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Reporting 3.0 PlatformBlueprint ProjectsOn Reporting, Accounting, Data & New Business Models
Catalyzing Future-Fit Reporting for a Regenerative & Inclusive Economy
Frankfurt. December 2nd, 2016
VfU Tagung 2015 – ein RückblickTenor:• Derzeitige Berichterstattung ist nicht ‘future-‐fit,’, Nachhaltigkeitsberichterstattung ist
zumeist ESG-‐Fortschrittsbericht und beantwortet die Frage nach der Nachhaltigkeit nicht;• Rankings sind nicht in der Lage nachhaltige Unternehmen zu bestimmen und orientieren sich
an ‘best-‐in-‐class-‐of-‐the-‐less-‐bad’; Ausfüllen von Fragebögen oftmals ‘Künstchen’;• Derzeitiges Nachhalthaltigkeitsmanagement ist (von Ausnahmen abgesehen) nicht in
‘Genen und DNA’ der Unternehmen verankert. Die meisten Unternehmenslenker sind nochstets mental abwesend.
Fazit: Wesentlichkeitsanalyse geht am Wesentlichen zumeist vorbei!
Frage:• Wie kann der ‘Big Shift’ von ‘Sustainability’ zu ‘ThriveAbility’ gelingen?• Was ist dann wesentlich?• Wie sieht strategisches Nachhaltigkeitsmanagement aus?
Next Generation Sustainability DisclosureOpen Source Initiatives and Tools
Goal-‐Setting & Transition Planning
Implementing Strategies
Measuring & Accounting
Reporting
• Future Fit Business Benchmark• Science-Based Targets• Pivot Goals• Preventable Surprises• GISR
• ThriveAbilityFoundation
• Embedding Project
• Total Contribution• MultiCapital Scorecard®
• Reporting 3.0
Introduction
About The Reporting 3.0 Platform
• Global Public Good: multi-stakeholder community generating knowledge to design future-fit reporting in a neutral, pre-competitive space
• Collaborative: co-creating solutions that spur deeper transformation than organizations can achieve individually within institutional constraints
• Positive Mavericks: constructive engagers who transcend incremental progress to align reporting practices with the necessary ambition to achieve a regenerative & inclusive economy
• Blueprinting the Future: After 3+ years of community-building through curated convenings, the Blueprint Projects shift Reporting 3.0 into action mode through Working Groups to identify, design and spur the needed changes at the systems levels through appropriate recommendations.
Who is supporting Reporting 3.0? • Accounting for Sustainability (A4S)• ACCA• Aegon• Beijing University• Boston College• BSD*• BT• Cabot Creamery Cooperative• Center for Sustainable Organizations• Convetit* • Crown Estate*• Durham University• EY*• Flag • FSLCI• Governance & Accountability Institute• Group of Friends of Paragraph 47 • IIRC*• Kanzai University
• Net Positive Project (Forum for the Future, BSR, Harvard SHINE)
• Pax World Mutual Funds• PivotGoals• Preventable Surprises• PwC• SASB• Shift*• Stellenbosch University*• Sustainability Context Group• Swiss Federal Office of the Environment• University of Augsburg• Tellus Institute • UNEP Inquiry• Volans• WikiRate• World Resources Institute*
* Steering Board Members
Robin EdmeSenior Advisor Responsible FinanceFrench Ministry of Ecology, Sustainable Development & Energy
Reporting 3.0 Steering Board
7
Bill BaueCo-FounderConvetit, Sustainability Context Group
Claudine BlameyHead of Sustainability & StewardshipThe Crown Estate
Cornis Van Der LugtSenior Research Fellow Stellenbosch University Business School
Ralph ThurmManaging PartnerA|HEAD| ahead
Peter TeuscherManaging PartnerBSD Consulting
Stephen RussellSenior AssociateWorld Resource Institute
Sarah GreyMarkets DirectorInternational Integrated Reporting Council
Mairead KeigherAdvisorShift
Brendan LeBlancPartner Climate Change & Sustainability ServicesEY
2013: Testing the waters
2014: Developing structure
2015: Preparing a Transition Roadmap
2015: Preparing a Transition Roadmap
2016-2017 Blueprint Project Structure…
..With Blueprint 1: Reporting & Blueprint 3: Data Launching in July 2016 with seed funding from the SwissFederal Office of the Environment (FOEN)… and other organizations
Blueprint 1: Reporting
Blueprint 1: Reporting (Exposure Draft)
This Blueprint explores how reporting inter-links the macro (ecosystems / societal / governmental), meso(industry) and micro (business) level systemic needs in the design of a Green & Inclusive Economy that advances Regenerative Capitalism.
