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Winter Solstice – will the US see the light again?

A couple of days ago I wrote about a new collective consciousness to saving us on this planet (my 2017 review), a new level of enlightenment by many that find a higher level of connectedness due to the arising awareness of the need for a Green, Inclusive and Open Economy. We all know our life conditions shape our level of consciousness, and this year in particular has been hopeful, too many prompters show the need for a new world order embracing this new paradigm. And more and more friends show up to make it happen.

Today I want to write about the ‘dark side’. For a year now we have to witness the decay and destruction of political culture in the US under the Trump regime. Not that it was so much better before (it was different though), but never was the level of ugliness, really an oath of manifestation of the political hygiene, so devastatingly visible than under Trump. Us comrades in sustainability have never thought we’d see the Grim Reaper of climate change arising from the ashes of old ideology so drastically and so quickly. It is as if we’re living in one of the worst nightmares since Trumplethinskin declared that the US would step out of the Paris Climate Treaty, a massive success story of the nations of this world, hard fought for for many years. The Paris Climate Treaty, as we all know is just the basis of more that needs to happen, not the end goal of global climate management.

Even more devastating is it to witness and being dragged into the endless and useless discussions between ‘the Dems’ and ‘the Reps’ fanatics. If you follow discussions on the US news channels or on social media it leaves you speechless, it’s purely one big war out there. Every aim to seriously discuss an issue is deteriorating within minutes into an ideological fight of left against right, of liberals against the GOP, and easy for the right-wing movement to position themselves as the new gods of unity, declaring America first, even from the balconies of the White House. My stomach regularly rebels listening to all that stupidity.

There are clearly patterns in such discussions that I took part in this year. It always goes like this:

  • Somebody offers a totally unsubstantiated opinion (Islamics are terrorists, the UN gets way too much money from the US, carrying guns safes lives, climate change doesn’t exist, trickle-down economics would save us, so make the rich richer, we need our (coal) jobs back, blahblah…) to justify ‘America first’.
  • When asked to substantiate these opinions through facts, new and totally unrelated new opinions are thrown at you (you feel that that someone felt forced to spend 60 seconds on research, mostly digging up some wicked unsubstantiated news site).
  • When revealing that the new opinions are also unsubstantiated you are called names, nut -head and idiot are some of the softest ones. And of course you are an arrogant liberal.
  • When I then say that I am simply a European citizen with a decent political education, taught in political discourse, and also a German that has learnt how to detect fascist tendencies and indications of dictatorship, the answer is: so you’re even a nazi, you should shut up anyway. You have no right to exist, you should be dead.

Well, those are the moments when my family thinks I should not have started these shitty conversations at all. But then I am reminded of other people I talked to or seen in documentations that explained the slow demise of the American Midwest, the death of the steel, mining, and automobile industry, the drying out of the corn belt (also the bible belt), connected with a drying out of decent education, medication, and normal socialisation. Those that feel that the establishment in Washington has forgotten them a long time ago and that the ‘swamp needs to be dried out’. Those that suffered in the financial crises that destroyed vast parts of the American Middle Class. So yes, there are reasons that started with Reagan in the 80’s that are now exploding under Trump and produce cracks in society, even within and cutting through families. Yes, I understand all that, and many more reasons to be annoyed about the political class. So I should be more humble and better understand where these people come from.

But then I again shiver when I the see how this president shamelessly misleads these American people while his voters flee into their ideologies that produce all that bullshit as exemplified above. They, who applaud more the more foul-mouthed the flash bangs out of Trump’s Office are, how on Earth can they ever return to a minimal decency and humbleness in political culture?

I am at the point where I think that the current generation of Trump lemmings actually are ‘the lost generation’; vulgar, dangerously gun-loving, and brain-washed. Totally hopeless. And I feel sad for them. As a German one is very uncomfortable to think someone like Trump can still continue his bedevilled manipulation game, and that only the 2018 mid-elections will be bringing salvation. Or one has to wait for special investigator Mueller to release the big bang proof of Russian conspiration. Not even to think of how much more damage is possible in foreign policy, although (apart from North Korea and the Middle East) the world has more or less turned to a ‘World against Trump’ pattern there. The US is more or less alone in foreign context. A laughing stock, just with too much military budget, so one has to take every fart coming out of the White House seriously.

I am also at the point where I think the ‘organised resistance’ that started to become active everywhere in the US after the Trump disaster is a failure for the short-term ‘Trump must go – NOW’ action.  Hundreds of thousands on the streets – oh that’s fake news anyway. Demonstrations – yeah they happen all the time and achieve nothing. Maybe in the beginning, but where are they now? Unfairest of all tax bills – hello, where are you guys?

What does all of that leave me with? Education, education, education. A new generation that learns about the other side – renewable energy, innovative social entrepreneurship, working at Benefit Corporations, doing project work in the circular, sharing and collaborative economy, reinforced quality in the education, medical and social sector. Continuing to individually decompose all unsubstantiated factless opinions, but also turn around and go when necessary. Believing in local change in cities and more and more states in the US that say ‘we’re still in (the Paris Climate Treaty)’, this is where most positive impact needs to happen anyway. This is where I also see the benefit and need of a longer-term ‘purpose-driven resistance movement’. Erase the two party system, a cancer in the existing political landscape, so learn from the hygiene a 4-5 party system that is dependent on coalition-building can produce. Reestablish views that ‘the other side’ isn’t the enemy, but a partner for nurturing good discussions that lead to accepted policy-making. And for me? I will continue to work dayin-dayout to make a Green, Inclusive and Open Economy a reality. That’s why I started Reporting 3.0. This is why I will relentlessly continue on that path. Until it’s there. Until the bullshit is over.

Happy winter solstice to all of my American friends. We’re in this together, and we’ll continue to be positive mavericks.

 
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Posted by on December 21, 2017 in Thriveability

 

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A new collective consciousness – 2017 in review

The last post on A|HEAD|ahead is from May 2016, this is 1.5 years ago. Did I lose appetite in writing? Not at all, but activities shifted. Many ideas first posted here, e.g. the 7-part series on the ‘new impetus’ for reporting (posted here between March 8 and May 11, 2016), advanced and made it into the Reporting Blueprint of Reporting 3.0. Since then I have written more than ever. The four Blueprints of Reporting 3.0 are each about 100 pages of packed research, insights, recommendations and tools for a new take on reporting, data, accounting and new business models, all content to be found at www.reporting3.org. The Reporting Blueprint (me as the lead author) and the Data Blueprint (authored by my colleague and friend Bill Baue) are released, the Accounting Blueprint (with Cornis van der Lugt as lead author) and the New Business Models Blueprint (with Bill and myself as co-authors) are still in the process for release at the 5th Reporting 3.0 Conference in Amsterdam on June 12/13, 2018, hosted once more by KPMG. In parallel we also posted a ten-part series on Sustainable Brands, now also available as an eBook here. By the end of 2017, and looking ahead to another important year for Reporting 3.0, I’d like to revitalise my A|HEAD|ahead blogging for those things that go beyond the purely professional Reporting 3.0 work, but not right away, so stay tuned for that. I’d like to start with a broad review of  what 2017 has taught me. 5 points come to mind:

  1. All research and reviews that we’ve undertaken in our professional work indicate that we need a new layer of institutions to solve our biggest problems. Luckily, this is already happening, and therefore I am happy to see a new collective consciousness arising in which many of the existing institutions also understand (often without admitting) that just being part of a puzzle doesn’t automatically lead to finalising the task of completing the puzzle. Examples are the foundation of a World Benchmarking Alliance, with the potential to create a streamlined and standardised way to compare truly sustainable performance; the creation of an Earth Commission (a program initiated by GEF, WRI, IUCN, WEF, IIASA and SRC), broadening the idea of globally applicable thresholds (carrying capacities) of all natural resources, and Reporting 3.0 itself as a pre-competitive and market-making work ecosystem to prepare for the necessary change of economic system design, potentially the biggest lever to not only rely on sustainability leaders, but to create scalability of impacts through incentivised followership. There are many more of these examples for sure, but these are closer to my and our work.
  2. As a result of this development there is now an even clearer articulation of the shortcomings of existing structures. While the business sector leans back and sings the choir of the SDGs and the Paris Climate Treaty as the ‘thresholds per sé’ upon which all action is now focused on, a more systemic approach shows that much more is needed beyond those given achievements. The SDGs lack a scalability potential as they mainly focus on a set of goals that aim to optimise a knowingly failed economic paradigm in which the rich get richer and the built-in hoaxes called ‘homo oeconomicus’ and ‘trickle-down-economics’ are still playing their disastrous game, happily embraced by e.g. the Trump regime in the US. They are tearing us apart in all means of life. Merely focusing on implementing the SDGs without tackling economic system design change is not creating the level of followership needed to create enough global impact at the level of speed that is needed. Alex Steffen has started a series of blogs on what he calls ‘predatory delay’, I recommend to read this one in particular. Aligned to this there is more and more recognition that we need to focus on a 1.5 degree (or below) global warming target than a 2 degree target if we want to escape the uncontrolled upward spiral of climate change. It is amazing to see how little perception is developing that the Paris Climate Treaty, even at 2 degree global warming target, is a deep and rough transformation agenda for businesses and that investors would be best suited to demand transition plans from the organisations they are invested in (an idea cultivated by Reporting 3.0 partner Preventable Surprises). Compare the urgency of speed to the reality, exemplified by the recent IIASA report ‘Two thirds of major emitting countries not on track to reach their climate targets’ when it comes to countries, so don’t expect things to be different in companies. The climate science itself is also very little connected to the economic system design change needs, at least there is an appeal to internalise external effects, but that plea is already 40 years old and since then bedevilled by economists everywhere. But, as #1 above shows, there is hope! I am however still mourning that there was not enough political will to demand a SDG # 18 – change economic system incentives towards regeneration and thriving.
  3. At Reporting 3.0, while developing and writing the Blueprints, we have decided to focus on building some necessary glue through what we call the Global Thresholds & Allocations Council. It became so blatantly obvious that the blind flight in sustainability is due to the missing implementation of sustainability context. Simply speaking there is much focus on the numerator data of an indicator that completely misses the denominators in order to be able to make a valid assessment how ‘sustainable’ any organisation on this planet truly is. Technically speaking we need a) science-based or norm-based thresholds (that is nicely linked to Kate Raworth’s ‘Doughnut Economics’, my recommended book of the year) in natural, social, human and economic capital spheres, as well as b) the globally/regionally/locally accepted allocations of those available capitals. It is amazing to see how much hardly everybody refuses to think of allocations while they happen all the time, but without proper thinking behind it. Partially the tragedy of the commons, but partially also cultural and educational blindness. Time to move on and open the eyes through a proactive and storytelling way should help pave the road ahead. Wish us luck in getting the GTAC up and running. At least having clarity around the data, levels and benefits of fulfilling the sustainability context challenge would already be a great success (in order to have a glimpse of an idea what ‘impact’ really means), the rest is purely political and societal will of wanting and getting used to this boundary setting as a pre-step to economic system design change.
  4. I have tested this throughout the year, and nobody really opposed: my answer to what ‘economic system design’ now practically means. A ‚grand design’ for the redefinition of economic system boundaries is hardly anywhere captured in its totality. There are existing pieces of the necessary patchwork covered in various fora, but the discussion among sustainability experts is close to non-existing when it comes to linking individual performance to economic system conditions. Language barriers, know-how barriers, a failure in addressing such topics to the right people within the organization to establish a proper discussion culture, lead to non-coverage. Deliberations from various Reporting 3.0 discussions about trying to reduce the complexity to an absolute but necessary minimum of ‚intervention points’ boiled down to mainly four areas in which economic system conditions and incentive structures need to change to allow for a green, inclusive & open economy, delivering market conditions that would automatically lead to minimally neutral, but more likely positive impacts:

    a) Adjusting cost accounting
    to cover the true cost of nature use and abuse, diminishing the ability of future generations to live a life with equal opportunities, respecting the idea of setting precautionary measures to ensure the intra- and intergenerational equity condition of sustainability. This has impacts on natural capital and manufactured capital and needs the monetization of the earth’s services, which is by far not a new topic. This won’t automatically lead to increased cost, a complaint often made by corporations, it will mainly be an incentive for true cost avoidance (not in the sense of ignoring external costs in the first place) in order to offer sustainable goods at a lower price than unsustainable goods. This would potentially help solve the stagnant amount of customers to buy the better – because (in the end) cheaper – sustainable goods. The same logic applies for social costs consequences that are often following the restrictions of nature overuse (see e.g. the current costs for the integration of climate refugees in many parts of the world).b) Introducing benefit accounting for the appreciation of positive impact, part of a total contribution system of accounting. This would include the monetization of positive increases in social capital, human capital, reputation capital and intellectual capital. The same applies for envionmental benefits, accounted for through natural capital and manufactured capital.

    c) Translation of these true costs and benefits into true prices
    and not keeping them hidden in shadow calculations. There are many companies that already use such shadow calculations as internal pricing mechanism, but do not add them to products yet. As said we expect innovative solutions to avoid the negative costs as a generic incentive to create net positive or gross positive products, so that they can be offered at a cheaper price than products that burden the environment or society. As a market mechanism absorbs the pricing signals it gets and prices also represent a value system the market mechanism is based upon, a capitalistic market system can indeed help customers ‚to do the right thing’ when choosing the cheaper options, meaning the more sustainable one. It can also allow the customer to still choose an unsustainable option, but at a price. This of course is only possible when industries accept and build these assumptions into a new global or regional level playing field. What holds us back so far are aspects of competition, power, and (partially accepted) abuse. We also see this part as a crucial necessity to achieve and to unlock the 25 years of expensive testing of how to change the behavior of customers. As long as pricing signals are the main driver for buying decisions, scalability of sustainable solutions can only be achieved through such market-based pricing levers.d) Changes in the incentive structures through taxation. This would mean  to signal a decrease of taxation on labor and an increase of taxes for non-renewable resource use. This can be done in combination with true costing mentioned above (leaving it partially to the regulatory power of governments to include every goods and services producing enterprise and let them become necessary followers of such taxation). This attempt also includes subsidies and other possibilities of tax cuts that can be granted for sustainable behavior. Of course, it would be beneficial to discuss these movements on regional and global scale and insert them in bilateral and multi-lateral trade agreements, an area of utmost friction between the different continents and political forces, but we can’t refrain from the fact that if business asks for it on the basis of creating fair and equal level playing fields, it can be done.Summing up, we see a specific advocational role for the already often quoted ‚leaders in sustainability’ and governments as the legislatory power to support societal consense through necessary laws, representing mainly the ‚bottom line’ of such new level playing fields. When corporate leaders explain the need that everybody in their industry must be following their lead, a voluntary solution will most likely not move the whole industry. Stepping into such a change agenda doesn’t imply a total switch at a certain point in time, a staggered approach following the convention building and new (academic and innovation) insight. We acknowledge the fact that this is most likely a ‚generational issue’, but we also recognize we only have one generation left to make those necessary changes. It is therefore necessary that end goals and timelines need to be negotiated from the outset.
  5. Closing this post and referring back to the starting point about a growing collective consciousness of what is needed above and beyond existing institutional design, this year has been revealing on many other fronts. It is strange to see how the existing economic paradigm is keeping us hand-cuffed. This reality does not even stop at the level of NGOs and foundations, those that once started out to ‘save the world’. These whole ‘sectors’ are so cut into issue-specific pieces that hardly anybody really oversees the whole systemic connectedness, even more a reason why it needs the pre-competitive and system-relevant thinking. I developed a very deep gratitude for the few that see ‘the whole’ and who funded the work of Reporting 3.0 in 2017 and will continue to do so in 2018. I have developed a rather thick skin for those that simply don’t want to learn, calling what we do ‘academic’ or ‘pie in the sky’. I tend to ask them what their alternative solution then is, and that is normally when it becomes rather quiet or they start to praise their own incrementalism which can be torn apart with 1-2 more questions (sorry if I stepped on anyone’s toes here). We have only seen the glimpse of the possibilities beyond ‘sustainability as usual’, of regeneration and ThriveAbility. I see how lost most are when you address aspects like prosperity and intergenerational equity, once essential but now forgotten preconditions of sustainability (we perverted the original concept to making it fit into an existing economic paradigm); or the understanding that incrementalism is part of the problem; or the fact that risk aversion in all sorts of hierarchies avoids seeing through; or the understanding that we suffer the ‘illusion of separation’ as my good friend Giles Hutchins has coined it and written a book about it (another recommendation to read). At Reporting 3.0 we have coined the mental mindset and world view needed to be that of a ‘positive maverick’. I think we can now say within 5 minutes if anyone fits that category or not. 2017 have brought us many new positive mavericks, others mentally unsubscribe. In a way this is clearing the mist.

I am thankful for the great meetings in 2017, the good discussions, the great team members at Reporting 3.0. I’d like to especially thank Bill Baue for thoughtful editing of a lot of what Reporting 3.0 published this year and thereby increased much extra depth into my writing; he is not just a wonderful friend and colleague to work with, he’s one of the most positive of all mavericks I know on this spaceship called Earth.

I wish all of you positive mavericks out there to have a bit of time to reflect on what we can achieve together in 2018. The look into our children’s eyes shows all the worth of it. They deserve it, and we need to deliver.

Happy Christmas and a wonderful turn of the year to you and your families!

 
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Posted by on December 19, 2017 in Towards 'sustainomics'

 

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GRI Reloaded – redefining the matrix for disclosure on sustainability performance – #GRI2016 conference reflections

It’s the week after the GRI Conference, the week when we attendees all return to our desks and reflect what we heard and learned. Clearly, GRI has set important steps, has changed its strategy towards becoming a standard setter, and has entered the digital age in earnest, finally. And yes, it was the networking that was valuable and to me it felt like a family gathering. There is no doubt about that. But are we convinced? Is this the big next thing?

