What does it take to measure what matters?
17th Feb 2012 by Emily Benson GEC
On Monday, Moody’s credit rating agency announced that the British economy has a ‘negative outlook’. These two small words have sent shivers through the Treasury and the city. Downgrading the creditworthiness of a national economy can have such catastrophic impacts on investment flows that governments have come to fear the verdicts of the large credit rating agencies. Presumably the mere mention of ‘junk status’ - now stamped on Greece and Portugal - haunts the dreams of finance ministers the world over.
Metrics and ratings are powerful tools. They drive behaviour and they describe our understanding of success. So, what if credit rating agencies such as Moody’s were guided by bigger global goals that underpin economic resilience – namely, our planet’s ecological limits and the need to provide a better quality of life for all? What if they started to grade the creditworthiness of companies and national economies by environmental and societal indicators rather than just financial metrics? And, what if those national ratings were informed by the progress that businesses, and indeed consumers, were making towards those same environmental and societal goals? What if all of our metrics of 'success', from local to global, were geared to measure our progress towards achieving a better quality of life for all within the ecological limits of the planet?
It was this proposition that the Green Economy Coalition posed in the first of the Green Economy Debate series on Wednesday evening. The vision may not be as implausible or as distant as it might sound. The current negotiating document for Rio+20 called 'The Future We Want' is all about metrics. There is a push for more integrated corporate reporting, there is a call for ‘beyond GDP’ metrics and there is also a call for global Sustainable Development Goals (SDGs). This is exciting stuff. But what is behind each of these agendas at the corporate, national and global level? And are they all informed by the same goals? The Coalition brought together a panel of experts to find out.
On the corporate level
According to Teresa Fogelberg from the Global Reporting Initiative (GRI) there has been some significant progress on the corporate scene. Of the top 250 biggest multinational companies 80% now submit sustainability reports that describe their environmental and societal impacts. However, when we take the lens wider we see that of a total 80,000 multinational corporations worldwide a paltry 8,000 provide sustainability reports. She stressed that we need a rapid scaling-up if we are going to bring about a transformation to a green and fair economy. This is why the Coalition is supporting GRI and Aviva's campaign, Report or Explain, that requests all large and medium sized companies in OECD countries and large emerging economies to report publicly on their economic and environmental, social and governance performance, or explain why if they do not.
For Richard Mattison of Trucost the challenge does not end at reporting. Working closely with a range of businesses they have found that, despite the proven value of sustainability reporting, the process fails to communicate in simple terms the connections between a company's operations and the global context. Mattison described a recent experience of working with Puma. As a result of the droughts in Russia in late 2010 the price of wheat rose 150%, which as a key foodstuff for cattle in turn increased the price of meat, which meant that the price of leather increased by 70%. While a vast number of companies were impacted by these price changes, few comprehended the causes. This speaks of a far wider and more intrinsic problem about the lack of understanding of the systemic inter-linkages between our economy, our ecosystems and our societies. In short, we are still struggling to see the big picture.
On the national level
So, if corporations are struggling to comprehend the dynamic relationship between environmental health and societal wellbeing and the resilience of their business models, then are governments getting the picture? Farooq Ullah, Stakeholder Forum, noted that the ‘beyond GDP’ agenda is getting support from Member States. In fact, the Coalition’s analysis of government inputs into Rio+20 showed us that Member States as diverse as the Russian Federation, USA, Croatia, and the EU are all actively supporting alternative GDP metrics. However he stressed that there are many different readings of beyond GDP. Despite the recommendations from the Stiglitz report that identified both ecological limits and equity as absolutely paramount to economic resilience, in many cases governments are interpreting the GPD agenda in rather narrow terms. Current focus on ‘wellbeing’ for example still misses the point of the intrinsic relationships between the health of our societies, the resilience of our economies and the condition of our environmental systems.
At the global level
So, are the conversations at the global level achieving the scale of thinking required? Camilla Toulmin, IIED, noted that, just as the Millennium Development Goals (MDGs) had helped to galvanise a global agenda on poverty alleviation - though progress has been cripplingly slow on some areas - so, a set of SDGs could help to focus our attention on what actually matters. She suggested that issues of equity, poverty, climate change and biodiversity were paramount but there were any number of themes that could and should shape our global agenda. The three year window between Rio+20 and the MDG review must be taken as an inclusive and global consultation to identify our notions of progress as an international community. Noting that Colombia was leading the charge for the SDGs she described how most of the energy around the sustainability agenda is being led by middle income countries. It is the likes of Brazil, Mexico, South Africa, India, and many more, who have something to say about the future of our planet and our societies rather than the old powers of Europe and the USA.
So, where does all of this leave us? Are we any closer to a more progressive set of corporate, national and global metrics that share the same understanding of progress? Could a credit rating agency such as Moody's be an agent for transformation rather than an arbiter of doom? Well, it is clear that companies, governments and the global community are beginning to recognise that current metrics for measuring ‘success’ are not delivering progress for society or the planet. However, we are still struggling to join the dots between our environmental, societal and economic systems. The evening also suggested that the sustainability agenda is no longer being driven by the old powers of Europe and the USA, but by middle income countries who have a much more advanced grasp of what sustainability means. We can learn a lot from their appraoch. Over the next four months the Green Economy Coalition will be working with governments, businesses and civil society to propel this agenda forward and to start measuring what matters. We urge you to work with us and to join the debate.