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EXECUTIVE PERSPECTIVE: Beyond ESG, an outcome driven approach to sustainability

Jane P. Madden

28 May 2014

It’s late May, and in the sustainability world, that means we are at the height of corporate reporting season. Every day, new reports fill my inbox. These reports are in response to the increased demand for transparency and metrics that demonstrate corporate environmental, social and governance (ESG) performance.

Thanks to existing frameworks like GRI, IIRC and SASB, businesses have made a lot of progress in ESG reporting and transparency. GRI was the pioneer, IIRC working with the GRI framework raised the bar on integrated reporting. Now, SASB is taking U.S. Corporate reporting to another level by developing indicators that link to core business and provide material data that align with investor needs.

But is ESG reporting giving us the full picture on corporate sustainability? We are learning more and more about corporations and their sustainability efforts, but we are still in the dark about the overall impact these initiatives have on society. Leaders in the field are looking to measure real social, not only ESG performance. We need to continue to evolve sustainability metrics so they sustainability’s full story. Outcomes-based measurement is one way to move the needle.

It is estimated that U.S. companies alone will spend $60 billion on sustainability initiatives in 2014. So, it is fair to ask if corporate sustainability investments are achieving the intended social and business outcomes. Are these programs improving human rights in supply chains? Are communities getting stronger? Does sustainability keep top talent or increase sales?

How do we answer this questions? To date, most answers have been based on anecdotes, rather than data. We don’t yet have great ways to understand sustainability across industries, particularly social impact.

For example, Nike and Exxon promote different sustainability initiatives, but do we know which company has a greater social impact? One way to answer the question is to map to universal outcomes. In other words, compare sustainability success with in and across industries by mapping initiatives to shared outcomes.

It comes down to the classic problem of comparing apples and oranges. The fruits are obviously different, but can be understood in terms of how they contribute to a common outcome like nutrition.   We can take a similar approach to measuring sustainability impact.

Outcomes can serve as a “universal currency” in sustainability. At Mission Measurement, our social sector research revealed a finite number of outcomes. We studied thousands of social program goals, deleting duplicate information, standardizing descriptions and ultimately identifying 132 common outcomes in a taxonomy for the social sector. From this foundation it is also possible to align programs with intended sustainability outcomes and then evaluate how effectively and efficiently various programs deliver those outcomes.

Figure 1. Example of outcome taxonomy for “Education”:TAXONOMYWhat is the value of measuring “universal impact?” All stakeholders, whether investors, activists or community leaders will have better information to evaluate and make decisions about corporations. Information that will inform external stakeholder’s decisions to invest, to protest or purchase. It can also provide Information that will inform internal decision makers if they should expand or adapt their human rights training or if employee volunteer or stakeholder engagement programs are achieving the intended social and business outcomes.

Applying “Universal Impact” methodology will help corporations measure and understand their sustainability investments. As we measure more and more corporate sustainability programs, we are adding to a database that will eventually allow us to not only measure, but also benchmark that impact within and across industries. This data can fill in the information gaps that ESG data alone cannot provide.

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