The article discusses and adapts an SSIR Article, which can be found here. This blog is by Sara Olsen, a Founding Boardmember of Social Value United States, a Joint National Network of Social Value International.
On the heels of the news from the Business Roundtable regarding its updated corporate governance stance that stakeholders are as “essential” as shareholders, the business community writ large needs clarity about HOW businesses are to account for stakeholder value. Sixteen leaders in this field have developed an article just published in the Stanford Social Innovation Review that articulates, at a high level, the shared consensus about how this is done, that each of us has witnessed emerge over the many years that we have worked toward the answer.
The basis for our observations of this shared consensus comes from, among other experiences:
This article has been a long time coming. It was my tremendous privilege to work with these remarkable co-authors and humans: Clara Miller, Ben Carpenter, David Pritchard, Brian Beachkofski, William J. Kelly, Karim Harji, Jane Reisman, John Byrnes, Jed Emerson, Eric Israel, Shi Yuwei, Veronica Olazabal, Tom Woelfel, Michael Harnar, and Shubha Kumar.
Here is an excerpt of the full article:
“In furthering the [Impact Management Project’s] IMP’s consensus-building effort, we have found that there are three basic elements to the emerging [stakeholder value] accounting system:
“1. Environmental, social, and governance (ESG) accounting | ESG typically refers to the measurement of an entity’s efforts to enact best practices with respect to ESG factors through its direct operations (e.g., employee health and safety, gender diversity), its products (e.g., consumer protection), and its distribution and supply chain (e.g., human rights protection). ESG is typically assessed using a predetermined list of indicators of these practices, and such lists now exist, as do rankings based upon them….
“2. Accounting for impact | Beyond measuring and disclosing their ESG performance, companies are beginning to measure and report on their specific positive or negative impacts, particularly ones that affect pressing social or environmental challenges. The scope of impact accounting varies according to the nature, size, and complexity of an undertaking….
“Although it is impossible to come up with a master list of predetermined indicators to cover the particular impacts of every business in context, IMP participants and supporters have reached a shared understanding of the dimensions of impact performance that matter for a complete and comparable picture (and therefore the types of data to collect, organize, and disclose to stakeholders) and on general principles that can guide practitioners in their judgments about what to measure, and how to measure it, in any given context.
“3. Accounting for the ESG-impact-financial-performance relationship | Frameworks to account for and understand the relationship between ESG and impact, on the one hand, and financial performance, on the other, now exist. Whether an investor focuses on the ESG factors that are material to financial performance in the near term (the way the Sustainability Accounting Standards Board does) or sets out to measure and manage the full range of interaction more broadly and strategically (the way Integrated Reporting does), it is clear that environmental and social factors affect financial performance—and vice versa….”
More detail about specific guidance and standards that pertain to these three elements, and the effort to grow this shared consensus, which you are and can be part of, is contained in the article.
Please join the effort to activate all CEOs in leading the advent of a new era in which business is accountable for, and thus grows, value not only for shareholders but also for people and the planet.