Companies take steps towards understanding impact – but real footprint still unclear

Covid-19 has sparked significant interest among business leaders in understanding and improving their overall impact on the world, experts say.

Mark Gough, executive director of Capitals Coalition, which helps organisations to identify and measure their impact on people and the planet, said his colleagues were being “inundated” by requests for help from large corporates – far outstripping their capacity to respond.

Gough (pictured) was speaking during a panel at the Social Value Matters conference yesterday. Social Value Matters is the annual conference from the Social Value International network, this year convened by Social Value Canada.

He said the spike in interest was driven by realities brought to light by the coronavirus pandemic. “[They’re] coming to us and saying, ‘I always thought the world was a safe and secure place, and I’m realising it isn’t now, my supply chains that I thought were good are being disrupted; the political will, where is that?’” 

The desire to better understand the value they were creating, he added, came from today’s uncertainties. “In a world when everything is being thrown up into the air, you have to have something to grab on to,” he said. 

Even if companies are not always coming to us for the right reason, it’s opening up a door

Some of these enquiries were driven by self-interest, suggested Gough, but this was not necessarily a bad thing. “Even if they’re not always coming for the right reason, it’s opening up a door for us,” he said.

Doors appear to be opening in other areas, too. Jason Murray, president of Toronto-based BIPOC Executive Search, said people were “definitely being more intentional” about diversity and inclusion, while Caroline Rees, CEO of Shift Project, which helped to draft UN standards on business and human rights and now helps businesses to meet them, also noted new impetus this year. 

“We’ve definitely seen Covid focus the mind around the ‘people’ dimensions of how business gets done,” she said. “There’s no doubt of that.” 

Investors were also “much more focused” on the quality of ‘S’ data, she added, referring to the S in ESG (environmental, social and governance) investing. 

But outsiders remain sceptical. Chris Coulter, CEO of research firm Globescan, cited research among a wide mix of investors, government, civil society and other stakeholders this year. While views on how large companies were performing on Covid-19 were relatively balanced (35% said they were doing a good job, and 28% a poor job), on inequality views were more stark, with 64% judging business as performing poorly. 

The findings suggested “a long way to go” to meet the growing expectations of stakeholders and the general public, he said.

“Very, very suspicious”

Sonal Pandya, a director at the Sustainability Accounting Standards Board (SASB), a nonprofit that sets guidelines for companies to report on sustainability information with financial implications, suggested company bosses may be receptive to such criticism. Market valuation nowadays relied more on intangible assets than on hard assets, as in previous decades, she said. 

“More and more investors recognise [the role of] issues such as business ethics, how they manage diversity and inclusion, how companies manage for harassment, how companies manage for the health and safety of its workers,” she said. “These things are impacting the valuation of companies more so than anything else.” 

As a result, investors – not only impact investors, but also large-scale institutional investors, asset managers and asset owners – were now really seeing such issues as “fundamental”. 

But most investors remained dissatisfied with the quality of information companies were reporting, Pandya said. “They’re very, very suspicious. Because the information is not reported in the way they want to see it.”

That was starting to drive change, however. “There is almost a sea change in how disclosures are happening, because more and more investors want to see this information in a very simple format, in a quantitative format.” 

Things like business ethics are impacting the valuation of companies more so than anything else

In some areas, numbers could work well, said Rees: her organisation is working with Capitals Coalition to use Living Wage data (calculated per country, and based on the cost of food, housing and transport expenses) to assess the quality of jobs within a company’s wider supply chain. 

But in others, there was a risk of “grabbing” at numbers that provided no more than “an illusion of comparability” – like the time spent undertaking training on HR issues. 

Those using such data should ask themselves, “is it really enabling me to compare those two companies? One might have really embedded that in how business gets done, the other might be just checking a box with some e-learning for 20 minutes.”

Consolidation urgent

Organisations like SASB, the Global Reporting Initiative and others were doing “really great work” towards more comprehensive corporate reporting, said Gough. But they were still missing something. “Until those metrics start including the value, and the value to who – who is actually being affected by this – that’s where I think we’re going to... [get] something that’s really useful,” he said. 

Until those metrics start including the value, and the value to who – that’s where we’re going to get something really useful

With the inequality gap “getting bigger and bigger”, Gough warned that time was running out to agree on a system that worked.

“We can’t just sit back on what we’ve already got at the moment. What we’ve got at the moment isn’t big enough.

“Every time we consolidate, it’s like an accordion: it opens back up again, and there’s lots of new initiatives and then we've got to bring it back together. 

“At the moment there's a wealth of new initiatives coming through, but we’ve got to consolidate that as quickly as possible and start looking at standardisation.”

Pioneers Post is a media partner of Social Value Matters, which runs all week. Follow all our coverage here.

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