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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 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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Integral Thinking & True Materiality – Part 2/7: The Need for a 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 2/7.

Those of us who have been working in the areas of corporate sustainability and integrated reporting struggle to reconcile the gap between our aspirations for a world we envision, and the current world that falls short of sustainability and integration. More precisely some of the following aspect have also lead to the raison d’être of the three initiatives that I presented in Part 1. Here are the most important ones:

  • the fact that existing standards (GRI, IIRC, SASB, etc…) fall short of enabling if and when an organization will actually be ‚sustainable’. We call this the Sustainability Context Gap, which the Sustainability Context Group has been addressing with the major standard setters for years. Many Sustainability Context Group members are actively engaged in Reporting 3.0 as well as the Sustainable Brands community of practitioners.
  • the failure of linking corporate performance with social floors and environmental ceilings in ways that lead to organizational transformation and pioneering leadership. The ThriveAbility Foundation calls this a ‚three gap problem’, and, if not tackled all together, there is little chance of success that the reporting entity will ever be sustainable.

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Diagram 2: The 3-Gap-Problem defines the lack of ‚integral thinking’ (Source: A Leader’s Guide to ThriveAbility, page 33).

  • the still diverse understanding of materiality. Allen White, co-founder of GRI described this in a recent virtual dialogue, held to prepare the 2015 Reporting 3.0 conference: ‘Corporate reporting must keep pace with the realities of an economically and ecologically interdependent world. The narrow scope and short-term horizon of financial reporting is increasingly detached from the complexities and multiple performance drivers of 21st century organizations. It is a moment for leading initiatives to find common ground, synergies and win-win situations in laying the groundwork for the next decade of innovation and mainstreaming a new form of corporate reporting. It is time to remove the artificial distinctions between internal and external materiality’. In other words, companies need to address both what’s material when considering the interests of their own organization, and what’s material when considering broader societal interests.
  • the contracted notion of what is now called integrated reporting. This way of applying what the IIRC advocates for as ‘integrated thinking’ lacks two main components. First, integrated thinking is mainly used to increase the collaboration of departments within an organization and often still lacks fluid interaction with various sets of external stakeholders around the multiple capitals, which is traditionally addressed through old-fashioned dialogue, but has become less and less prevalent and truly functional as of late; and secondly, this sort of thinking misses out on two of the three gaps as described by the ThriveAbility Foundation, namely really instigating organizational transformation and pioneering leadership. Integrated thinking as articulated by IIRC falls short on these fronts, and thus fails to be truly ‘integral’.
  • the fact that accounting isn’t yet ready to shift toward multi-capital bookkeeping (even in trial pilot form). The litmus test of ‚integral’ approaches in accounting needs to showcase that financial capital hasn’t been built on the back of any other capital (natural, maufactured, social, human, relational, intellectual). Based on that the ThriveAbility Foundation offers the idea of ‚True Future Value’ as a new business equation of success, to be discussed in part 4 of this series.
  • the fact that many organizations pursue sustainability as a goal isolated from other aspects of the business. For example, most organizations focus on negative footprint reduction, and have yet to learn how to increase their positive impacts (handprints) and how to scale them up through their products and services, through collaboration, through advocation of their leaders, and by organizing their own operation around flexflows instead of hierarchies. Scalability of what works well and how it can be combined through yet unknown possibilities are often far out of sight.

In consequence of this list of struggles, strategy, organizational dynamics, data management, accounting and finally reporting need a new impetus if we want to tap the ‚transformational potential’ to become thriving organizations. We need trust, innovation and resilience as the outcome of a combined approach to renew the discussion around purpose, success and scalability, as shown in diagram 1 in Part 1 of this series. Part 3-5 will pick up on each element – purpose, success and scalability, while part 6 will look at the wanted effects – trust, innovation, resilience. Together, they define the future agenda of reporting as a trigger for sustainability – to create the future we envision.