Let me take you on my personal journey, and note my background with GRI from 1998 onwards, including time as a GRI staff member from 2002 until 2008. I am probably one of the very few that have been actively involved in developing all 4 generations of the GRI Guidelines. My feelings about GRI come deep from the heart, I sometimes joke about GRI as being a child going through its childhood and puberty, and now leaving home to truly build a life on its own, exploring new relationships, independent from the family’s own past. I’d like to present my thoughts in three sections:

Atmospheric distortions

In the run up to the conference I spoke to many people that I suspected going to GRI’s conference. I learnt that many of them decided not to go this year. When asking why, the answers were quite mixed, but they addressed various issues, and this continued in conversations at the conference as well:

  • The glamour is gone: earlier conferences had highlights that were missing this time. GRI had Al Gore, Queen Rania of Jordan, Michael Porter and BBC news anchors in the past. Seems like these ‚sustainability celebrities’ are indeed attracting numbers of participants and GRI might have purposefully decided not to approach such people this time, for various (good) reasons.
  • GRI’s communication about the new strategy, the new GOLD model of participation, the ‚exclusive clubs’ (Leader’s Group, Technology Collaboration, certified GRI practitioner process) isn’t yet resonating well with many, taking into account that most reporting organizations are also part of minimally half a dozen and up to a dozen other initiatives and networks. It all becomes complicated and hard to follow. Many out there who I talked to were surprised not to be ‚Organizational Stakeholders’ any more.
  • A feeling of cold commercialization of what was supposed to be a community that embraced its members, involved its stakeholders for a common purpose (and I’m not even touching the pricing strategy for the conference, especially the huge amount of ‚exclusive’ sessions and to-be-paid-for masterclasses). The true multi-stakeholder nature has moved a bit into the background. A new set of standards is now presented to the world, designed by the GRI staff and the GSSB. ‚Hold on a minute’, I heard often: ‚wasn’t there a working group process designing this? There suddenly is a public comment period about something I wasn’t even aware would come?’ Of course, just restructuring G4 into a set of standards doesn’t need a full multi-stakeholder process I said, but it wasn’t clear to many and a sign that information overload takes its toll.
  • The notion that GRI’s conferences tend to lose focus on the reporting aspect. Many sessions are broad discussions about sustainability with little rigor or facilitator focus to bring it back to reporting and/or disclosure, at least at the end of the sessions. Is it helpful to have sessions about who to trust more (governments or NGOs or corporations) when all of them have a role to play in adding and consuming data? While I thought this year’s conference was more focused when looking at the session’s titles, the discussions themselves often remained less focused.

Summing up this part, the words of a former high level representative of GRI’s governance bodies still rings in my ears, saying ‚GRI is losing its soul!’. Indeed, some say GRI starts to copy/paste what SASB has been doing in past years, has a strong bias with financial market players (although hardly present at the conference), is very North America and Europe focused, and communicates less with its (former) community. My own experience is that there’s now at least as much talk in conferences why not to follow GRI any more as there is talk to position it in the overall reporting regime, including IIRC’s integrated reporting approach, SASB’s industry specific disclosures, the EU Directive’s requirements, the rating organization’s questionnaires and the requirements of stock exchanges. I think we are at the point where GRI’s growing number of younger staff starts to forget about the roots of the organization, where the different departments within GRI have their own means of communication and that indeed some ‚soul searching’ would be recommendable. If 1.200 participants (including 200 speakers and GRI staff) mean ¼ less participants at the confernce (noted by many), it points to some homework to be done in re-emphasizing the true purpose of GRI. To many it isn’t so clear any more, before and after the conference, at least for those who went.

Necessities

A lot of what GRI presented at the conference makes a lot of sense to me. The move from Guidelines to standards helps to generate a more constant work rhythm for the GRI Secretariat, creates the ability to make changes to individual standards, given the advances of science or technology, becoming more strict in defining requirements besides recommendations and guidance. This could strengthen stock exchange requirements, legal requirements, governance aspects, assurance processes and simply enhance additional clarity away from blurry descriptions. It would also hopefully reveal still existing greenwashing in reports.

GRI finally also moved into the world of digital technology and data. The Technology Consortium – as was announced at the conference – will be broadened through the ‚Digital Reporting Alliance’, called to be the ‚vanguard of the next phase of sustainability reporting’. I agree with the need to ‚liberate’ data from pdf’s and use new technology to make the data available for everyone’s use. In the end, it’s the impact that data make, so the number of sustainability reports per se doesn’t really define the success of sustainability reporting. Rather, it’s the transformational capacity these data entail; it’s what the data reveals about those affected by corporate actions and how companies and their stakeholders alike can use these data to drive such transformation. This needs new approaches and open source platforms, like WikiRate, that have the ability to not only liberate data, but also to democratise the accuracy and use of data and put them into context through open data indicator development. It holds the power that an emission scandal like Volkswagen could be detected before it actually goes through the roof. eRevalue, a narrative screening ‚vacuum cleaner’ data service has shown that disclosure of emission data has gone down in the majority of corporate sustainability reports of automotive companies in the last years, except Ford Motor Company. Look at what has come out over the last half year and who is now accused of using emission control software and who is not: Ford Motor Company is amongst the few in the latter category. The power of data is just at the beginning of an explosion, so GRI’s aim to support data liberation through partnerships is important. Various sessions during the conference focused on data and transparancy.

The uncovered to-do’s

GRI’s conference took place at an important moment in time. After COP21 in Paris and all the follow-up happening to get countries adopting the agreement, and after the SDGs got accepted and are now waiting for the processes to best implement them internationally and country-by-country, GRI looked at these from the perspective of making necessary links (GRI, WBCSD and UN GC already published the SDG Compass last year). Of course GRI was also involved in the preparations of both these events, within the limit of its mandate. These themes were of course captured in important sessions at the conference.

But what struck me most was what was not discussed, and given the fact that about 90% of the global multinationals are still not reporting on their sustainability achievements (partially based on the fact that a huge amount of these companies are privately held and still sneak out of mandatory reporting requirements), we are still far from mainstream. As the conference subtitle was ‚shaping reporting for the next 20 years’ GRI missed addressing a list of things that will have at least as much influence on the future success of GRI than the steps now taken. Here are my top 5:

  • As sustainability reporting sort of goes with the flow and – while mentioned in the Guidelines – chronically forgets about sustainability context, we remain at an incremental stage of disclosure. We are missing the benchmarks of getting closer to the real deal: disclosing when a company can call itself a ‚sustainable company’. While environmental ceilings and social floors are known, global footprints are defined up to local level, and more data about the condition of the world are available than company-internal data, the discussion around context was close to absent. Just a glimpse of that came up in a session about linking corporate data with national statistics data on the SDGs. I highly doubt that the national statistics offices will excite corporations to make the necessary data links and suddenly push innovation.
  • Redesigning dislosures based on a more capitals-based approach. The basic assumptiom of building accounts around a ‚systemic contribution’ to society will need to answer the question about value creation. There isn’t any better litmus test than to disclose in how far financial capital has been built on the back of any other capital. This doesn’t mean total monetization of all capitals, but starting to discuss conventions and directions on how to count and account, working towards qualities such as the ‚Total Contribution’ concept of the Crown Estate in the UK. Realizing that net positive and gross positive approaches are possible beyond what is now seen as sustainable (doing no harm) seem to be so far away from mainstream that GRI doesn’t give these truly commendable approaches a stage. As such the needed collaboration with accountants – not very active in rethinking accounting from throughput to circular – isn’t a programmatic area of GRI, but will be the Achilles heel of the purpose of sustainability disclosure if it wants to stand the litmus test.
  • The word ‚innovation’ was high up on the agenda. The opening session carried a set of three innovative entrepreneurs (potentially none of them producing a sustainability report), that aimed to somehow make a sort of connection to innovation, but in the proceedings it boiled down to the forthcoming standards and data aspects that seemed to be the only real news in reporting. Of course, communication, XBRL (if ever used mandatory) and open source data can make a big difference, but it’s the combination with data that are not yet in GRI’s terrain that can empower stakeholders to new qualities of dialog (at this moment often in a degenerating stage due to boring processes) that will potentially revitalize dialog, meaning empowering stakeholders to be well informed to talk to corporations at the same eye-level.
  • The systemic component of how to create a longer term roadmap involving macro, meso and micro level, defining a truly serving purpose of reporting, linked with innovations in accounting, data management and new business model reporting demands, was little to non existing. The conference emphasized once more the need to go beyond the reporting standard setting world to overcome the inherent problem of standard setting – a too short scope to be able to deliver on future-ready reporting. The Reporting 3.0 Platform, now in its 4th year of existence (reporting3.org), has recently announced the ‚Blueprint Projects’, a set of 4 projects that develop and cross-pollinate the different necessary constituencies in the reporting landscape: reporting (clarifying the principles and serving function of reporting that truly supports a green & inclusive economy), accounting (based on a multi-capitals approach), data (taking into account the internal and external data sources to deliver on the litmus test question of being sustainable), and new business models (and their demands to disclose in principal ‚handprint’). Will we be able to deliver on reporting ‚for the next 20 years’ without any of these areas fully embedded?
  • Lastly, are we actually asking the right questions? The predominant focus on ‚footprint’ isn’t exciting for the majority of companies on this planet. We totally forget forging ‚handprint’ information. Instead of not doing harm, doing good isn’t structured in sustainability reporting, so all reporters are asked to figure that out themselves. The new circular, sharing, collaborative businesses are bluntly absent from the disclosure through existing standards, but it would be them to learn most from. Also, there are no data and benchmarks that would aim to describe the organizational transformation capabilities and socio-cultural leadership capabilities of an organization, adding to the litmus test question described above. We’re not even touching the sustainability context gap in its totality, and we’re missing two major components of necessary disclosure (see the work of the ThriveAbility Foundation to learn more about that, thriveability.zone).

