Last week at Sustainable Brands’ New Metrics ’18 conference in Philadelphia, PA*,** over 300 delegates from brands, NGOs, strategists and practitioners across sectors gathered to share the newest credible tools and solutions for assessing the ROI of Sustainable Business. The densely packed program dug deep into topics ranging from Finance & Investment to Operational Metrics and Strategy — and several sessions provided pertinent insights on the evolution of Stakeholder Engagement.*
Understanding and communicating the emerging science of wellbeing
By Aishwarya Chaturvedi
Monday morning, a panel led by Pamela Wilhelms updated a packed room on the latest in the ‘science of wellbeing.’
How do we define and measure wellbeing?
Eileen McNeely, Director of Sustainability and Health Initiative for Netpositive Enterprise (SHINE) at the Harvard T.H. Chan School of Public Health, shared the six principles for flourishing in life — meaning and purpose, social connectedness, emotional wellbeing, physical wellbeing, character strengths and financial security — from which you can derive principles of wellbeing at work.
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Victoria Brown, Senior Program Officer at the Robert Wood Johnson Foundation (RWJF), took this opportunity to introduce everyone to the ‘Culture of Health for Business’ initiative, launched by the RWJF and GRI earlier this year. The framework defines 15 business practices that are important for building a culture of health at an organization, suggests how to measure the organization’s effort in this direction and outlines the potential impact for the business and health of its employees (the consultation paper is open until November 12, 2018; if you’d like to share your feedback, you can respond to the survey here).
Shawn Hesse, Community Engagement Manager at the International Living Future Institute
(ILFI), shared ILFI’s Living Building Challenge (LBC) and JUST organization label to illustrate its approach towards wellbeing. The LBC looks at a building as a flower and uses the term ‘petals’ to highlight all the various elements that contribute to wellbeing.
Wilhelms shared that they looked at wellbeing in terms of whether people at work are able to show up physically, emotionally, spiritually and intellectually. All of the wellbeing measures help ascertain if people are able to engage at the workplace successfully.
What do companies learn from measurement and how do they improve?
Hesse cited the experiences from a couple of JUST organizations who have used the tools to identify gaps readily and make immediate changes to their workplaces. One organization learned that it had no women on its compensation committee; another learned that its employees weren’t as happy and engaged as they originally assumed: “They dug right in to understand the source of this unhappiness and what they could do about it,” Hesse said.
Mark McElroy, founder of Center for Sustainable Organizations and co-author of the MultiCapital Scorecard illustrated his experience of consulting organizations such as Ben & Jerry’s, Cabot Creamery and New Chapter on context-based thinking. He mentioned that discussions on wellbeing often start with ‘whose wellbeing are we talking about,’ and the approach that McElroy and his team has recommended is to include everyone whose wellbeing is impacted by the actions of the company in any manner, shape or form. These stakeholders can then be considered right at the beginning of materiality assessments and stay at the center of the company’s sustainability initiatives.
Questions from the audience
Wilhelms then asked the audience to discuss what this topic means in the context of their organization and come back to the panel with questions. One attendee commented on the merits of an approach focused on individual wellbeing versus one based on communal wellbeing. In other words, is it appropriate to discuss individual wellbeing when the system at large is not able to create wellbeing for everyone?
McNeely immediately concurred with the emphasis on systems and suggested that it is fundamentally about changing the system, so that it produces wellbeing for everyone. However, she added that measuring individual wellbeing is important to measure the changes in the system and is necessary for us to get there. Hesse pointed to the lack of the principle of equity at the heart of most sustainability initiatives, adding that if we don’t change that, ‘we are only going to sustain inequity.’
Another audience member noted that sustainability efforts often involve tradeoffs and was curious to know the best way to manage them.
McNeely emphasized the importance of a caring culture to manage these tradeoffs, to which Brown concurred — the answer lies in reframing the idea of the tradeoff itself, more than an objective tradeoff analysis, if you will.
Hesse also mentioned that ILFI forwards its program to clients first as a philosophy, then as a methodology, so it is possible to make exceptions where necessary. For instance, under the LBC, if a company has a sustainable design aspiration that cannot be met because of local jurisdictions, the company still earns the certification if it is able to show a commitment to change the status quo. Soon enough, as more such exceptions arise, barriers start to tumble.