 
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Posted by on March 9, 2016 in Thriveability

 

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The long sustainability shadow of the refugee crisis

For those of us working in the sustainability field for many years, sometimes decades, following the current discussion about the ‘refugee crisis’ hurts. We are used to think longer-term, at least those of us who are not just on the compliance path of following a reduced understanding of sustainability. Remember, wasn’t it people, planet and prosperity, wasn’t it intra- and intergenerational equity, and wasn’t it about human’s behavior to remain safe on this planet, offering limited resources for up to 10 billion people, recognizing that there will minimally be 3 billion more people by 2050-2100. Sustainability was asking us to get ready. The current refugee crisis painfully shows how far we are away from that. What surprises me most is the fact that none of this comes right out of the blue! Politicians saying to be amazed of what has happened in the last 12 months should look into the mirror and ask themselves why they couldn’t have seen the big lines of development and have allowed themselves to be eaten up by the daily nitty-gritty. What went so awfully wrong?

Let’s go back in time. Weren’t you amazed in school when you looked at a continent map like Africa and saw the straight lines that showed the borders of all these African and Middle East countries? This is one of the most visual leftovers of colonization, lines that got drawn 100-150 years ago. Why bother, a desert is a desert, so these lines were drawn in the interest of those colonizing, not those that lived there hundreds of years, tribal heritage, cultural sights, trade routes, etc.. While colonizing is over the scars sit deep in the minds of generations and generations of Africans and Arabs, remembering very well who abused their habitat for resources, threw money at dictator regimes in a broad variety of these countries, only to keep the revolt down and continue to ‘dig, baby, dig’ for the growing need of Western consumerism. Development aid for decades ran into the wrong canals, often only a little portion reached those in need, while Westerners remained rather easy on these fatal flaws, it simply continued to keep people quiet and secured easy access to resources. Most of the oil producing countries were or are based on a brutal regime of a dictatorship of a single or a couple of families that managed to keep the poor majority somehow in a ‘too much to die, too little to live’ state, while building a life of affluence for themselves. Sure, there was growing awareness that our country’s systems and ideas about ODA failed, we needed more help for people to help themselves, avoiding what went wrong in the past. But can we say we succeeded? In my view we can’t, we never solved this problem. Did we really do the best we can? Just look at how wimpy we created development aid programs, how unimportant a development minister always was and still is, and look at the history of cuts in their budgets to close other holes in the overall budget. Look at how many countries really succeeded to spend at least 0,72% of GDP for development aid, the minimum agreed upon, hardly ever delivered upon. And why? Because it was known it was mostly useless, the real problems were never tackled since it meant stop funding dictatorships.

And then climate change, demographic developments, poverty and transparency through social media created the brew that lead to the Arab spring. Dictatorships fell because of the inability to react to massive poverty created by more and more climate-related droughts. Look at Libya and Egypt as examples. The tragedy of that situation simply was that those revolted and took dictators down had no education and hardly any help how to build strong democracies, they never learnt it. This gave space to regained religious and tribal power, awakening from their decades of suppression. While the economy was down and no improvement in sight fights between myriads of little new parties, partially religiously motivated, went on and on. Instability, just droughts and poverty, no jobs, no trade, no life. People started moving.

In other parts of the Middle East existing regimes fight against religiously motivated groups, with IS the most radical one, trying to re-establish an Islamic caliphate. It created new alliances in which the West changed fronts all too easy, the Assad regime in Syria is the best example. While he was called a tyrant some years ago, throwing poison gas against his own people and the West condemned him for that, he is now a ‘partner in crime’ against the IS. The country facing climate-related effects and related poverty is now totally demolished. There’s no hope for anyone trying to raise a family in dignity, people fled to Turkey, Lebanon and Jordan in the first instance.

Two decades earlier Russia and the US failed in Afghanistan, and whoever is still there from the Western alliance faces the Taliban when they attack the semi-democratic leaders  through suicide bomb and other terrorist attacks. Together with Irak it remains unstable terrain, one can easily see the hesitation of Western countries to totally withdraw the remaining armed forces from there. Droughts and uncontrollable floods continue to pester these countries every year, including also Pakistan. No wonder more and more refugees also started to move from there. The ongoing struggle between Saudi Arabia and Iran is on the surface one of tribal rivalry, but in the end it’s about power in the region, with the Wahabites being the most aggressive force.