Summing up this last headline, GRI needs to of course balance the needs of the mainstream and take reporting organizations from where they are at to where they should be, but the conference didn’t deliver on a good sketch of ‚the next 20 years’, embedding the SDGs into disclosure and liberating the data seemed to be the maximum presentable to conference participants.

Of course, one can argue that first things come first and that we are expecting too much. I know so very well from my own GRI past that ‘globally applicable and globally acceptable’ was and is the mantra for disclosure items to be added to GRI’s list. There will be another 5 GRI conferences until 2030 where more of this could be discussed, but do we have the time to wait? The absence of at least a statement of what’s still needed to deliver on the mission of GRI and a roadmap that offers a back-casting of the next steps for the next couple of years, concerned many of us at the conference. Now was the time to address and embed these necessary enhancements, but it seems we have to wait until the 2019 edition of the conference to add these points to the reporting matrix. The least we can do is to continue to work with GRI to show what is possible until then.

 

 

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Integral Thinking & True Materiality – Part 7/7: What Others Say About The New Impetus

This 7-part series has been first published on Sustainable Brands between late January and early March 2016 as a 6-part series and a follow-up by Bill Baue, co-founder of Convetit and the Sustainability Context Group. It captures the essence of my thinking I was able to gather through the extraordinary work of the Reporting 3.0 Platform, GISR and the ThriveAbility Foundation in 2015. What came out is a structure that I called a ‘new impetus embracing purpose, success and scalability for thriving organizations’. I am reposting the original 6 parts here and add a part #7 with reflections of others. This is part 7/7.

Time to let others speak! I am grateful to Allen White, Georg Kell, KoAnn Vikoren Skrzyniarz, Bill Baue and Robin Lincoln Wood for their appraisals of ‘Integral Thinking & True Materiality’. I guess the impetus stands the test of some of the top thinkers and past and existing leaders in sustainability. Time to test it further, pilot it and share the learning experience with others, through the various angles to do so: Reporting 3.0, GISR and the ThriveAbility Foundation.

Allen White (Co-Founder of GRI and Founder of GISR) 

Progress toward a thriving future requires a new lens for viewing corporate purpose, strategy and practice.  Ralph Thurm’s Integral Thinking & True Materiality framework provides such a lens, enabling business leaders to better understand the broader socio-ecological milieu in which they operate and to which they ultimately are accountable.  This kind of holistic thinking is a prerequisite to transforming organizations at the depth and speed a troubled world demands.  Indeed, anything less imperils the prospects for building a just and resilient global future.

Georg Kell (Vice Chairman of the Board, Arabesque Partners; former Executive Director of the UN Global Compact)

Ralph Thurm has always been on the forefront of sustainability, from his time at Siemens to joining GRI and later Deloitte. He now continues as A|HEAD|ahead, working on necessary structural enhancements in sustainability through the various affiliations of his work, eager to explore the next level of finding suitable criteria for clarified purpose, better understanding of success and ways to scale up what’s needed to overcome sustainability incrementalism. This reader is condensing some of his thinking into a new impetus, and it contrasts current thinking that often still tends to be a bit cautious and risk-averse into a wonderful tour de force that opens the mind and connects what belongs together. Enabling fresh thinking, Integral Thinking & True Materiality is at the same time inspiring and without doubt a precious resource for anybody who wants to build lasting and thriving organisations. Following this lead we may rethink if we have done enough to invigorate trust, innovation and scalability, the outcomes of the new impetus Ralph describes.

Dr. Robin Lincoln Wood (Founder, ThriveAbility Foundation)

How can the SDG’s be integrated into corporate reporting so as to move beyond a set of silo’ed goals for ‘zero negative impact’, to stimulate innovation, excitement and the breakthroughs we need to create a safe, just operating space in which humanity can thrive? Some of the answers to this question will be found, like clues in a detective novel, in Ralph Thurm’s short compendium of articles on Integral Thinking & True Materiality.

The first clue is to be found in the leading Diagram 1 in the compendium – „Trust“. In a world where trust in our institutions and the ‚system’ is at an all time low, who can you trust? The power of great brands, like good leaders, is that they inspire trust in their promises, and by delivering reliably on those promises, that trust grows. Many organizations are now learning just how critical and valuable trust is, especially those who have lost the trust of their key stakeholders at considerable financial cost.

Clue no 2 is that „Resilience“ and „Innovation“ are pre-conditions for products and services to deliver in the longer term on an organization’s promises. The big question is: How can we ensure that an organization is trustworthy, resilient and innovative? For that we need to go inside the triangle in Diagram 1 to find four enablers: integral thinking, success, purpose and scalability:

  • Integral thinking requires leaders to incorporate both negative and positive externalities into their business reporting within the context of planetary boundaries and social floors, to be genuinely sustainable. This results in „True Materiality“.
  • Success in the 21st century will not be measured purely in financial terms.Through the integration of the seven capitals, we can arrive at the True Future Value of any decision or investment, thereby providing a trustworthy indicator of where an organization should focus its efforts.
  • Purpose is needed to align organizational stakeholders toward a North Star that enables the web of stakeholders and their business ecosystems to realise their True Future Value creating potential as an interconnected system of mutually satisfying promises delivered and commitments met.
  • Scalability enables the fruits of True Future Value generating innovations to „cross the chasm“ from the early adopters to the mainstream markets to go truly global, resulting in world enhancing outcomes.

Reporting standards and the sustainable development goals have the power to shape the governance frameworks which determine how value is perceived and created in our economy. Business leaders, investors and consumers need to trust that their decisions are contrubuting to True Future Value, not just doing less or no harm. By being able to measure what „Doing well by doing good“ really means for all stakeholders in an organization, the ThriveAbility Governance Framework and Index offers us the opportunity to move rapidly to a regenerative inclusive economy- a world where promises are delivered in ways that rebuild our trust in ourselves, each other and the possibility of a thriving future.

KoAnn Vikoren Skrzyniarz (Founder/CEO Sustainable Life Media, producers of Sustainable Brands)

In 2006, Sustainable Brands launched out of a belief that the pathway to a flourishing future depends on our ability to successfully shift our businesses and the global economy beyond those models that enabled success during the industrial age and toward something new, and more evolved. We recognized that while the industrial age delivered significant improvements in prosperity around the globe through the design of business systems focused on driving efficiency from mechanistic models of operating and the development of silos of expertise, it also produced a raft of unintended consequences brought about largely by the loss of our up till then natural aptitude for being conscious and sensitive to the interconnectedness of things.

Today, we find ourselves faced with a compound set of crisis resulting from the unchecked exuberance of our construction of a consumer economy. Our highly efficient, take, make, waste based economic engine has left us with dangerously depleted natural resources, concerning levels of toxic waste, rising temperatures and sea levels, and a rampant decline in biodiversity — all of which have has put our very survival at risk. Perhaps even more insidious is the way we’ve slowly redefined the role of humanity, away from that of citizens tasked with being stewards of our common well-being, and toward being simply a cog in the economic machine, tasked only with buying and consuming more in order to feed what some would define as a somewhat cancerous economy which seems now to have become dependent on over consumption beyond the needs of health and happiness.

Now is the time to turn our ship back toward healthier modes of commerce and consumption based on a ressurgence and deepening of our ability to see and think in systems.  We have complex challenges to face, partly of our own creation.  At Sustainable Brands, however, four key beliefs, supported by mounting research and evidence, encourage us and give us hope for the future:

  1. We believe and see growing evidence that humans are actually wired for good, and that we generally desire to learn, solve problems and to leave the world a better place than we found it.
  2. We believe that business as an institution is uniquely equipped to innovate and create new forms of value in the world.  Once we recognize a problem, and can connect solutions to the potential for economic return, we are well equipped to act.
  3. We believe brands — which are essentially the promises made by business to their stakeholders about what they aim to deliver, are uniquely equipped to help shift our global aspirations back toward health.  We have it in our capacity to help nurture a shift back toward our now latent, but yearning to be reengaged higher selves, offering more systems conscious models that acknowledge our growing awareness of the interconnectedness of things.  And maybe most importantly,
  4. The available knowledge and growing set of models and tools to help us get where we need to go are exploding all around us.

