Consistent and transparent financial reporting standards have helped investors measure business success for decades, but we need to expand their scope to mobilize the power of capital markets to help build a more sustainable future. What gets measured gets done, and with the launch of the ISSB and the publication of its first proposed standards, we’re that much closer to achieving transparency of sustainability performance.
KPMG just released its first update to Our Impact Plan, a catalogue of our organization’s ESG commitments and a roadmap of how we’ll meet them. By using the World Economic Forum’s stakeholder metrics as a guide, we now have a much clearer understanding of our business and are having detailed conversations about where we need to go. And ultimately, we are making better decisions that I am sure will help to strengthen our global organization over the long term for the benefit of all our stakeholders.
As the world faces many serious challenges — from climate change and nature loss to social injustice and inequality – business has a responsibility to change, but also a real opportunity to lead on important issues that can help to shape future prosperity for all. Consistent and transparent sustainability reporting will certainly help, and the businesses that start today will be better off tomorrow.
We need a ‘science-based target approach’ to Social reporting, too- Ruth Harper, Chief Sustainability Officer, ManpowerGroup
We are inching closer to shared measurement around “Environment,” but when it comes to “Social” reporting, we are still at the beginning of this journey.
Metrics like the IBC’s Stakeholder Capitalism Metrics could be seen as another ingredient in the alphabet soup of reporting, but more optimistically interpreted as a significant nudge forward, helping to drive harmonization of standards, metrics and reporting and, ultimately, scale our collective impact.
We need a similar science-based target approach to the “Social” reporting as we have the “Environment” reporting – just without taking as many decades to do it!
The more CEOs, CFOs, CSOs and other business leaders leverage data that demonstrates target setting, milestone monitoring and progress reporting, the better. And importantly, the more our ambitions and achievements can be correlated with attracting and retaining the best talent while demonstrating business effectiveness and results, the better for ESG.
ManpowerGroup’s Working to Change the World Plan is fully aligned with our business plan to ensure we can deliver on our ESG promises. For E, we’re delivering on our validated science-based targets by addressing our scope 3 emissions and are currently piloting work to measure and ultimately reduce the environmental impact of our millions of associates we place into work every year.
‘Link compensation to specific, numerical targets’ – Michael Froman, Vice Chairman and President Strategic Growth, Mastercard
There has been significant progress in standardizing reporting on ESG issues, but there is still a lot of work to be done if we are to use the tools of disclosure, metrics and ratings to encourage the kind and scope of action needed by the private sector.
And while there has been much discussion about the role of the corporation in society, the standards for measuring a company’s impact on society — the “S” of ESG —lag behind other metrics.
If we want to incentivize corporations to include the goal of progressing positive social impact in their business strategy, we need to develop metrics that reflect that.
That’s hard. It’s difficult to compare what one company does to broaden financial inclusion to what another might do to further education. Yet, that is precisely the type of commitment we want to encourage. It is going to take collective effort among companies, accounting firms, investors and regulators to get this right.
Even as we work toward that goal, one step we can each take is to embed sustainability goals into the core of our business and culture – that includes how we operate, what we measure and how we reward employees.
At Mastercard, our ESG strategy belongs to everyone. That’s why we recently announced that for all employees globally, we’re now linking compensation to specific, numerical targets linked to our ESG priorities: reducing emissions in accordance with our approved science-based targets, engaging with additional suppliers on their decarbonization, increasing financial inclusion and narrowing the median gender pay gap.
With shared accountability, we can better connect the “why” of our purpose to the “what” of our fundamental business strategy to ensure we deliver long-term growth for our shareholders, build trust with stakeholders and contribute to a more equitable and prosperous world. Together, we can work toward a sustainable, inclusive economy.
‘Document the financial impact of non-financial indicators’ – Daniel Schmid, Chief Sustainability Officer, SAP SE
For business leaders to make appropriate decisions for a company’s long-term success, they need access to comprehensive data and performance metrics that go beyond only financial measurements. This non-financial data enables holistic steering and reporting, providing the visibility required to mitigate negative ESG impact and increase positive ESG impact.
The broad range of reporting frameworks and standards, as well as national and transnational regulations, presents spiralling complexity which limits the ability to compare performance across companies and industries. Consolidation is needed to avoid ESG reporting becoming an end in itself and distracting companies from investing their resources in sustainable value creation.
Double materiality assessments enable leaders to regain focus by identifying a company’s key social and environmental impacts to be addressed. Additionally, applying an impact measurement methodology like that from the Value Balancing Alliance allows the calculation of ESG impacts in monetary terms which can be integrated into business decision-making.
Documenting the financial impact of non-financial indicators has helped SAP move closer to achieving our sustainability goals. The approach paves the way to achieving goals like our commitment to net-zero emissions by 2030. Our impact measurement experiences also feed into our investments in digital technology and solutions, such as the SAP Sustainability Control Tower, to provide transparency and reporting with greater speed and accuracy.
‘Consistent, comprehensive and transparent reporting’ – Scott Tew, Vice President, Center for Energy Efficiency & Sustainability, Trane Technologies
With a heightened focus on how companies combat climate change – particularly reporting greenhouse gas (GHG) emissions – businesses of all sizes must prioritize producing consistent, transparent and measurable sustainability performance data, holding them accountable for environmental progress with the same vigor as with financial performance.
ESG reporting is one of the most impactful avenues for Trane Technologies to demonstrate actionable progress toward our 2030 Sustainability Commitments, as well as long-term environmental and social targets. The 2021 ESG report, Transform Tomorrow, Today, also details our decision to link executive and senior leader compensation to ESG metrics, including emissions reductions, women in management and diversity.
With a longstanding history of industry leadership in voluntarily delivering comprehensive and informative data for investors, customers, employees, NGOs and other stakeholders, our annual ESG report adheres to more frameworks – including the Task Force on Climate-Related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI), the Sustainable Accounting Standards Board (SASB) and the World Economic Forum Stakeholder Capitalism Metrics – than any other company in the sector. This provides a deeper level of transparency for diverse stakeholders seeking to understand and review our performance, processes and data – and their link to the company’s strategy and broader societal narrative.
Many companies have yet to calculate their entire emissions footprint, with others selectively sharing only portions of their environmental and social impact data. We urge business around the world to join us in dedicating the resources necessary for consistent, comprehensive and transparent reporting – enabling a more environmentally and socially conscious future for generations to come.
This article was first published by the World Economic Forum.