Looking back 10 years ago, did you consider which bank you’d used based on its green credentials, did you know anyone who was vegan, did it matter to you whether the company you worked for had a green ethos, and were your children learning about recycling, reuse and ecosystems in school? Possibly not, but odds are you do now.
In an era where conscious choices are being made about the environmental viability of every aspect of our lives, sustainability touches everyone and everything. It has to: an increasing number of the conditions necessary to human life as we know it are disappearing, and we now recognize that we’re responsible for this situation.
People care and green consciousness is growing
Fortunately, people care — and increasingly so. Yes, there are many other issues high on boardroom, policy and consumer agendas — whether it’s conflict in Ukraine, rising energy prices or the continued fallout of Covid-19 — but a sustainability mindset has taken hold and environmental literacy is stronger than ever, blazing an irreversible trend.
This has transformational repercussions for business; those companies that embrace sustainability as an integral part of their operating model are seeing their value increase. This is not just in terms of profits, but also in higher staff retention and engagement, greater customer loyalty, and improved access to markets and funding. With this shift towards sustainability come improving examples of best practice, better short-, medium- and long-term targets and regulation.
How to report sustainability
This amorphous trend requires the discipline of standardization and regulation. One area in which the World Economic Forum is particularly active is standardized sustainability reporting. Let’s be honest, this isn’t an exciting-sounding subject, but it is essential to progress in supporting everyday sustainability and ultimately its success.
Do you remember measuring your height as a child? That pencil mark on the wall or chart that progressively marched upwards, maybe with a date attached. You could measure your progress because you had a tool, in this case a tape measure, and a standard, either feet and inches or centimeters and meters. Measuring sustainability is no different, and for companies, it’s this type of yardstick that is needed not just to measure and compare progress, but also to hold themselves, and others accountable in meeting their climate-related targets.
Think of corporate accounting and its two major systems of measurement — the U.S. Generally Accepted Accounting Principles and the International Financial Reporting Standards (IFRS) — both of which offer a commonly-understood, legitimate, verifiable approach that extends across borders and jurisdictions. That’s what we are working towards: a globally-recognized, and importantly, comparable system that meaningfully measures how sustainable a business is.
What does a sustainable business look like?
Businesses are facing increasing pressure to deliver prosperity sustainably. We aren’t just talking about the impact a business, its operations and workforce have on the environment, but also its resiliency. A business that manages risks (including climate change) and disruptions well is regarded as resilient. This makes sustainability information critical to businesses and gets to the heart of understanding how they create or erode value.
That growing green consciousness mentioned earlier is integral to this. Businesses that fail to shift to a sustainable operating model will see their customer base shrink, fall behind in terms of technology, face tighter regulations, find it harder to compete and struggle when economic conditions are difficult.
The World Economic Forum doesn’t offer a solution; it accelerates progress towards one
The Forum is ideally placed to understand the short- and longer-term challenges that businesses and different sectors face, and is helping shape the ecosystem and streamline the processes required for transformation.
On its platform, the Forum hosts a large and growing coalition of companies that are driving the sustainability agenda, and through its convening power, enables stakeholders to navigate the investment sphere.
In terms of sustainability reporting, the Forum is a strong advocate of convergence. Since 2019, it has been working with the “Big Four” accounting firms and consulted with more than 200 companies to produce the Stakeholder Capitalism Metrics (SCM). These offer a universal means for companies to report on their sustainability, and already more than 150 companies are using the SCM to chart their progress in meeting green targets, producing crucial, comparable data.
This work has resulted in a coalition of CEOs who support progress on convergent sustainability reporting standards. In turn, this is providing the International Sustainability Standards Board — which falls under the purview of the IFRS — with a sounding board for its work in creating a universally accepted sustainability reporting standard.
Measuring and managing sustainability
We know what we value — in this case a healthy and sustainable planet — and as such, understand that the impact we are having on it needs to be measured and managed.
Expectations of the purpose of business, as well as how companies operate and deliver is evolving, but the lack of a universal reporting standard poses an obstacle to tackling climate change.
This makes standardized sustainability reporting one of the most important topics on the agenda. By getting it right, we can better consider and accurately measure the impact that we are having on our future, helping ensure that there is a worthwhile future to enjoy.
Olivier Schwab is Managing Director of the World Economic Forum.
The views and opinions expressed in this opinion section are those of the authors and do not necessarily reflect the editorial positions of Caixin Media.
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