Let’s be totally clear. While all of that turmoil is multi-facetted and overshadowed by tyranny, religious infatuation, tribal power plays, missing segregation of religion and state (one can say that Islam never had a renaissance like christianity) and lack of education of how to handle democracy, the root cause of this has been climate-related poverty and a disillusionment of being able to have a proper life for families. And here is where I don’t understand the Western governments: while the Arab spring was probably surprising, climate-related movements of people are not. Let’s not forget that many of the refugees now reaching Europe also come from countries like Eritrea or Sudan. So, besides historical effects, the West is now also paying back for their ignorance of climate change and climate-related poverty in these parts of the World, forecasted since decades.

Europe is at a make-or-break point of being able to solve this crisis. And while we have ignored the environmental source code of this crisis for long we utterly only have this one chance to at least show the social salvation potential of the crisis we helped to create in the first place. Europe doesn’t have a refugee problem, Europe has solidarity and humanity problem. While we always say we need immigration for demographic and economic reasons (just look at the demographic trees of our societies growing older and older) we don’t accept this opportunity now as a blessing in disguise. We have 380 million people in the European Union, one million refugees per year means 0,026% increase of population if we would be able to equally share the ‘burden’ of this immigration wave. It is in my view a devastating behavior of the majority of the EU member states, totally ignoring the mess created in the past, and a total blindness of responsibility today. As a European citizen I am ashamed of the year-long inactivity of the European Union in the light of repeating tragedies in front of the island of Lampedusa. More than once European Commissioners and ministers of various countries promised to help, the writing was on the wall for a long time, and nothing happened as soon as they were back at home. They helped to create the mess Europe is now in, and as politicians are, they are very easy to forget or blame an earlier Commission or Cabinet for purely disgusting political game plays. Let me not even start to talk about the rape of the refugee theme in US-American pre-election Muppet Shows.

While we could easily cope with this situation in Europe – and we have to as a whole – the ignorance of the past now creates the short-term problems that lead to new short-term devastation. Building fences, securing borders, the potential closure of the Schengen area, costing billions of tax-payer’s money and having enormous economic implications, are totally wrong moves and will play into the continued re-establishment of right-wing parties, partially extreme. Poland and Hungary are early warnings. Refugees are blamed for a situation we created in the first place, and honestly: it is not for the first time that I have a déjà-vu with the early days of the Nazi movement, where all of us always wondered: how on earth could this have happened? We are now seeing extremist right wing movements gaining power again, the police is met with no respect, in certain areas of our cities private groups organize ‘security services’, and all fueled by our authority’s inability to cope with the massive stream of immigrants, empowering criminal energy to recruit new herds. I am shocked that there is no streamlined immigration procedure in Europe, not even in my home country Germany, allowing system abuse. I am shocked by the fact that deportation isn’t equally enforced, and that people that now want to move back to their home countries because their immigration procedure could take up to a year and are unable to bring their families in for even longer can’t get their passports back and/or their home countries actually refuse to have them back. It is not the refugees to blame, it is a blatant failure of the European Union and its member states not being able to have organized at least a rudimentary streamlined procedure and enforcement.

So what does a sustainability expert recommend in such a situation?

First of all, those involved need to understand the broader context of the situation. We need to accept the long curves of history and establish an understanding of ‘climate refugees’. Separated from the ‘white noise’ of all of the religious, cultural and tribal aspects, we are moving into a future in which between 60 and 250 million climate refugees will be the new normal. Whatever the COP21 treaty will lead to the situation will still get worse for the next 30 years before their is a chance that it can get better. We are now seeing the effects of CO2 emitted 30 years ago. Also, understand the demographic implications of 10 billion people on Earth is essential. Immigration of 1-2 million climate refugees per year will continue. Any politician that thinks this can be solved through fences is naive!