Chapter 3: The Green & Inclusive Economy• Macro-‐economic urgencies versus micro-‐economic stereotypes• Defining factors for ‚green’ and ‚inclusive’ in an economy
• Past approaches• The unit of measurement• Top-‐down versus bottom-‐up• Aligned regenerative capitalism• New value-‐creationparadigms• Shortcomings of existing reporting standards & frameworks• Economic system boundaries – redefinition of incentives• The ‚business case’ – a fair question in existing ecosystem boundaries?
• Framing a set of principles for reporting in a green& inclusiveeconomy
• Principle 1...• Principle 2...• Principle 3....X
• Integral thinking & truemateriality in reporting
G&I Economy starters• Variety and rich set of
sources of reports to start from
• Principles for a regenerative capitalism, published in Capital Institute‘s White Papers...
• Principles for a regenerative business, published by Carol Sandford, ...
• Building blocks for a second-‐tier consciouscapitalism, as published bySaid Dawlabani in ‚Memenomics’
• UNEP Inquiry• ...additional sources
Necessary Change of the Economic System & Boundaries
• Adjusting cost accounting to cover the true cost of nature use and abuse, diminishing the ability of futuregenerations to live a life with equal opportunities. This has impacts on natural capital and manufacturedcapital. This needs the monetization of the earth’s services, which is not a new topic. This won’t automaticallylead to increased costs, it will mainly be an incentive for true cost avoidance (not in the sense of ignoringexternal costs in the first place) in order to offer sustainable goods at a lower price than unsustainable goods. This would potentially help solve the stagnant amount of customers to buy the better – because (in the end) cheaper – sustainable goods. The same applies for social costs.
• Introducingbenefit accounting for the appreciationof positive impact, part of a total contribution system ofaccounting. This would include the monetization of positive increases in social capital, human capital, reputation capital, intellectual capital.The same applies for environmental benefits.
• Translation of these true costs into true prices and not keeping them in shadow calculations. There are manycompanies that already use such shadow calculations as internal prices, but do not add them to products yet.
• Changes in the incentive structures of taxation. This wouldmean to signal a decrease of taxation on labor andan increase of taxes for non-‐renewable resource use. This can be done in combination with true costingmentioned above (leaving it partially to the regulatory power of governments to include every goods andservices producing enterprise and let them become necessary followers).
First Set Of Principles (1)• Relevance -‐ this would include sustainability context and materiality and allow to explore fiduciary and
stakeholder duties through a clearer impact description, adds the perspective of cumulated impacts andscalability
• Reciprocity – the recognition that there is an exchange between information upward and downward theinformation food and demand chain; it clarifies the need of seamless flows between micro, meso and macro(vertical dimension)
• Circularity – the necessity to define impacts from a circular economy perspective; the idea that there shouldn’tbe ‚a loser’ in a value cycle; the needed change from value chains (as a relict of the throughput economy andthe take-‐make-‐waste past); the notion that if a negative impact isn’t tackled it will bounce back (an analogy tothe planetary system and its circularity: increased nature abuse lead to weather extremes bouncing back on usover time)
• Mutuality – the understanding that every action leads to reaction, and that collaboration is better thancompetition (that normally leads to losers in the value cycle and counter-‐reactions; both reactions are mostlikely not serving a societal purpose); this also addresses the ideas about sharing and collaborative businessmodels in the interest to reduce footprint and increase handprints
• Connectedness – the need to agree to making a contribution to the bigger ‚whole’, hardly visible in today’scorporate approaches. The idea that ‚there is no sustainable business in an unsustainable world’ isn’t just a nice set phrase, it is the hard fact and reason for the need for the already discussed economic system boundarychanges.
First Set Of Principles (2)• Redundancy – The notion that while we are pushing innovations for more sustainability, a real test case for
increased positive impact is the proof that ‚the old’ got redundant, or obsolete, meaning it will not continue tostay as stranded assets or in use in other parts of the world. This will help clarify the real sustainabilitycontribution, the real contribution made. It addresses the ‚net effect’ of what has been done.
• Modularity – a lot of what sustianability addresses, what circular business models demand has to do withintelligent use of resources so that they aren’t losing value. It also looks at circular business model connections, material flows and their effective strengthening of each other. It addresses each industry in a different way andchallenges systemic thinking.
• Adaptability – recognizing that circularity, multi-‐capital thinking, changes in economic system boundarieswon’t be realized from one day to another, but that there’s a journey to walk together. This demands a proactive and forward-‐looking governance, leadership and strategy. It also, at the downside of the journey, that certain practices won’t have a future in a green& inclusive economy.