Ralph’s booklet Integral Thinking & True Materiality – A New Impetus Embracing Purpose, Success and Scalability, published as an e-book together with Sustainable Brands is a perfect example of the 4 bullet points mentioned above. It asks for new focus on purpose, connecting to the truly material problems to which we all can make contributions to; on success, in which the pathway to a multi-capital success measurement as a litmus test for delivering the truly material issues becomes blatantly clear; and on scalability, in which education, collaboration and advocation are so essential. Sustainable Brands embraces these ideas through the events it organizes and the services it offers. Ralph’s work helps us to level up our approach to business, and deliver against a new desire to fully account for all externalities impacted by our business activities, and ultimately to deliver net positive good to the world. The work of Reporting 3.0, GISR and the ThriveAbility Foundation, the parts of Ralph’s portfolio to deliver on the new impetus, are also presented and showcased in Sustainable Brands conferences.

Sustainable Brands is a global community of the willing — influential leaders in and around business who are committed to breaking through to new models that can enable a thrivable, flourishing future. We are happy to call this team of integral thinkers part of our community and to support bringing visibility to their ideas as together we search for the best possible solutions for transforming our world for sustainability.

Bill Baue (Editor, Co-Founder Convetit & Sustainability Context Group)

It has been my pleasure to edit this tour-de-force 6-part series by my colleague Ralph Thurm in which he lays out his vision for how integral thinking and true materiality can catalyze a regenerative and inclusive economy, leveraging the work of the ThriveAbility Foundation, the Reporting 3.0 Platform, and the Global Initiative for Sustainability Ratings (GISR).

In editing this series, I recognized the genius of Ralph’s triangulated conception centered on true materiality and integral thinking, as it resolves the primary outside-in and inside-out dilemmas in current corporate architecture.

True Materiality reconciles what GISR Founder Allen White calls “the artificial distinctions between internal and external materiality.” Internal materiality prioritizes that which impacts of the organization and its ability to generate value – primarily for providers (and extractors) of financial capital. External materiality prioritizes that which impacts the organization and its stakeholders, including their mutual ability to maintain wellbeing through ongoing access to vital capitals shared in the commons.

Ralph’s notion of true materiality bridges this divide, integrating both the issues that determine the future value of companies expressed in financial capital (with consideration of the multiple capitals), and the issues that determine the true value of companies by assessing positive and negative impacts on the common capitals that are vital to stakeholder wellbeing in terms of ongoing viability of these capitals within the thresholds of their carrying capacities. True materiality dismantles White’s “artificial distinctions” and thereby serves as the linchpin for assessing what the ThriveAbility Foundation calls True Future Value.

Integral thinking takes up where integrated thinking leaves off – in particular, addressing the inside-out dynamic. The primary object of integrated thinking, as conceived and articulated by the IIRC, is the external structures in need of integration – primarily, the multiple capitals. While Ralph’s notion of integral thinking certainly includes this need to integrate the capitals, it also transcends this limited focus on external realities by integrating internal dynamics as well.

Most importantly, integral thinking calls for mindset shifts, and equips us with the tools to map the center of gravity of our mindsets in terms of psychological and cultural stages of development. This additional depth transforms the more mechanistic approach of integrated thinking into a more holistic approach that accounts for both internal and external perspectives, both individual and collective perceptions.

In approaching this 6-part series, I find it quite remarkable that Ralph manages to address such a broad swath – both the shortcomings and the solutions – before us. This series challenges us to acknowledge the existential crises we face, as a corporate community and as a society, and to rise to the occasion by tapping into our human genius and resilience through inspiration and aspiration toward true thriving.


 
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Posted by on May 11, 2016 in Thriveability

 

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Integral Thinking & True Materiality – Part 6/7: Defining Trust, Innovation and Resilience

This 7-part series has been first published on Sustainable Brands between late January and early March 2016 as a 6-part series and a follow-up by Bill Baue, co-founder of Convetit and the Sustainability Context Group. It captures the essence of my thinking I was able to gather through the extraordinary work of the Reporting 3.0 Platform, GISR and the ThriveAbility Foundation in 2015. What came out is a structure that I called a ‘new impetus embracing purpose, success and scalability for thriving organizations’. I am reposting the original 6 parts here and add a part #7 with reflections of others. This is part 6/7.

With this final part of our series, we examine the outcomes of the newly proposed reporting impetus and assess the interconnected effects of the three parts of the triangle we discussed in Part 3, Part 4 and Part 5, synthesizing the elements of trust, innovation, and resilience into what we call integral thinking & true materiality. As we believe that reporting can be a trigger of change, following the new impetus demands additional strategic, governance, educational, measurement and process changes within the organization to be able to come into fruition.

Readers are likely familiar with the notion of integrated thinking from the work of the IIRC, which we applaud for pointing our field in new and fruitful directions. However, we posit integral thinking as a further development that transcends and includes integrated thinking in two important ways (among others):

  • Integrated thinking considers how organizations create and diminish value inside and outside the organization, but falls short of assessing the true materiality of these positive and negative impacts in the context of sustainability thresholds;
  • Integrated thinking rightly promotes a holistic approach, but it focuses almost exclusively on structural systems, essentially ignoring the internal psychological integration needed at the individual and collective level to instigate the transformations necessary to scale up a green & inclusive, regenerative economy.

We believe that both of these aspects of integral thinking are necessary to scale up the achievement of sustainability (minimally) and even ThriveAbility (maximally) by focusing on purpose (and connectedness), success (and True Future Value determination) and scalability (and the size of impacts needed).

Collaborators in the Reporting 3.0 Platform and the ThriveAbility Foundation believe that reporting can trigger this change toward the ‚North Star’ of achieving a green & inclusive – and, indeed, regenerative – economy. To do so, reporting must transcend compliance with current sustainability and integrated reporting standards that typically set norms within our existing economic regime – which can lead reporters to hesitate or even choose not to act, even as our current economic structure threatens the very survival of the human race on this planet.

To explain how the elements described in the earlier parts of this series integrate the three sides of the triangle together to achieve the overarching goals of integral thinking and true materiality at the center, we will use the final part in this series to unpack the diagram below:

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Diagram 11: Desired outcomes of the new reporting impetus are the result of the logic combinations of the aspects of the triangle: Trust, Innovation and Resilience.

 Trust

To build Trust with internal and external stakeholders, organizations must combine an organizational purpose, describing the contribution the organization can make to achieving a green & inclusive economy, with the answer to the litmus test question of Part 4: ‚have we ensured not having built financial capital on the back of any other capital’. Take, for example, The Crown Estate’s Total Contribution methodology, pioneered in their integrated reports using a multi-capital model, which the company acknowledges isn’t yet perfect but functions well as decision-useful tool for internal leaders as well as for external stakeholder scrutiny and recognition. The approach provides a much better understanding of the world view of the organization, the value it puts on all the capitals, and how it assesses its activities from a holistic perspective on collateral damages and benefits.

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Diagram 12: Aspects of Total Contribution, taking into account various capitals, as examplified by the Crown Estate, UK, to reflect a decision-useful framework about how purpose is proven and success is built upon.

Examples like Puma, The Crown Estate and a variety of other companies on the Net-Positive pathway experiment with these models and can be useful validators of a more sophisticated approach including accountants and standard setters.

Innovation

To achieve success (according to a True Future Value determination) and scalability of solutions, organizations need to map and tap into innovation pathways, that align investment decisions on products, services, and collaborations with positive impacts on the multiple capitals. Given that the Chief Sustainability Officer carries primary responsibility for managing impacts (and optimizing opportunities to regenerate) the multiple capitals, we see the CSO as the key untapped potential for unlocking breakthrough innovation. Indeed, we foresee a future where the CSO combines with the Chief Innovation Officer to become the Chief ThriveAbility Officer.

This development would remedy the current state whereby sustainability focuses on treating symptoms by digging deeper to address root causes in ways that shift from „less bad“ incremental improvements through Net Positive trade-offs and counterbalancing to enter the realm of Gross Positive impacts that continually regenerate the multiple capitals.

Integral thinking catalyzes root-cause, multi-capital, context-based, holistic decision-making. Below is a highly simplified example of an investment assessment from a multi-capitals basis.

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Diagram 13: Preparation for an investment decision for the energy supply system for a plant, looking at 3 potential solutions from a multiple capital perspective.

The ThriveAbility Foundation has laid out comprehensive Innovation Pathways for organizations (‚Alpha Partners’) interested in closing the 3 Gaps (Sustainability, Organizational, and Mindset), and aims to work with experienced third parties (‚Delta Partners’) that can execute the program under a license agreement and quality control by the ThriveAbility Foundation. Working with up to 300 Alpha Partners in various industries, supported by the Delta Partners, will lead to working groups that will assist the development of a focused ThriveAbility Index for their cluster industry. It is aimed to roll out these Indexes by 2019, to be fully implemented by 2020.