Secondly, learn to understand the social implications of immigration. Immigrants want to work, want to learn our languages, want to put their kids into schools, and look for nothing else than a bit of dignity, and being able to make friends. Let all young people in our countries do a ‘social year’ devoted to help especially immigrants to adjust. We ourselves made friends with a Syrian family, now living close by, and offer our service as helpers when new refugees arrive. We made extremely positive experiences. The most important fact is quicker processes to get refugees into a position to be able to work and produce value-added. What has to be avoided vis-a-vis our own population is a feeling of greed in which refugees are prioritized when it comes to social housing, allowances, social services, etc.. Many of the refugees would love to help to create work to help themselves. We have architects, engineers, translators, nurses, doctors, social workers amongst them. Give them the opportunity to do something. If we created systems that don’t allow refugees to work as long as they are not fully accepted as immigrants, change that very system. Again, these people can and would love to work!

Thirdly, dry out criminal energy in our towns from the outset. We don’t get more criminals just because refugees come into the country. What needs to be avoided is that criminals can recruit disillusioned refugees into their groups, given our slow procedures. If 1 percent of the people in each country shows criminal energy the increase of the population through refugees is more likely to lower that percentage, but only if refugees get a positive vision of a potential life in our countries. It is simply not true that the refugees increase the crime rate. Simple statistics 1:1. Some culture shocks like we saw them at New Year’s Eve need to remain ‘anomalies’ in these early days of learning how to cope with such massive immigration.

Lastly, refugees are a blessing in disguise for our economies. Not only that the majority of the billions of extra budgets for handling immigration right now are already spent in our countries (and increase GDP), it’s the long-term economic effect of letting refugees work. There are many thousands of open vacancies in many industries, and our social services can themselves benefit from educated refugees. We need diversity to learn from. Infusion of new and different thinking will give extra impulses for growing strong together. We know that, the high priests of the global economy just told us in Davos this week.

It is essential to keep our inner borders open while existing law is enforced (and that includes securing the outer borders). It is a fatal flaw to close borders and blame the refugees for that. It is a flaw to think it will hold climate refugees back from coming into our countries. It is a flaw to allow right-wing extremists to fuel the fire. It is a flaw to think we need to defend our culture while all of us more or less come from immigrant families (just look back 2-4 generations in your own family history). It is a flaw to believe that Islam takes away anything from us, it adds a new colour to our society.

At this moment this is not the Europe I was born into, it is not the Europe I want to live in. I feel ashamed of what is going on. It was all foreseeable, so let’s be quick in remembering what we learned about sustainability and apply it as should have for the last 20 years.

PART 2 will come out in a couple of days.

 

 

 
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Posted by on January 24, 2016 in Thriveability, Uncategorized

 

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Heaven or Hell in Garden Eden? – A|HEAD|ahead’s year in review

Another year went by too quickly, at least this is how it feels. Let’s put the question aside if this is because of getting older or simply because this year was filled with (too?) much work. Maybe this is a good sign, too! Leaning back in my chair at the last ‘official’ working day in 2014 and thinking about how this year has been special, insightful, positive or negative, progress or setback, I can’t define a clear ‘yes or no’, more sort of an ‘and’.

Clearly, 2014 has been a year in which many of the problems on this planet have become even more strikingly clear, due to the many different events that reached the news. Amongst them, and in no particular order, are the brutal violence against women in India, the blazing racial incidents in the U.S., the wrecked havoc in the Middle East due to the never stopping war between Israel and Palestine, the brutality in Syria and its neighbor countries through IS and still existing governments in place, up to the sorrow for millions of climate and political refugees that need to leave home, and many of them not surviving on their trail of tears, e.g. when crossing the Mediterranean Sea. I can’t even imagine the pain that these millions go through and doubt I would personally be able to survive under these circumstances. Humans can be monsters, but humans can also be wonders, and many of the latter now stand up to make the world a better place, so I bow to humans like e.g. Malala, Bill McKibben (350.org), and the many nameless individuals that risk career’s, reputation, legal punishment, and sometimes their life, just for their mission.