• Humbleness – how often do we hear and read about a company wanting to be the most sustainable player in their industry, and how often did we need to readjust our picture, leading to a lack of trust. We already knowthat reportinging should be balanced, also in language. We see the need to acknowledge that economicsusccess is limited in a stressed economic, ecologic and educational system. So being successfull economicallyand building that success on the back of other capitals isn’t going to work.
• Salience (instead or in addition of relevance?)• ...other principles?
Reporting 3.0 Advances “New Impetus”Future-fit reporting needs• Clarity of purpose & connectedness
amongst micro-, meso- and macro-level requirements of a regenerative & inclusive economy
• Multicapital-based success measurement for true futurevalue assessment
• Attention to scalability of positive impact & transformative change
• Resulting in ‘integral thinking & true materiality’, building trust, resilience and innovation as outcomes
Chapter 4: Reporting PURPOSE• Purpose – the linking pin between inside and outside of an
organization’s perception• Contribution to a bigger ‚whole’• Ambition – where to position the organization in a strategy continuum
• The litmus test for purpose: from ‚denial’ to ‚thriving’• Consequences for the reporting regime• Consequences for stakeholder dialog• Consequences for the governance approach• Consequences for leadership behavior
• Recommendations• Reporting standardsetters• Governments, legislators andmultilaterial organizations• Corporations• Investors
The Reporting 3.0 Strategy Continuum…
…shows the level of ambition necessary for reporting to play its role in catalyzing a regenerative & inclusive economy
Value of the SDGs in this discussion• Extrapolation of ‘do no
harm’• Targets to be translated
into national plans• Aggregation over 190
countries• Getting 80k
multinationals involved• Technical
Implementation Mechanism
• Financial Implementation Mechanism
• Value?
Generic 3-Gap-Problem for Purpose Generation• Sustainability context gap just
one of three gaps• Context of ‘activating purpose’
needs suitable links between macro-urgencies and micro-deliveries
• ‘Integrated thinking’ still neglects ‘integral’ purpose discussion, making a ‘contribution’ to society and the planet (IIRC & SDGs just interim steps, reporting standards cure symptoms)
• Materiality discussion therefore neglects aspects of ‘cumulated’ impacts when discussed as a silo issue.
• Successful organizations tackle all three gaps simultaneously.
Statement on Purpose – Allen White
Disclosure related to a ‘purpose’ perspective -Examples
Contextualization:• What is our ‘World View’? • Where are we on the continuum?• Do we cure symptoms or are we having
impact by tackling root causes?Leadership Attitude:• Do we have a socio-‐cultural leadership
gap? And a transformation gap?• What role do hierarchy and functions
play for our ‘thriving’ organization?• In how far does leadership address the
economic system malfunctioning?Ambition Level:• How do we address growth and
differentiate sustainable from unsustainable growth?
• Are all employees involved?
Chapter 5: Reporting SUCCESS
• Purpose & contribution – the creation of value revisited• The past focus: financial capital in a throughput economy• The new focus: multi-‐capital approach in a green&
inclusive economy• The litmus test for success: total contribution
• Consequences for reporting regime• Consequences for stakeholder dialogue• Consequences for the governance approach• Consequences for leadership behavior
• Recommendations• Reporting standardsetters• Governments, legislators andmultilaterial organizations• Corporations• Investors
Disclosure related to a ‘multi-capital’ success perspective - examples
Measurement:• Is there an inventory of impacts/ stress test
regarding the capitals?• Are external effects properly addressed and
assessed from a capitals perspective?• Does the company collect data on all three gaps
(sustainability/transformation/leader-‐ship gap)?Target-‐setting:• Are ‘science-‐based-‐goals’ assessed and context
used for connecting to ‘social floors’ und ‘environmental ceilings’
• How are long-‐term targets defined and then used to backcast mid-‐ and short-‐term targets?
Incentives:• Does the organization incentivize sustainable
performance? How does it punish non-‐sustainable performance?
A multi-capital success ‘litmus test’ –Crown Estate
• The Accounting litmus test question: ‘Have we built financial capital on the back of any other capital?’
