5 Benefits of a Gold-standard ESG Benchmark

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In my last blog, I positioned a benchmark that would be used by raters and rankers of companies’ sustainability progress, and by companies themselves. Rather than assessing a company’s environmental, social, and governance (ESG) performance against its past performance, its ESG goals, or against other companies, we would assess how much closer it is to being a truly sustainable business, as defined by a fourth gold-standard ESG benchmark. Let’s suppose we could define a small set of science-based key performance indicators (KPIs) for that ESG benchmark. Would that be a good thing or a bad thing? Here are five benefits of having a gold-standard benchmark for a truly sustainable business. 1. It addresses the confusion factor One lament in the business community about sustainability is that it is difficult to understand. It is too complex and has too much confusing terminology. A gold-standard ESG performance benchmark outlines clear, measurable sustainability criteria. It promotes sustainability literacy, since its criteria are expressed in relevant, measurable, science-based terms. The benchmark blows the fog away from the finish line in a race to the top. Read More

The Fourth ESG Benchmark

ESG Benchmarks When organizations assess how well a company is doing on its sustainability efforts, they need something to compare it to: they need a benchmark. Today, raters and rankers of companies’ sustainability progress use three benchmarks to assess company performance on environmental, social, and governance (ESG) factors. These benchmarks are also used by companies themselves in their sustainability reports. 1. ESG performance in a baseline year The company compares its performance today on an environmental or social issue to its performance on that issue in a previous year. Progress is expressed as a percent improvement, or is plotted against several previous years to show a trend line. Read More

It’s Time We Measured What Matters

17013293_s Integrated reporting encourages companies to track the value they are adding to, or subtracting from, six capitals:
  • financial,
  • manufactured,
  • intellectual,
  • natural,
  • human, and
  • social.
That’s an excellent idea, but we are challenged with how to assess natural, social, and human capital. As we get serious about ensuring conditions for a flourishing human society on this planet, those capitals are the ones that matter most. My plenary talk at Sustainable Brands ’13 in San Diego earlier this month was entitled, “Enabling the Renaissance: The Perfect Storm in True Cost Accounting.” Using the metaphor of the Iceberg of Company Value, I explained why we need to get better at measuring and tracking the intangible reputational value of companies, since it represents about 80% company market capitalization. It’s too big to ignore, especially as we migrate to Capitalism 2.0. Measuring how the company is protecting and enhancing human, social, and natural capitals will help us better assess its “non-financials.” Read More

Capitalism 2.0

  Capitalism The game of business as we have played it for the last 150 years cannot continue. We are primed for Capitalism 2.0. The current rules of the game reward companies that privatize benefits and gains, socialize harm and losses, and under-price risk. As Peter Bakker, president of the World Business Council on Sustainable Development, said in a speech at The Prince's Accounting for Sustainability Forum in December 2012, “Business as usual is not an option for a future-proofed economy in which nine billion people live well within the limits of the planet by mid-century.” Read More

Five ESG Standards Will Awaken Capital Markets

harmony on the planet Last week’s blog outlines my four strategies to help capital markets embed environmental, social, and governance (ESG) strategies into the mindset of executives. I briefly referenced five concurrent ESG standards initiatives that are in play in capital markets to make this happen. They will lead to an ESG mindset in lenders and investors. Following the axiom that “what interests capital markets fascinates executives,” this will precipitate an ESG mindset in company executives. The five ESG standards efforts are shown in the adjacent figure, beside their corresponding element of the capital market information ecosystem. I describe three of them in my April 15 article for Network for Business Sustainability (NBS) entitled “2015 Will Bring ‘Sweeping Changes’ to Capital Markets.”  They are:
  • A New Ratings Standard: The Global Initiative for Sustainability Ratings (GISR)
  • A New Voluntary Reporting Framework: The International Integrated Reporting Council (IIRC)
  • New Regulatory Reporting Guidance: The Sustainability Accounting Standards Board (SASB)
Read More

Four Strategies to Use Capital Markets as a Force for Good

accelerating corporate sustainability adoption practices We need sustainable businesses if we are to have a sustainable world. That means we need strategies to use capital markets as a force for good and we must embed environmental, social, and governance (ESG) thinking in executive’s mindsets. For the last 12 years, my strategy has been to appeal to executive’s profit motive. I thought if I could help them see how more profitable they could be if they embraced sustainability strategies, they would stampede to make the necessary transformation. That’s what my four books, two DVDs, worksheets, dashboard, and hundreds of talks have been all about. How’s it going so far? Okay, but way too slow. We need to add a push strategy to our pull strategy. We need to wake executives up with the down-side risk of not doing more, to compliment the up-side opportunity of higher revenue, lower expenses, and higher employee productivity and retention. The business case simulator helps companies quantify 14 risks to profit from inaction, but I should have highlighted the mother of all risks: more difficult access to capital when lenders and investors prioritize ESG factors in their company assessments. Capital markets are gate-keepers to corporate interest in ESG. Here are four strategies to make them a force for transformational change. Read More

5 Reasons I Low-Ball Employee Productivity in the Business Case for Sustainability

As explained in The New Sustainability Advantage, sustainability strategies and programs result in higher levels of employee engagement. Engaged employees are more productive. They want their company to succeed so that it can continue to add value to the community and ecosystems which the employees care about. Engaged employees are the secret sauce in the business case for sustainability. When employees are engaged, magic happens. Read More

Sustainability Business Case # 3: Share Price

In previous posts, I identified three ways to frame the business case for sustainability: improved profit; high return on investment (ROI); and higher share price/market valuation. I've already illustrated that the profit-based business case and the ROI-based business cases are very strong. Now let’s discuss that final rung: whether a case can be made that sustainability initiatives will have a positive effect on market value/share price. Read More

Sustainability Business Case #2: ROI

In my last post, I identified three ways to frame the business case for sustainability, including through improved profit. The profit-based business case is robust and smart sustainability initiatives can improve profit by at least 51 percent to 81 percent within three to five years while avoiding a potential 16 percent to 36 percent erosion of profits if they did nothing. Now let's consider the ROI perspective. Read More

Sustainability Business Case #1: More Profit

How would we know a business case for sustainability if we saw one? The strength of any business case depends on agreement on what we mean by “business case”—how we’d know one if we saw one. These headlines have caught my eye in the last few months [and these are just five of many more with similar wording]: Read More