The roughness of the pictures add to the notion of urgency to find solutions to these problems, and my impatience is growing with all those that always have a ‘yes, but…’, stay inactive because there is a little risk in a sea full of opportunities, look at others to make the first step, ask ‘what’s in it for me’ as the first reaction to a proposal, or simply put their egos first. Many reactions are simply put under the smokescreen of political negotiations, tactics to ensure personal positioning (in order not to lose one’s reputation) or simply hiding behind the unavailability of budgets, or hierarchy not allowing to move forward. Sticking one’s neck out is often a no-go in an ongoing financial, climate, poverty, equality, … crisis, it often feels like talking to people in straight jackets in an inherent atmosphere of fear. I wonder what positions people are sometimes able to defend or take although they have families or kids at home, kids that will be very critical with their parents in the not-so-far future, and what excuses will these parents have when the kids start to ask these questions? How much guilt do they load upon their shoulders through inactiveness and by putting themselves or other bad reasons first. I also often ask that question to myself, too: what more and how much more could I have personally done? And yes, there are also bullet points on my secret list to do better, no question.

But 2014 was also the year in which I have personally witnessed and been engaged in areas that do give a lot of hope. Without mentioning all of them individually, I’d like to offer some of the insights of the conglomerate of my work in 2014, leading to positions that I take, and given the experience of the work I have done this year. I am thankful that my work has allowed me to derive to those insights, so a big thank you goes out to all my affiliations and business partners, you know where and who you are ;-). Some of these insights may be helpful for you, and I am much open to comments an reactions!

