Sustainability requires contextualization within thresholds. That’s what sustainability is all about.
Allen White, co-founder, Global Reporting Initiative
The part can never be well unless the whole is well.
Plato, Charmides, 380 BCE
How to Slice a Pie
Thresholds define the dividing line between sustainability and unsustainability (as GRI co-founder Allen White reminds us above). Implementing sustainability at the organizational level requires allocations — in other words, setting fair-share “slices of the pie” for the shared burden of meeting these thresholds (as Plato reminds us above). So, achieving sustainability in aggregate, at the societal/planetary level — by achieving it at the individual company level — requires clear information on thresholds and allocations.
However, we currently lack such information across all areas of impact, validated by global experts, in “off-the-shelf” packages. To close this gap, the Reporting 3.0 (r3.0) Platform has produced (with support from White in his role as a r3.0 Advocation Partner) a Concept Note proposing the creation of a Global Thresholds & Allocations Council (GTAC). This Council, which enacts a Recommendation of the 2015 UNEP Raising the Bar report (reiterated in the r3.0 Data Blueprint report), will be comprised of a mix of scientists and practitioners with expertise in the fields of physical & social sciences, business, investment, government, civil society, and other relevant areas, attending to diversity of perspective, culture, geography, gender, etc. We are currently soliciting partners.
Bill Baue and Mark McElroy
at New Metrics '17.This outreach has resulted in key clarifying conversations, such as a recent email dialogue between us — r3.0 co-founder/Senior Director Bill Baue and Center for Sustainable Organizations founder and r3.0 Advocation Partner Mark McElroy (Note: We are also co-founders of the Sustainability Context Group and Key Sustainability Partners (KSP) of Cabot Creamery Cooperative) — and Cabot Sustainability Director Jed Davis and fellow KSP Andy Whitman of Manomet. The thread focused on the question of how best to determine organization-specific standards of performance; and in particular, the distinction between thresholds and allocations.
Whereas thresholds refer to the carrying capacities of vital capitals, allocations refer to the responsibilities individual organizations have to create and/or maintain them. In some cases, such responsibilities are exclusive, in others, they are shared. In cases where they are shared, the challenge becomes how best to assign or allocate them to different organizations in ways that are fair, just and proportionate.
All of this has been core to applying the Sustainability Context principle to measurement and reporting for years now, including in the application of Context-Based Sustainability and the various metrics and methods that have grown out of it. What the GTAC is now trying to do is to elevate and expand the application of these ideas by making it easier for organizations to specify their own standards using common protocols for how to do so.
Here’s the dialogue as it unfolded, edited for ease of reading:
Bill Baue (BB): FYI, see this recent 2-volume report that applies a thermodynamic, carrying capacity approach to the Commons here. At the very least, I highly recommend that you scan the tables of contents, to get a good sense of the concepts they cover. This coincides with Reporting 3.0’s drafting (with significant support from Allen White) the attached proposal for a Global Thresholds & Allocations Council (GTAC). Thoughts?
Mark McElroy (MM): Bill, I really like the way in which you have framed the GTAC concept. It’s nice to see it so well-articulated. A couple things to bear in mind as it moves ahead, though:
- Thresholds and allocations are also required for the “Uncommons,” as in areas of impact (AOIs) that are not shared and for which organizations and other actors are solely responsible. They would need to be addressed by GTAC as well, otherwise, context-based reporting will not make meaningful inter-organizational comparisons (or reporting in the aggregate at the macroeconomic level) possible. See Can Performance Reporting for Different Companies Be Both Context-Based and Comparable?
- GTAC should also ideally address materiality, as in thresholds and allocations for what? Again, this speaks to the issues of comparability and aggregation. Who cares if everybody is getting thresholds and allocations right if at the same time they are focusing on the wrong AOIs?
BB: Thanks so much for your kind words — the draft was significantly enhanced by Allen, so credit due to him, as well.
On “Uncommon” AOIs, thresholds apply but not allocations — is that safe to say? Could we isolate the “Commons” language in the draft to the allocations section?
In terms of throwing materiality in there, too, I agree it needs to be addressed, but the scope of GTAC is already ambitious, so I don’t think this is the venue to tackle the materiality issue. r3.0 addresses this issue in our Integral Materiality Process, which draws on your work on integrated materiality in terms of embedding context. So, providing the tools to get context right is a key precondition for getting materiality right.
MM: Bill, allocations apply to the Uncommons, too. It’s just that the allocations are made to a single party. I wouldn’t leave it out.
On materiality, I think it could be sufficient to simply say that getting it right is a precondition to getting thresholds and allocations right. And that getting materiality right requires a context-based perspective with some references, perhaps, to specific frameworks for how to do that.
BB: Point taken on materiality. It can certainly be incorporated into the process itself.
And on “Uncommons" allocation, I’m scratching my head a bit — what’s the reason for allocating when there’s no apportioning?