Resilience

What constitutes resilience when it comes to building a green & inclusive, regenerative economy?

  • A (financial) market mechanism that serves the economy by respecting how money and goods/services are created and distributed through a balance between true costing, true pricing and true taxation;
  • Companies that aim to create Gross Positive benefit;
  • Customers that understand the accurate pricing of resources without triggering extra burden through lower taxation of labor;
  • National budgets that respect nature and the wellbeing of their citizens and immigrants.

Looking at such a world, reporting creates ‚the glue’ for how organizations communicate their successes internally and externally on a multi-capital and True Future Value basis. As we closely look at organizations in this series, governance is potentially the other resilience factor that needs to be in place to allow for the new impetus to come into fruition. So, how would a resilient company’s governance approach look like?

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Diagram 14: Organizing governance as part of a GSE Pull instead of the existing ESG Push.

Currently, ESG activists push companies to adopt governance structures that lead to social and environmental (and economic) sustainability because it’s necessary; a more resilient governance regime pulls companies toward social and environmental (and economic) ThriveAbility because it’s more attractive than business-as-usual.

In our view, governance is defined by authority, decision-making and accountability, and they are nicely linked to the new impetus as described here:

  • Authority stems from mindsets, built from value systems. This constitutes the will of an organization to discuss purpose vis-à-vis its contribution to a green & inclusive economy in a holistic system.
  • Decisionmaking is based on metrics that better describe impact – and create success by measuring (and generating) True Future Value.
  • Accountability, based on multi-capitalism, creates value. In a green & inclusive economy this value is dependent on the scalability of that value within a 1-planet footprint through an enlarged positive handprint.

In a GSE pull approach, organizations would look at these basic ingredients when defining objectives, committees, principles and processes for a resilient governance approach.

The grande finale

‚A better world is possible’ – this is one of the sentences that all of us in the sustainability community grew up with. But a reality check reminds us that the data still show the opposite, and future trajectories suggest that a better world is slipping further and further from our grasp. 40 years of pursuing CSR to retain a license to operate has failed to deliver sustainability. Clearly, a reset is in order.

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Diagram 15: The constituting parts of the journey towards becoming a resilient company in a green & inclusive economy.

ThriveAbility sets its sights higher than sustainability – in part to inspire greater excitement and innovation, and in part to give ourselves a greater margin for error as we re-engineer a new global economic operating system on the fly. Diagram 15 shows the building blocks of such a system, set on the foundation of respecting the carrying capacities of social and environmental systems to launch innovation that optimizes synergies between and amongst the multiple capitals to realize our future potential of a green & inclusive, regenerative economy. The Reporting 3.0 Platform, the ThriveAbility Foundation as well as GISR are three non-profit organizations that corporations can join and that are driving this journey, they link synergistically for the described outcome of this new impetus. Come take a seat and join us for the ride!

 
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Posted by on March 22, 2016 in Thriveability

 

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Integral Thinking & True Materiality – Part 5/7: Scalability Opportunities Define the Size of Impact

This 7-part series has been first published on Sustainable Brands between late January and early March 2016 as a 6-part series and a follow-up by Bill Baue, co-founder of Convetit and the Sustainability Context Group. It captures the essence of my thinking I was able to gather through the extraordinary work of the Reporting 3.0 Platform, GISR and the ThriveAbility Foundation in 2015. What came out is a structure that I called a ‘new impetus embracing purpose, success and scalability for thriving organizations’. I am reposting the original 6 parts here and add a part #7 with reflections of others. This is part 5/7.

Here in Part 5 of the series, we look at the lower-right third of the new impetus diagram that we introduced in Part 1. We have already built a great basis through the discussion about purpose of the organization, how that links to support a green & inclusive and/or regenerative economy concept (Part 3). We also have more clarity on how organizations calculate success through multi-capital accounting and assess True Future Value potential (Part 4). The tools used don’t have to be perfect already, as long as they are decision-useful and are good enough to prepare decision-making by the relevant bodies. Take, for example, Puma’s first e-p/l or The Crown Estate’s Total Contribution concept as good examples of decision-useful concepts that readily admitted their room to continue maturing.

So this Part will focus on activities needed to scale up a green and inclusive economy from within the organization and externally. And as the below diagram suggests, scalability ties directly into purpose and success.

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Diagram 8: Integral thinking and true materiality need a renewed focus on scalability and the necessary size of the impacts to be achieved for the green & inclusive economy we desire.

Overcoming the 3-gap problem internally

Internally, the challenge is to create the necessary socio-cultural leadership atmosphere that creates the understanding of the organizational transformation capacity that allows sustainability to be fully embedded, up to the potential ambition level of being a thrivable organization (as per the strategy continuum presented in Part 3, Diagram 4) and as presented through the 3-gap-problem in Diagram 2 in Part 2 of the series and the aligned ThriveAbility Index measurement as laid out in Part 4.

The ThriveAbility Foundation based its approach on a ThriveAbility Journey for organizations on the idea of stratification, recognising that people pass through developmental stages at different rate and that their worldview, values and needs vary considerably depending upon their developmental Center of Gravity i.e. where they are most comfortable and capable. This means that:

  • in our communications and interactions with others, we are most likely to be effective when we meet people where they are at;
  • when designing change and transformation initiatives, surveys of the developmental levels of people in the organisation are essential to map the alignment of individuals with the organisation and each other, as well as the changes proposed;
  • motivating people needs to take a stratified approach, while also identifying where the energy for change is coming from, and where the blockages to change arise*.

Various techniques advance this approach. At the ThriveAbility Foundation, we use CultureView and LeaderView assessments to build the basis for an organizational stratification approach**. This approach stems from more than 40 years of learning about Spiral Dynamics and Integral Theory, now also designed to fit the ThriveAbility strategy continuum. The below diagram shows a sample of a Masterclass of executives that was able to learn

  • the various levels of the emergence of human consciousness as it has been mapped by Integral Theory. It is the story of a dynamic interplay of human coping mechanisms that leave behind observable patterns in ‘bio-psycho-cultural-social systems’;
  • how the individual emergence level of the group participants is composed of;
  • how the sum of the individual levels constitute the governance, hierarchy and work processes of the organization;
  • how their present working state differs from their desired working state that allows organizational transformation and the necessary purpose and success discussions and decisions to become focus areas for the organization to prepare for that change.

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Diagram 9: Building organizational awareness about present and desired work arrangements through a cultural and leadership lens.

The group also learned about their readiness for change, their change patterns and their executive change intelligence, as well as their patterns of thinking, coping mechanisms, perception of organizational priorities and finally an overall cultural fit-factor. If a total change of mindset is necessary, it will need to happen here.

To measure progress toward ThriveAbility across the 3 Gaps, the ThriveAbility Foundation can utilize:

  • CultureView and LeaderView, which assess progress on the Socio-Cultural Leadership Axis;
  • The ThriveAbility Maturity Assessment, which covers about 90 specific criteria and related variables to measure scaling up on the Organizational Transformation Axis;
  • The Multi-Capital Scorecard (MCS), a context-based measurement tool successfully employed at Cabot Creamery Cooperative, Unilever subsidiary Ben & Jerry’s, and Procter & Gamble Subsidiary New Chapter to assess progress on closing the Sustainability Axis, as well as the Future Fit Business Benchmark (FFBB), which offers a set of 21 science-based indicators (to be published in spring 2016), employed e.g. at The Body Shop.

Combining all these tools will help to transform Kate Raworth’s 2-dimensional Doughnut, which defines the environmental ceilings and social floors to achieve a safe and just operating space for humankind, into a 3-dimensional change management tool that describes how companies can support the shift from suffering to struggling to thriving by activating innovation pathways. This would build the core roadmap design for an organization that attends to micro-macro connections while creating business benefit and measuring programs and activities in a multi-capital way. Building a connection to the SDGs now also makes more sense as they are seen in a seamless and clearly positioned manner. It would also lead to a strengthened role of governance, best described from moving from an ESG push to a GSE pull (as described in Part 3 already), a change of mindset of governance experts is needed.

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Diagram 10: Designing Innovation Pathways that helps organizations connect a clearer purpose, success definition and scalability potential to their ThriveAbility approaches (Source: ThriveAbility Foundation, based on Kate Raworth’s Doughnut).

In addition to these tools, scenario planning and business modeling are important tools, too. Building on Osterwalder’s Business Model Canvas, the Flourishing Business Model Canvas is a welcome broadening of Osterwalder’s model, but still in an experimentation phase.

While the stratification approach is mainly educational for designing and deciding on strategic priorities, the second main aspect to prepare for scalability is collaboration. While current conventional wisdom embraces Integrated Thinking, the ThriveAbility Foundation advocates the deeper approach of Integral Thinking, which embraces Integral Theory to dig deeper and combine all dimensions of the 3-gap-problem.