  1. Those dealing with sustainability have often forgotten the true meaning of sustainability, especially using ‘intergenerational equity’ as one of the most important guidelines of how to come to a net positive strategy. Overall, the majority of those corporations that have a certain focus on sustainability (in the still unbelievable absence of the majority of corporations to deal with sustainability at all) are happy with a ‘show less bad’ attitude, simply because they think becoming net positive is impossible to reach. There is only a handful of leaders that understood that net positive is not just one strategy to stay alive, but in the end the only strategy to keep a license to grow. It is impossible until it gets done, Mandela said.
  2. Many sustainability strategies fail to address a challenging ambition level because they are built on symptoms, not on root causes. This partially due to the standards and management systems that are built on the idea to reduce negative impact, not to increase positive impact. If climate change is an aspect to deal with, the symptoms-based strategy is to reduce emissions. A root-caused strategy will look at the causes of climate change (e.g. environmental degradation, demographic effects, urbanization, technical developments, world trade shifts, etc.) and look at ways how an organization’s business model can make positive contributions. Such a strategy will not just scratch the surface, it will go to the real questions about the purpose of the organization, the long-term vision of how the company can make a contribution, and how to excite employees, customers and investors anew.
  3. The question about the business case of sustainability is unfair to ask as long as the economic system boundaries always force people to the wrong direction due to existing pricing information. The discussion about the internalization of external effects into cost accounting, the translation into product and service prices and the counterbalancing of potentially raise in prices through lowering tax on work (and increase of taxes on resource use) needs to be seen in combination. Solutions of course need a level playing field, but again there is little fantasy to get these negotiations started. Too many ‘yes, buts …’. The effect is that a pure discussion around internalization of external effects leads to little (although we know much) as there is too much fear about unfair market conditions and increase of prices.
  4. The green and inclusive economy is undervalued and there is little going on in the corporate world to get it defined better or operationalized. I have come across people in corporations that even laugh about it since they see this as a revival of the various UN Green and Clean Tech programs, more of the old in new sheets. This is sad and possibly disastrous. Some of my work in 2014 focused on how to give shape to the idea of the green & inclusive economy and how a company’s reporting would react to that. What would be the methodologies, the tools, and what is already available. Find more through http://www.reporting3.org and read the posted report of the second Reporting 3.0 Annual conference. There are also great books that give more insights, I recommend John Elkington’s ‘Breakthrough Challenge’, Said Dawlabani’s ‘Memenomics’, Jeremy Rifkin’s ‘Zero Marginal Cost Society’, Frank Biermann’s ‘Earth System Governance’, Nick Gogerty’s ‘The Nature of Value’, Giles Hutchin’s ‘The Illusion of Separation’, Robin Wood’s ‘The Trouble with Paradise’, Tomas Sedlacek’s ‘Economics of Good and Evil’, and for those with more time, Thomas Piketty’s ‘Capitalism in the 21st Century’ makes sense if you acknowledge that there are more capitals than just financial capital. Take the essence of these books and tell me what else is missing to start making a green & inclusive economy a reality! Since we recently learned from the OECD that the idea of a ‘trickle-down economy’ is a complete failure, not one good reason is left not to work on the new economic model together.
  5. We forgot to take humans on board in order to shift from sustainability to ‘ThriveAbility’, the way to inhale new excitement to the idea of organizing the green & inclusive economy. I am deeply appreciative of the steps the ThriveAbility Foundation has taken in 2014 and is planning to take in the years from 2015-2018 and I deeply hope that the methodologies, factors, index algorithms will sink in quickly with many of the potential collaborators, and I am excited to be a co-founder of the ThriveAbility Foundation. The meetings this year have created so much positive energy, and hearing some of the partners we now have in our ecosystem, some of them experts in sustainability for decades, saying that this initiative has the potential of a ‘grand design’ truly makes me happy. I am sure the team now at the starting line will do its utmost to create the necessary breakthrough for the idea of ThriveAbility. Feel free to go to http://www.thriveability.zone or drop me a response or email (ralph.thurm@kpnmail.nl) if you are curious or excited or simply want to learn more about it.
  6. UN Secretary general Ban Ki Moon has just published a report and some blogs about the great potential the year 2015 has with regard to climate change negotiations and the agreement on the Sustainable Development Goals (SDGs). In my view these are great and necessary steps to be taken to come closer to the idea of a green & inclusive economy, but they can only be intermediate steps. Take what I said in #2 about less bad strategies and #3 about the necessary pricing information to create new boundaries for an economic system and you understand why. I also realize that any successes in 2015 will need to be translated in national legislation and then operationalized in organizations, including controlling, mitigation and sanctions. This will take at least until 2017/2018 to become effective, and results not to be expected before 2019/2020. In the meanwhile I fear tactics like ‘creating shared value’ are not enough, in one of my blogs this year I even described them as ‘a spicy sauce to make a rotten meal taste good’, and I admit there is a cynic touch in that expression. I therefore put even more hope in the work the TriveAbility Foundation can potentially achieve in the meanwhile, so please take that journey with us.
  7. Let me finish with one more advice, and that one is a result of many years in this terrain: we need to avoid the idea that whatever we design for the green & inclusive economy would have to be 100% exact from the start. Whatever methodology we use, whatever algorithms we try out, and whatever reporting format we apply, they don’t have to be 100% correct from the beginning. Although academics don’t like that, although a lot of what to try out is based on normative assumptions and not always fully covered by science, there is no other way than to try it out, so me plea is for ‘progressive approximation’ and the result will lead to conventions that are good enough to make necessary decisions. Take the LCA movement and how that has come to conventions, take the examples of environmental profit&loss accounts and how they have helped corporate decision making. The design of the green & inclusive economy needs several iterations, and we can simulate trial & error until we are all good to go. We just need to do it, nothing holds us back! The immense progress IT has made in the last years is a great help, and I am happy to be involved in some of these, too.

I continue to like Omar Bradley’s quote ‘It’s time to be steered by the stars, not by the light of each passing ship’. We have seen many ships passing by that didn’t get us anywhere, so it’s long time to go back to the stars. For Martin Luther King it was enough to have a dream, the plans came later. So what is holding us back?

I hope to hear or see many of you somewhere in 2015. Thank you to all old & new subscribers to this blog and the thousands of readers of any of my blogs on Sustainable Brands, CSR Wire, Guardian Sustainable Business, to have taken out precious time to do so. Wishing all of you and your families all the best in 2015!