MM: Bill, the point on allocations is that it preserves and reinforces the essential focus on duties and obligations (D&Os) in the methodology. Once thresholds have been defined, allocations are next, no matter what. It is simply that in some cases, D&Os are shared; in others, they are not. But to say that a D&O is exclusive to a single actor is not to say that a D&O does not exist or that the allocation step in the methodology should not be taken. In each case, we simply ask: Is the allocation burden shared or exclusive? Once answered, we move on to the next step.
Also, GTAC should address thresholds and allocations in their entirety in my view; otherwise, it leaves the non-shared dimensions of performance flapping in the wind. Indeed, protocols and guidance for defining allocations in cases where organizations bear the sole burden of maintaining vital capitals are just as important (and potentially vexing) as protocols for specifying shared ones. Unlike targets for impacts on natural capitals, they will typically involve ongoing efforts to produce and maintain capitals at defined levels (i.e., maintaining production of anthro capitals instead of constraining consumption of natural capital). How should that be done? The guidance needed for one (the anthropogenic capitals, whether shared or not) will be different from the guidance needed for the other (natural). Exclusive allocations can be just as complex and problematic as shared ones.
BB: I think I follow you in principle, but I’m grasping for a hands-on example. Without it, it seems like the allocation step for non-shared D&Os is essentially a ghost step, where nothing really happens, so it’s unclear why it’s needed (other than to preserve methodological equivalence with shared D&Os). As Denzel Washington says in Philadelphia, "Explain it to me as if I’m dumb."
MM: Bill, it’s not a ghost step because as I said, "In each case, we simply ask: Is the allocation burden shared or exclusive? Once answered, we move on to the next step.” If we didn’t ask the question, we wouldn’t know that the burden of the allocations is exclusive in cases where it is. Actively asking and answering the question is not a ghost step.
Also, even in cases where the answer is “exclusive,” we’re still left with the need to quantify and allocate the burden to maintain the carrying capacity of the capitals to individual organizations. So just because the allocation is “exclusive” doesn’t mean all issues have been resolved. I thought GTAC is setting out to address thresholds and allocations both, not just thresholds. If so, then even AOIs with exclusive allocations attached should be addressed, because allocations have nothing to do with thresholds.
The other thing that occurs to me about your position is that it presupposes an answer to the very question that is being asked in the allocation step. In other words, we don’t know if an allocation is shared or exclusive until we formally ask the question. You seem to be saying that in cases where the answer is “exclusive,” there was no point in having asked the question in the first place. But unless we had asked the question, we wouldn’t have an answer to work with. You can’t have it both ways.
Further, in cases where the answer is “exclusive,” the next step is to turn back to the thresholds calculation because that is the burden to be borne exclusively by an organization in that case.
BB: Got it — sounds like we’re essentially saying the same thing with different words/assumptions. Yes, asking the question if the burden is shared or exclusive is a key step. I suppose I’m conceiving of allocation as pie-slicing. If we determine that I get the whole pie, then I don’t need to slice it — I just eat the whole thing. That’s what I meant by “ghost step.”
Circling back for one clarification: After making the exclusive determination, you say, "We’re still left with the need to quantify and allocate the burden to maintain the carrying capacity of the capitals to individual organizations.” If we’ve determined the burden is exclusive, then what does this step entail? Measuring the size of the pie? How is that different from determining the threshold? Again, a specific example may be helpful here.
MM: Bill, good. And yes, to your last question. The threshold is the total size of the pie. If the allocation is exclusive to an organization, it is responsible for producing and maintaining the size of the pie in its entirety all by itself. Examples often include returns on equity owed to shareholders, livable wages payable to employees, workplace safety, product safety, etc. These are all things for which the burden to maintain the thresholds (i.e., the carrying capacities of capitals) is exclusively allocable to individual organizations. So, the allocations are 100 percent of the thresholds in all such cases. In the shared, non-exclusive cases, it is something less than 100 percent: fair, just and proportionate in some normative way.
BB: OK, we are indeed on the same page. I was using “ghost step” to mean that the threshold had determined the size of the pie, the exclusive determination had been made, so the “allocation” (in the “slicing" or “apportioning” sense of the word) step doesn’t involve any further calculations. That said, this thread has been helpful for clarifying, and in particular for reminding me that the term “allocate” means not only “apportion” but also “assign,” so I see where the confusion arose.
Last, might I count on CSO as a supporter of GTAC? Allen has urged us to shoot for a next draft with logos of partners quickly…
MM: Bill, of course. I and CSO have been calling for this idea for years ever since I first did so in my doctoral dissertation in 2008.
Jed Davis: And count Cabot in too, Bill — we applied exactly this process when determining our own thresholds and allocations, so we welcome the idea of making it easier for others to do so as well, without having to reinvent the wheel anew.
BB: Cool — thanks to you both!