New Metrics

Integral Thinking and True Materiality Define Trust, Innovation, Resilience (Part 6)

This is the final part of a 6-part series about integral thinking and true materiality. It proposes a new impetus to develop reporting that is able to serve the idea of a green & inclusive economy.

By Ralph Thurm | Published 8 years ago | About a 8 minute read

This is the final part of a 6-part series about integral thinking and true materiality. It proposes a new impetus to develop reporting that is able to serve the idea of a green & inclusive economy. Read Part 1, Part 2, Part 3, Part 4 and Part 5.

With this final part of our series, we examine the outcomes of the newly proposed reporting impetus and assess the interconnected effects of the three parts of the triangle we discussed in Part 3, Part 4 and Part 5, synthesizing the elements of trust, innovation, and resilience into what we call integral thinking & true materiality. As we believe that reporting can be a trigger of change, following the new impetus demands additional strategic, governance, educational, measurement and process changes within the organization to be able to come into fruition.

Readers are likely familiar with the notion of integrated thinking from the work of the IIRC, which we applaud for pointing our field in new and fruitful directions. However, we posit integral thinking as a further development that transcends and includes integrated thinking in two important ways (among others):

Integrated thinking considers how organizations create and diminish value inside and outside the organization, but falls short of assessing the true materiality of these positive and negative impacts in the context of sustainability thresholds;
Integrated thinking rightly promotes a holistic approach, but it focuses almost exclusively on structural systems, essentially ignoring the internal psychological integration needed at the individual and collective level to instigate the transformations necessary to scale up a green & inclusive, regenerative economy.

We believe that both of these aspects of integral thinking are necessary to scale up the achievement of sustainability (minimally) and even ThriveAbility (maximally) by focusing on purpose (and connectedness), success (and True Future Value determination) and scalability (and the size of impacts needed).

Collaborators in the Reporting 3.0 platform and the ThriveAbility Foundation believe that reporting can trigger this change toward the ‘North Star’ of achieving a green & inclusive — and, indeed, regenerative — economy. To do so, reporting must transcend compliance with current sustainability and integrated reporting standards that typically set norms within our existing economic regime – which can lead reporters to hesitate or even choose not to act, even as our current economic structure threatens the very survival of the human race on this planet.

To explain how the elements described in the earlier parts of this series integrate the three sides of the triangle together to achieve the overarching goals of integral thinking and true materiality at the center, we will use the final part in this series to unpack the diagram below:

Trust

To build Trust with internal and external stakeholders, organizations must combine an organizational purpose, describing the contribution the organization can make to achieving a green & inclusive economy, with the answer to the litmus test question of Part 4: ‘have we ensured not having built financial capital on the back of any other capital.‘ Take, for example, The Crown Estate’s Total Contribution methodology, pioneered in their integrated reports using a multicapital model, which the company acknowledges isn’t yet perfect but functions well as a decision-useful tool for internal leaders as well as for external stakeholder scrutiny and recognition. The approach provides a much better understanding of the world view of the organization, the value it puts on all the capitals, and how it assesses its activities from a holistic perspective on collateral damages and benefits.

Examples such as Puma, The Crown Estate and a variety of other companies on the Net Positive pathway experiment with these models and can be useful validators of a more sophisticated approach including accountants and standard-setters.

Innovation

To achieve success (according to a True Future Value determination) and scalability of solutions, organizations need to map and tap into innovation pathways, that align investment decisions on products, services, and collaborations with positive impacts on the multiple capitals. Given that the Chief Sustainability Officer carries primary responsibility for managing impacts (and optimizing opportunities to regenerate) the multiple capitals, we see the CSO as the key untapped potential for unlocking breakthrough innovation. Indeed, we foresee a future where the CSO combines with the Chief Innovation Officer to become the Chief ThriveAbility Officer.

This development would remedy the current state whereby sustainability focuses on treating symptoms by digging deeper to address root causes in ways that shift from ‘less bad‘ incremental improvements through Net Positive trade-offs and counterbalancing to enter the realm of Gross Positive impacts that continually regenerate the multiple capitals.

Integral thinking catalyzes root-cause, multicapital, context-based, holistic decision-making. Below is a highly simplified example of an investment assessment from a multicapitals basis.

The ThriveAbility Foundation has laid out comprehensive Innovation Pathways for organizations (‘Alpha Partners’) interested in closing the 3 Gaps (Sustainability, Organizational, and Mindset), and aims to work with experienced third parties (‘Delta Partners’) that can execute the program under a license agreement and quality control by the ThriveAbility Foundation. Working with up to 300 Alpha Partners in various industries, supported by the Delta Partners, will lead to working groups that will assist the development of a focused ThriveAbility Index for their cluster industry. It is aimed to roll out these Indexes by 2019, to be fully implemented by 2020.

Resilience

What constitutes resilience when it comes to building a green & inclusive, regenerative economy?

A (financial) market mechanism that serves the economy by respecting how money and goods/services are created and distributed through a balance between true costing, true pricing and true taxation;
Companies that aim to create Gross Positive benefit;
Customers that understand the accurate pricing of resources without triggering extra burden through lower taxation of labor;
National budgets that respect nature and the wellbeing of their citizens and immigrants.

Looking at such a world, reporting creates ‚the glue’ for how organizations communicate their successes internally and externally on a multicapital and True Future Value basis. As we closely look at organizations in this series, governance is potentially the other resilience factor that needs to be in place to allow for the new impetus to come into fruition. So, how would a resilient company’s governance approach look like?

Currently, ESG activists push companies to adopt governance structures that lead to social and environmental (and economic) sustainability because it’s necessary; a more resilient governance regime pulls companies toward social and environmental (and economic) ThriveAbility because it’s more attractive than business-as-usual.

In our view, governance is defined by authority, decision-making and accountability, and they are nicely linked to the new impetus as described here:

Authority stems from mindsets, built from value systems. This constitutes the will of an organization to discuss purpose vis-à-vis its contribution to a green & inclusive economy in a holistic system.
Decision-making is based on metrics that better describe impact – and create success by measuring (and generating) True Future Value.
Accountability, based on multicapitalism, creates value. In a green & inclusive economy, this value is dependent on the scalability of that value within a 1-planet footprint through an enlarged positive handprint.

In a GSE pull approach, organizations would look at these basic ingredients when defining objectives, committees, principles and processes for a resilient governance approach.

The grande finale

‘A better world is possible’ is an idea that all of us in the sustainability community grew up with. But a reality check reminds us that the data still show the opposite, and future trajectories suggest that a better world is slipping further and further from our grasp. 40 years of pursuing CSR to retain a license to operate has failed to deliver sustainability. Clearly, a reset is in order.

ThriveAbility sets its sights higher than sustainability — in part to inspire greater excitement and innovation, and in part to give ourselves a greater margin for error as we re-engineer a new global economic operating system on the fly. Diagram 14 shows the building blocks of such a system, set on the foundation of respecting the carrying capacities of social and environmental systems to launch innovation that optimizes synergies between and amongst the multiple capitals to realize our future potential of a green & inclusive, regenerative economy. The Reporting 3.0 platform, the ThriveAbility Foundation and GISR are three non-profit organizations that corporations can join and that are driving this journey, they link synergistically for the described outcome of this new impetus. Come take a seat and join us for the ride!

Ralph Thurm

Co-Founder
Reporting 3.0 (R3)

Ralph Thurm is one of the leading international experts for sustainable innovation and strategy as well as sustainability and integrated reporting. He is the Managing Director of Reporting 3.0 and Oncommons gGmbH.

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