 

 

 

 

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Reporting for the ‘future we create’ – shaping next-generation transparency

Recently the report of the October 6/7 Reporting 3.0 Platform Conference ‘Reporting at the crossroads – ensuring purpose, practicability, performance’ was posted at http://www.reporting3.org, together with a great video summary, a repository of presentations as well as an event gallery that wonderfully highlights the spirit and buzzing enthusiasm of the 170 participants from 4 continents and 13 countries. Please find the report attached here as well: R3_Conference_Report

I had the honor to curate the design and facilitate the conference on both days, together with a great team of BSD staff and voluntaries, and also wrote most parts of the conference report. During the whole process in the many months of preparing the conference (that included working on two Transition Labs and two Regional Roundtables), post-conference writing and thinking about how to shape Reporting 3.0 for 2015, I often wondered how much more would already be possible in reporting through a combination of existing vision, methodologies and tooling. Reporting 3.0 brought the majority of influencers together, so a glimpse of the possible was clearly visible already during the two days of the conference.

The report therefore also focuses on three main messages and gives a whole plethora of insights and examples:

1. The ingredients of the ‘green & inclusive economy’ are becoming much clearer and more tangible for corporate decision makers, investors and leading thinkers from academia and the civil society; 

2. New approaches, standards and benchmarks are under development or will be developed to close the ‘sustainability context gap’ in reporting; 

3. Information technology and respective providers offer new solutions for big data management and algorithms as well as applications that enable a new level of sustainability driven decision-making by corporate managers, investors and consumers.

As a teaser to read the full conference report I am also posting parts of my pre-conference speech that I held at the speakers dinner the day before the conference officially started here, shedding light on intentions, focus and ambitions.

“Let me start off by quoting Otto Scharmer, the author of Theory U, who once said, ‘We cannot transform the behaviour of systems (and the people in them) unless we transform the quality of attention that people apply to their actions within those systems, both individually and collectively’. I think this already comes quite close to what we want to achieve with Reporting 3.0, both the conference, but also the platform. We started off from three basic ideas: 1) that we will take serious the plea to achieve a green & inclusive economy and the design for a capitalism achieving that, made at Rio +20 in 2012; 2) that we believe that reporting has a trigger function to create necessary change (many from us come from the early days of sustainability reporting when that was indeed the case); 3) that reporting with that trigger function to achieve a green & inclusive economy will need to be different from what it is today, and most likely it is needed within just one decade.

Reporting 3.0 can change the ‚quality of attention that people apply to their actions towards an envisaged system’ through various pathways: 1) By taking note of the various developments that surround reporting, especially around new business models (circular, sharing, regenerative, restorative), and the enhanced role of (big) data, data architecture, and IT capabilities; 2) By assessing the necessary consequences of the idea of a green and inclusive economy to accounting, given the fact that these new business models need different accounting rules, and that accounting will need to embrace a grand design as well: true costing, true pricing, and even more necessary, true taxation, to balance the burdens to consumers and communities, and to allow to set new economic system boundaries in which market mechanisms can work towards the right direction, on a better and global level playing field; 3) By embracing the idea that measurement needs to much stronger close the sustainability context gap, meaning that macro-data and micro-data allow for assessing performance from a future-readiness perspective and give stakeholders confidence that what an organization says and does is good enough or in the right direction to achieve a green & inclusive economy.

Looking at the vast variety of players with different backgrounds, all knowingly or unknowingly part of the ‚grand design’, and many not from the reporting terrain, reporting more or less logically rather comes at the end of the thinking, if it comes up at all. And those in the reporting space often don’t have the time, capacity, capability to convene formats that deliver insights with these forward-looking players. They normally convene with other experts in the reporting field. The early infusion of knowledge to build the ecosystem for forward-looking reporting is rather uncovered terrain, reporting at this moment adapts to the unavoidable, and doesn’t deliver on a ‚grand design’.

To be clear, we already do benefit from what has been produced so far. There are indeed strong shoulders of that little child Reporting 3.0 to sit on! And still, not enough has been thought of, produced or tried out to sketch the new reporting landscape and to build a ‚grand design’, stemming from the North Star, the green & inclusive economy.”

 

 
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Posted by on December 18, 2014 in Sustainability Reporting

 

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