• Companies on the continuum from sustainable to net positive to gross positive will need a proper proof
• The IIRC differentiates between input capitals and outcomes on output capitals (6 capitals)
• The Crown Estate looks at 6 capitals, as well as internal and external ‘depreciation’ and ‘appreciation’ of each individual capital
• Monetization, interrelation between capitals and accumulation in a p/l and balance sheet difficult
• Need for CONVENTIONS
Yara Valley Water (Australia) Integrated p/l
Chapter 6: Reporting SCALABILITY• Purpose, contribution and success – from individual to joint efforts• Education inside and outside of the organization• Collaboration for the common good• Advocation for economic system boundary changes – closing the loop with the macro-‐economic system
conditions• The litmus test for scalability: defining new level playing fields
• Consequences for reporting regime• Consequences for stakeholder dialogue• Consequences for the governance approach• Consequences for leadership behavior
• Recommendations• Reporting standardsetters• Governments, legislators andmultilaterial organizations• Corporations• Investors
Disclosure related to ‘scalability’ perspective -examples
Education:• Are ‘World View’, ambition level and the related
(ONE) strategy addressed to all employees through education and training?
• Are there joint educational programs developed for the whole value cycle?
Collaboration:• In how far is the company engaged beyond its
associations and interest lobbying? • Do employees have time for societal engagement
to help find long-‐term solutions?Advocation: • Is leadership actively engaged in the promotion of
a green & inclusive economy and the necessary changes in boundary setting, e.g. internalization of external costs, changes towards a more sustainable tax system, creating of level playing fields in international relations?
The impact of governance in scaling impactsfor ‘thriving’
• ESG ‘Push’ hasn’t resolved scalability issues, few Corporate Governance Codes address sustainability as potentially THE core issue of survival
• New Corporate Governance Codes like King IV ask for ‘ethical management’
• A need to move from ESG Push to ‘GSE Pull’ needs aware and trained boards to understand ‘integral governance’ that needs responsibility beyond the corporate lens
• Economic system boundary change, the idea of private and public governance of a green & inclusive economy, needs strong advocation from the corporate sector to create global level playing fields
Outcomes of the new impetus
• A clear ‘storyline’ how to connect purpose,multi-capital-based success measurement and advocation for scalability of new level playing fields
• Builds the bridge between level playing fields(that corporations rely on) and economic systemand boundaries change.
• Connects building trust, focused innovation forThriveAbility and resilience for a green & inclusiveeconomy.
• Pushes for ‘integral’ thinking• Pushes for collective (true) materiality in the light
of absolute human impacts towards ‘green’ andinclusive
• Converges instead of divides; allows for rocksolid approaches beyond symptoms basedapproaches
• Supports the ‘positive mavericks’
Blueprint 3: Data
Blueprint 3: Data (Exposure Draft)
This blueprint maps out a coherent ‘holistic data ecosystem’ to make the reporting interface more accessible to a broad spectrum of stakeholders, including targeted decision-makers in the public and private sector worldwide.
Chapter 3: Data Integration, Contextualization & Activation for Multicapital Accounting
• Integration• The primary problem in need of solution is not necessary data quantity or quality (though these issues
certainly warrant attention), but rather it is data integration: filling the missing links between andamongst data. The most evident disconnect is between and amongst the multiple capitals (the capitalsgap), and also the necessary interlinkage between company-‐level impacts and broader systems-‐level impacts (the context gap).
• Contextualization• Filling the context gap requires significant advancement in understanding and actual application of
contextualization. In addition to applying Sustainability Context (the micro-‐ / macro-‐link), other forms ofcontextualization are also key.
• Activation• “Metrics absent a higher purpose are inherently limited,“ says Allen White – or absent an “ultimate end“
Donella Meadows would say. Likewise, data without engagement is useless; “activated” data fulfills itspotential of driving the change signaled by integrated, contextualized data. The key to activation isevidence-‐based advocacy by context-‐driven stakeholders. And activated data also triggers “acceleration” to scale up change to trigger tipping points of systems change.
Daly’s Triangle (a la Dana Meadows)
‘Positive Mavericks’• Work productively (not obstructively) toward positive change• Are motivated more by ultimate ends, with intermediate ends and means
serving as vehicles, not destinations• Challenge the constraints, structural limitations, unconscious bias and
shadow agendas of the institutions and organizations they work with• Backcast from a desired future, building bridge foundations on the far side of
the river• Work collaboratively in ne(x)tworks with other positive mavericks• Think and act at systems levels• Seek transformative (not just incremental) change
Ralph ThurmCo-Initiator
Lead, Reporting BlueprintCo-Lead, New Business
Models Blueprint
[email protected] +31 6 4600 1452
Cornis Van Der LugtCo-Facilitator
Lead, Accounting Blueprint
[email protected] +41 79 257 5281
Reporting 3.0 Operations Team
Bill BaueCo-Facilitator
Lead, Data BlueprintCo-Lead, New Business
Models Blueprint
[email protected] +1 413 387 5824
Peter TeuscherCo-Initiator
[email protected] +41 44 260 60 30
Please Contact Us to Participate!
