottom line (natural capital).
The MultiCapital Scorecard is the world’s first integrated, multicapital- and context-based measurement and reporting system, McElroy and Thomas say.
“If you’re an organization that is interested in understanding the sustainability of your operations from not just a financial but also social and environmental perspective, this is a methodology that makes that possible,” McElroy tells Environmental Leader. “The MultiCapital Scorecard is an advanced implementation of what is otherwise referred to as context-based sustainability.”
Three companies are currently piloting the MultiCapital Scorecard — Ben & Jerry’s, Procter & Gamble subsidiary New Chapter and dairy food producer Agri-Mark, aka Cabot Creamery Cooperative, and the partners are looking for additional companies to participate. They’re also writing a book on the topic, which will “make the explanation of it more readily available,” McElroy says. “The methodology itself is open source. Anyone is free to use it.”
The pilot programs have uncovered two issues that need to be addressed to fully measure and report on multiple capitals. First, the data needed to populate a MultipCapital Scorecard wasn’t always readily available.
“For example, in case of Ben & Jerry’s one or two of the metrics we have identified called for information about the environmental circumstances of their suppliers who are in far-flung parts of the world,” McElroy says. “Ben & Jerry’s is simply not necessarily in possession of the descriptive information we are looking for. That’s a case where we took that metric and put it on the shelf with the understanding that they would undertake to improve their own ability to collect the data that the scorecard called for.”
The second is more of a structural issue. “Organizations are typically not organized from a management standpoint in terms of triple bottom line accounting,” McElroy says, adding that both of these lessons learned during the pilot programs will help improve the scorecard. “What it tells us is that in order to do a better job of measuring and reporting performance, some work needs to be done with respect to data collection and also internal organization.”
Natural Capital Protocol
In other efforts to help businesses improve their reporting — and subsequent decision making — to include sustainability metrics, the Natural Capital Coalition says more than 50 companies including Coca-Cola, Dow Chemical and Shell, are now participating in its pilot program, testing the Natural Capital Protocol, which aims to standardizing how businesses’ relationship with nature is measured and valued.
The Coalition released the latest draft of the Natural Capital Protocol in October and says it has many more companies lined up to pick the Protocol up when it launches in July. The Coalition’s membership continues to grow by two to three new members a week and is now at 180. The group says it will make “some high-profile announcements” of new members in coming weeks.
“We have been pleasantly surprised by the uptake of businesses piloting the draft Protocol, which now stands at over 50, with many more lining up to start when the first version is released in July 2016,” Natural Capital Coalition executive director Mark Gough told Environmental Leader. “The businesses tell us they know that when they make decisions at the moment they can’t include their relationship with nature and that the benefits of the Protocol are that it helps them to do this in a standardized way, reducing potential risks and improving performance. A report on the findings from the piloting and the broader consultation will be available in July 2016.”
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