It is reassuring to see how organizations that deal with these three gaps at the same time develop the best potential to become thrivable organizations. A shining example is Interface, one of the leading carpet-tile companies, showcasing the success potential of becoming what they call a ‘restorative’ business. Over the last 22 years the company has worked on their ‘Mission Zero’, climbing ‘Mount Sustainability’ and developing business models like ‘NetWorks’ to succeed on an fully embedded Circular Economy approach and Biomimicry strategy by 2020, while building additional social value. ‘NetWorks’, developed with the Zoological Society of London (ZSL), stems from that thinking. Other organizations that come to mind that show potential in closing the 3 gaps simultaneously are Kingfisher, The Crown Estate, Natura, Unilever, BT, The Body Shop, Patagonia, with many other organizations still some steps away.

The problem, however, is that for those companies that still need to follow suite 22 years later, the path is way too long. So the work of Reporting 3.0, The ThriveAbility Foundation, and GISR are all essential pieces to get this enlightenment pathway down to 5-10 years, so scaling up successes through education and collaboration is essential.

Overcoming the 3-gap problem externally

Collaboration and education of course also have an external side. Programs could be envisaged for industry associations and specific networks that are playing an important role in issue-specific leverage on many fronts. They can use the same instruments as companies use internally, and can hugely benefit from them. Analyzing many of the existing networks from the 3-gap-problem perspective, most of them deal with one or two axis, hardly anyone pushes for all three. The above portfolio is an offering to learn and fill the blanks through education for such groups and additional stimulation for collaboration.

At this time it is crucial to insist on one specific point that also closes the circle to the discussion around purpose and success definition. We have already discussed the economic system aspect in the earlier Parts, especially around the ‚micro-macro-link’. To put it bluntly again: without a generic change in our economic system boundaries that define costing, pricing and taxing of resources and activities, there won’t be ThriveAbility, let alone sustainability. We will have to rely on the 5-10% of enlightened leaders that will help to make the remaining 90% become brave followers through a changed economic system with a level playing field that will need to demand playing by the changed rules. That means that advocation of existing leaders towards such a change in the economic system boundaries becomes a crucial aspect in scalability to turn our planetary ship around, or even more: it becomes a matter of survival.

We saw glimpses of that potential willingness for advocation in the cases of the SDGs and COP21, but we also see specific not-for-profit organizations ready to start for that advocation through their very own purpose, too. Ex’tax, a Dutch NGO, is specifically advocating for the taxation system to change to resource taxation instead of taxation on labour. The True Price Foundation advocates for a better inclusion of external costing in pricing structures. Other initiatives like Trucost, The Natural Capital Coalition, the Science-Based Targets Initiative (and many more), help define other parts of the advocation spectrum and link micro through meso to macro. These initiatives tackle the heart of economic system boundary change, they go further than just the SDGs that don’t imagine a changed economic system.

What to do in the short term?

Let’s imagine once more what a sustainability and/or integrated report could already report on for the scalability part of our new impetus. Innovation roadmaps, transformational change, stratification as laid out in this part of the series will take a while to become customized, fine-tuned and carried out. But here’s what could be reported on in this coming reporting cycle already:

Education (internal and external):

  • How far are the ‘World View’, the ambition level and the related strategy communicated within the organization, and how do education/training programs consider and support this?
  • Are all employees addressed and is this completely integrated in education and training on all levels of the organization?
  • Are there joint educational programs developed for the whole value cycle (in consequence: internally and externally) and does this support joint target-setting and implementation campaigns to achieve sustainability/ThriveAbility in these value cycles?

 Collaboration Capabilities:

  • In how far is the company engaged beyond its associations and interest lobbying? Which networks, cross-industry initiatives to create new sustainable business models for societal value added is the company part of? Do those need to be created still by a group of companies?
  • Do employees have time for societal engagement and are they positively stimulated to help find long-term solutions in order to avoid short-term conflict? Is there slack time to ‘think’ alone, in groups, on all three parts of this new impetus?
  • Is the company aware and busy with true sustainable innovation beyond existing rebound effects, e.g. in creating circular, sharing or collaborative service business models?
  • In which thematic research networks is the company active? Does it take part in award schemes on most sustainable solutions, alone or together with other partners?

 Advocation:

  • Is the company perceived as an active player in presenting their ‘World View’ and their potential scenarios around sustainability and/or ThriveAbility?
  • Is the leadership actively engaged in the promotion of a green & inclusive economy and the necessary changes in boundary setting, e.g. internalization of external costs, changes towards a more sustainable tax system, creating of level playing fields in international relations, e.g. trade agreements, international accounting rules, etc.)

With Parts 3, 4 and 5 we have now covered all three parts of the triangle that surround the idea of Integral Thinking and True Materiality. With the instruments in place, the processes to be adapted, and the people lined up towards purpose, success and scalability, the new impetus should create necessary outcomes to become a useful framework for designing a multi-year roadmap. By that, all current initiatives an organization carries out can be put in place, assessed and positioned.

In Part 6 we will look at the envisaged outcomes of the new impetus. It will be the closing Part of this series.

* Thanks go to Dr. Robin Lincoln Wood for crafting the ‚stratification’ definition for the purpose of achieving ThriveAbility.

** Culture View and Leadership View have been developed by 5Deep Ltd. and have been adapted to help closing the 3-gap-problem for ThriveAbility. These are standard instruments in masterclasses and corporate transformation projects for ThriveAbility.

 

 
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Posted by on March 20, 2016 in Thriveability

 

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Integral Thinking & True Materiality – Part 4/7: Success Definition For True Future Value Creation

This 7-part series has been first published on Sustainable Brands between late January and early March 2016 as a 6-part series and a follow-up by Bill Baue, co-founder of Convetit and the Sustainability Context Group. It captures the essence of my thinking I was able to gather through the extraordinary work of the Reporting 3.0 Platform, GISR and the ThriveAbility Foundation in 2015. What came out is a structure that I called a ‘new impetus embracing purpose, success and scalability for thriving organizations’. I am reposting the original 6 parts here and add a part #7 with reflections of others. This is part 4/7.

In this part of the series, we will focus on another very important aspect for the new reporting impetus that can serve the needs of a green & inclusive or regenerative economy – the question of how we define success. We are at this moment not able to truly claim when an organization is ‚sustainable’ (as laid out in stage 3 of the strategy continuum Diagram 4 in Part 3 of this series), and that just being ‚minimally good enough’ to indeed sustain the organization – and the real-world systems it operates within. Most reports aren’t giving a proper ‚world view’ or scenario context to their long-term targets.

Bildschirmfoto 2016-03-08 um 10.37.58

Diagram 5: Integral thinking and true materiality need a renewed focus on the definition of success to create True Future Value for the economy we want to live in.

Progress in defining ‚micro-macro’ links

Discussions in recent years show progress on defining ‚micro-macro’ links between companies’ impacts and the health of the broader systems they operate within. The elaborations about context-based reporting, science-based target setting, together with Kate Raworth’s Doughnut that defines environmental ceilings and social floors, has added vision and revealed depth as to the ‚devil in the details’ of measuring them in relation to the corporate context, and splitting them up into local, regional or global ‚allowances’, raising the profile of around thresholds and allocations.

Also, the link to the economic system thinking around the usefulness of GDP as the leading success factor has been called into question through the discussion around ‚Beyond GDP’, the Global Footprint Network, and the enhanced (yet mostly unconnected) indicator systems around National Sustainable Development Strategies of regions (like the EU). We see combinations of indices – e.g. country Ecological Footprints versus the Human Development Index – revealing the corridor in which countries should end up being sustainable. The problem here is that the ‚micro-macro’ link is not expressed at the corporate level, so companies take note of these data, but don’t know how to apply them in their specific case. The bigger and the more diversified a company is (crossing national borders), the more difficult it becomes.

The SDGs are an interim step to help fill that ‚micro-macro’ gap by dividing the global challenges into silo’ed aspects of problem articulation. There is merit to see the SDGs as a valuable attempt to induce companies to consider their contribution to a threshold through science-based goal-setting and context-based reporting. The problem is that, while the SDG areas are interconnected, the performance indicators aren’t. We already see companies start to think about picking and choosing some of the SDGs closest to them and define contributions they could make, without taking the step of developing a worldview (see Part 3 on purpose) that articulates responsibility for helping achieve the SDGs. We should not think that the SDGs will get us to any economic system transformation through voluntary contributions by the world’s millions and millions of companies. But without this transformation, there won’t be regeneration, let alone sustainability.

A stable solution for the next couple of hundred years?

We are in an experimentation phase, I fully admit, but I also claim that now is the time to not only set conventions for delivery indicators for the SDGs by 2030, but something that we can use for the next couple of hundred years, and that gets me to … accounting systems. Jane Gleeson-White already proclaimed the ‚third accounting revolution’ in her bestselling book Six Capitals, or can Accountants save the Planet?, cutting through double entry bookkeeping that was invented in the 15th century for the throughput economy, towards multi-capital bookkeeping. We now need an accounting system that prepares us for the green & inclusive economy.

The litmus test question of success that needs to be answered, both for each and every single SDG, and also as the basis to define what we will define below as ‘true future value’ simply is: does an organization have a license to grow by showing that it hasn’t built financial capital on the back of any other capital – or, quite the opposite, that it has built business models that regenerate all capitals? If yes, this would be sustainable, and possibly gross positive (ThriveAble) over time (stage 5 in the Strategy Continuum in Diagram 4 in Part 3).

In order to get there, though, we will need to renew our accounting system from double-entry to multi-capital-based. Why?

  • Simply because accounting is how economies and executives, boards and supervisory boards tick and answer questions: is my company successful? Where can I be more efficient? Do I deliver on my purpose? On my targets? On my benchmarks? Did my incentives work? What information does controlling need from accounting? What can I externally assure? Interesting how shy our community is to create this missing reporting link – also for the SDGs. We sorely need accountants to raise their voices on the need for multi-capital accounting!
  • A multi-capital accounting system aims to cover all sets of potential performance calculations: on SDGs, for context-based reporting, for science-based targeting, for value cycle efficiency. An outcome capital of the supplier can be an input capital for the next phase of such cycle, so it can serve as ‘docking station’ in a seamless review of value cycles – if all partners agree on the necessary convention on how to account and disclose in what the recently published UNEP Raising the Bar report calls “Collaborative Reporting”.
  • The structure of multi-capital accounting gives space to the necessary formulation of conventions (that’s what an accounting system mainly is, it’s not a 100% accurate discipline) and structuring of the discussions we need to have: what can be monetized? Is it necessary to monetize everything? How to link to local/regional/global thresholds? E.g., water has a different, more local or regional threshold basis than carbon emissions. How to implement threshold based and capital-absorbing indicators into corporate dashboards, into national statistics, into a ‘global pulse’ of how we are doing altogether.
  • Finally, the painful and often repeated mistake is that we think we can create indicators without proper data architecture in mind, where aggregation and disaggregation are possible and where slicing and dicing of information for multiple aspects is possible. A multi-capital based systematic approach can support that, like activity-based costing does in controlling for a long time.

Multi-capital accounting to create ‘True Future Value’

Multi-capital accounting shifts from measuring value to measuring ‘True Future Value’. The ThriveAbility Foundation adds a forward-looking focus on true future value, assessing not only the ongoing viability of the organization and the systems it operates in (science-based thresholds), but also its potential for breakthrough innovation to reduce (and ultimately eliminate) negative environmental footprints while maximizing and optimizing social handprint value creation. It uses 7 capitals, adding relational capital as a separate capital to the group of 6 capitals as proposed by the IIRC.

Bildschirmfoto 2016-03-11 um 09.22.40Diagram 6: High-level formula for deriving at ‘True Future Value’; a more detailed version with all variables can be sent by the author on request.

Here are some of the advantages of using a multi-capital basis to create ‘true future value’ (TFV) results:

  • CONTEXT SENSITIVITY – TFV is a context-sensitive methodology, which works on the basis of progressive approximation to arrive at a best-estimate based decision. The context of the decision/s being made is the very first factor taken into account when applying the equation;
  • TRUE BENEFIT/COST – TFV is a holistic equation that measures the ratio of the value created in any human activity through synergies between human, relational, social and knowledge capitals (or “anthrocapitals” that generate thriving and benefits), relative to the natural and manufactured capitals costs associated with that value creation activity;
  • THREE CORE VARIABLES – TFV includes three key terms – on the denominator we have Science Based Thresholds (social floors and environmental ceilings) divided by a Sustainable Innovation Factor (including, for example, circular economy/C2C, green chemistry, renewable energy, biomimicry and micro-biome based innovations); and on the numerator we have the Value Creation Capacity of the anthrocapitals that generate thriving;
  • ALL EXTERNALITIES INCLUDED – TFV includes both positive and negative externalities in terms of metrics that measure both impacts and value/thriving, in such a way that context based sustainability thresholds are honored;
  • THRIVEABLE DECISION BENCHMARKS – TFV provides a benchmark for decisions of all kinds through which a “thriveable” decision can be made, taking into account a full seven-capital, multi-stakeholder analysis of the true costs and true benefits of a particular investment, program or action.

True Future Value as the Basis for a ThriveAbility Index

Going a step further, the ThriveAbility Foundation has designed the ThriveAbility Index model in which the components of the TFV are embedded (see Diagram 7).

This model picks up on the idea of the three gap model in Part 2 of this series, and measures the gap closure in all three dimensions, and by that explaining where an organization stands in the continuum from surviving to thriving. It represents a different way to assess and report on the overall fitness of an organization. This is a completely new quality in helping to define the profile and positioning of an organization in a three-dimensional fitness space and probably represents the most holistic performance measurement. The argument that ‘sustainability’ or ‘thriveability’ can’t be summarized in one indicator, something the sustainability community has always declared impossible (and by that has kept the interest of multiple financial market players on a low simmer), can be overcome. This high level fitness indicator, to be developed for 10 cluster industries through the ThriveAbility Foundation by 2017 to 2019 (with the aim the have it ready to use in 2020), can be disaggregated into its three components, used for True Future Value Creation of any contextual area of interest (such as the SDGs) and offers high potential for a new quality of corporate, city, country or global performance dashboards. It can be used by Rating Organizations to produce a new generation of sustainability or ThriveAbility fitness ratings. It can be used by regions (e.g. counties) or national statistics offices as a meta- performance structure.

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Diagram 7: Three axis model of the ThriveAbility Index model that corresponds with the three gap model assessing progress in all the gap areas (Source: A Leader’s Guide to ThriveAbility, page 38).

Will we get there?

We may need new and different networks to build what’s needed. I fear the existing standard setters alone won’t cut it, the UN system alone won’t succeed, the governments alone won’t deliver, the accounting standard setters need support, IT companies needs an architecture meta-structure to work in consortiums and open source (liberated data), and the majority of corporations in the mainstream will anyway only respond to legal requirements or ‘cookbooks’ that give them a step-by-step delivery template.

Reporting 3.0, mentioned in Part 1, a networked community of several hundred interested individuals has recently proposed a set of blueprints to recommend the necessary ‘glue’ between those defining a green & inclusive economy and those in reporting, accounting, IT and new business models.

The ThriveAbility Foundation offers masterclasses, pilot projects and a multi-year business plan to deliver on TFV and the ThriveAbility Index and invites partners into the Index development.

GISR offers principles and an accreditation scheme to align with the principles, many of them in support to ingredients mentioned here for reporting and accounting. The Labs, one of the components of their CORE program, offer space for joint creation of the basics for thriveable ratings.

 What to do in the short term?

 So, let’s again imagine a sustainability and/or integrated report that showcases a reporting organization’s contribution through a success measurement involving a multi-capital accounting approach (e.g. as showcased by The Crown Estate, UK, in their integrated reports on Total Contribution). What would a reader expect to see answered? Here are examples of what I would find substantial in that area, taking into account that it still takes time to report back in a complete and structured manner as described above.

Measurement:

  • To what degree does the company inventory shows its impacts from the different levels of its value cycles (instead of value chain, reflecting the need for a circular economy)?
  • Is the internalization of external effects seen as part of a ‘True-Value-Screening’ an option to better understand the value-creation process?
  • Does one differentiate between various capitals and are these integrated in the success measurement? Does the company therefore know its value-creation potentials and weaknesses better? Does the company address the consequences from these outcomes?
  • Does the company identify one or more SDGs to align measurement methodology that looks at context-based or science-based thresholds, and does it aim to develop multi-capital assessments about their contributions to these SDGs?
  • Does the company also collect data about the organizational transformation capacity and leadership capacity, taking into account the 3-dimensionality of achieving ThriveAbility, responding to the 3-gap-problem?

 Target setting:

  • Are there defined target corridors for the sustainable use of different capitals?
  • Are ‘science-based-goals’ assessed and context used for connecting to ‘social floors’ und ‘environmental ceilings’ when targets are defined?
  • How are long-term targets defined and then used to backcast mid- and short-term targets?
  • How are data of organizational transformation and leadership capacity used in defining targets also for these categories?
  • How are potential scenarios linked to target-setting?

Incentives:

  • How does the company incentivize sustainable performance? How does it punish unsustainable performance? Is this based on the measurements as mentioned above?
  • How does the company trigger and incentivize better leadership and transformational capabilities?

The combination of multi-capital approaches in internal accounting and controlling as well as external reporting, combined with experimenting their interconnections through True Future Value Calculations, and adding transformational and leadership capacity factors into measurement, target-setting as well as incentive structures, could help tremendously to report on the future readiness of an organization’s business model(s).

 

 
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Posted by on March 11, 2016 in Thriveability

 

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