A key leverage point for people to drive these changes in their organizations
Brown suggested pandering shamelessly to people’s self-interests. She mentioned the ‘a-ha’ moments that RWJF has had in implementation came by suggesting that the process will make it easier for people to find the best practices within the organization and replicate them with ease.
Hesse advised that people find advocates in the organization when introducing a new program. The advocate is best suited to remove obstacles and build the necessary enthusiasm within the organization. Hesse mentioned that the ILFI creates content for the advocates to help them win over people within their organizations.
McElroy echoed WBCSD president Peter Bakker’s assertion that “accountants will save the planet,” and pointed to a lack of data and insufficient management dashboards that keep the management away from “precisely the data they need to understand sustainability performance.”
McNeely recommended measuring impact as a motivational tool to keep people on the path. She also stressed that these impacts need to be measured over a broader horizon and that managers need to plan such initiatives for the long term.
With this, Wilhelms left the audience with the message: “We build the capacity to see the wellbeing outside of us by taking care of our own wellbeing. We are constantly working in very tough systems; your own wellbeing and resilience is crucial to building the capacity and keep going in this work.”
Lessons for brands from the researchers who exposed the VW emissions scandal
by Mia Overall
Volkswagen’s 2015 emissions scandal, dubbed “Dieselgate,” resulted in the largest-ever fine of an automaker in the US — roughly $30 billion. How could this have happened within such an iconic brand otherwise known for its quality?
Monday afternoon on the main stage, Dan Carver — from the Center for Alternative Fuels, Engines and Emissions at West Virginia University — shared his findings on the corporate culture that led to the defeat device: “VW’s corporate culture squelched voices of reason to do the right thing,” he said.
Achieving low emissions is a balance between performance, compliance with emissions standards and cost, Carver explained. After walking the audience through catalytic converter technology, the emissions testing process and the widely publicized facts of the case, he described several contextual factors at play.
- First, VW was politically entrenched in Germany. Key political figures including the “Auto-Chancellor” and Vice Chancellor and former president have sat on VW’s board, so auto culture was king, likely creating a sense of imperviousness.
- Second, people could not keep up with the engineering timeline, which kept people from doing the right thing.
- Third, the chain of reporting in both engineering and compliance led to the same manager. As a result, procedures that would have protected people who wanted to come forward were not in place.
- Fourth, transparency was a problem. Volkswagen had been known for being insular in Germany, and this continued when it entered the US market.
So, “Dieselgate was a perfect storm,” Carver said. VW was responding to a critical time, it was overextended and had a corporate culture that led to the decisions that were made. And it cost the company dearly in fines, share price and brand value.
What’s the lesson for other brands? Take a close look at your corporate culture, organizational structure and expectations managers are facing, and the impact these things have on decisions.
A practical guide to the TCFD and its implications for companies
by Max Pinnola
This Tuesday afternoon deep dive discussion kicked off with a brief overview of the Task Force for Climate Related Financial Disclosures (TCFD) — a multi-stakeholder industry task force established by the G20 Financial Stability Board in 2015, at the request of G20 leaders — the purpose and importance of which is highlighted by rapidly growing demand for climate-related information from which investors can base their decisions. Further, it allows companies to more effectively evaluate their climate risks and strategy. The relevance of climate change impacts on financial performance is becoming more undeniable. However, forward-thinking investors and lenders who are interested in weighing the associated opportunities and risks are often bombarded with thousands of metrics, which vary by industry. Therefore, another major focus of the TCFD was to boil down the metrics into a more digestible disclosure standard. Other key takeaways of the TCFD are outlined below:
Goals of the TCFD:
- Develop recommendations for voluntary climate-related financial disclosures
- Provide decision-useful information to lenders, insurers, and investors
- Guidelines for integration into mainstream financial reporting
- Disclose the organization’s governance around climate-related risks and opportunities.
- Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s business, strategy and financial planning, where such information is material.
- Disclose how the organization identifies assesses, and manages climate-related risks.
- Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
After the overview of the TCFD, moderator Julia Casciotti, Senior Project Officer of Disclosure Services at CDP, turned to the panel for a thought-provoking discussion of the implications of the TCFD for companies and investors. Key insights included:
“Science-based targets are a useful tool for benchmarking and serve as a great signal. However, following actual execution and performance relative to their peers is what we are more interested in." — Duane Roberts, Portfolio Manager at Dana Investment Advisors
“We are still trying to ask as many questions as answers. [TCFD] changed how we discuss risk management and broadened our view with a new lens for climate-related risks.” — Bruno Sarda, Head of Sustainability at NRG
“TCFD is starting a conversation on what investors see that they like, what would they would like to see more of. This also creates opportunities for proactive companies to engage with investors and lenders and also provides valuable information to those who may not be as proactive.” — Dan Saccardi, Director of the Company Network at Ceres
“Start with year one and broad strokes. Identify where major risks/hot spots are and how new regulations and [carbon] pricing may affect them. Full economic analysis can come in future years. Be pragmatic at first. You don’t need to start with sophisticated models. It’s a really interesting way to take a look at what the future may hold for your organization." — Charles Henderson, Corporate Climate Change Expert at South Pole, on scenario analysis as a tool
The reporting performance of the Dow Jones 30
by Cindy Mehallow
New research released by the global consultancy EcoAct analyzes the environmental reporting performance of the Dow 30, and there is good news: The report paints an encouraging picture of strong environmental action … one that stands at odds with the current political climate in the US. The report marks the first time EcoAct has mapped Dow Jones-listed companies against the performance of climate-leading companies in other global indices.
Addressing a crowd of 300 over lunch in the Millennium Ballroom on Tuesday, EcoAct North America CEO William Theisen presented the report, which examines the extent and quality of the sustainability measurement, reporting and emissions reductions of the 30 Dow Jones-listed companies. It also ranks them against their peers in other international or global indices.
In addition to advising companies on climate change and carbon neutrality strategies, EcoAct Group conducts research to assess publicly listed companies’ efforts in these areas. Research for this report involved the assessment of companies listed in the Dow Jones, FTSE, CAC and IBEX indices against 79 tailored criteria. It examined how well they report on environmental sustainability and climate change.
Theisen shared key findings that reveal how the DOW 30 companies are managing climate risk and future-proofing their business operations:
- A continued commitment to combating climate change — While environmental and climate-related regulation at a federal level is decreasing in the US, internal governance of individual corporations continues to prioritize sustainability. CEOs from half the largest companies in the DOW 30 have publicly committed to continuing action against climate change. A desire to maintain competitiveness in the global marketplace is likely at work here.
- Sustainability starts at the top — The Dow 30 index has the highest proportion of companies offering incentives for sustainable behavior by their employees at 37 percent, and 30 percent also offer incentives to upper management for performance against sustainability targets.
- Room for improvement — The research also uncovered areas where the DOW 30 companies have room to improve. Just 27 percent of Dow 30 companies have made solid commitments to reach 100 percent renewable energy, if they haven’t already done so. And only 30 percent of Dow 30 companies have a plan to mitigate climate-related risks. But given the integration of the aforementioned TCFD into the CDP reporting framework and increased investor interest in this area, we could expect to see improvement in this area.
- How does the US measure up? — After discussing the relative performance among the Dow 30 companies, Theisen shared EcoAct’s list of the Global Top 10. Holding the audience in suspense, Theisen disclosed that only one US company ranked among other sector leaders across the indices. Not only did that company — Microsoft — make the top ten, it came in at first place. So while US companies have room for growth, they can look to their colleagues in other regions for inspiration. They can also emulate Microsoft for best practices in both climate action performance and environmental sustainability reporting.
A holistic approach to investor relations: What ESG integration means for management
By Aishwarya Chaturvedi
Continuing the lunchtime talks on Tuesday, James Dymond — Investor Relations Manager at SAP — stressed the importance of integrating ESG reports with other financial disclosures. Pointing to the continued dynamism in the world in terms of climate, demographic, technological change, he suggested that a holistic approach to investor relations helps businesses demonstrate their willingness to help solve these challenges.
Take, for example, governments. Regulators around the world have grown concerned since the last financial crisis. In an attempt to reduce their risks even further, regulators are seeking non-financial information on ESG factors. A holistic approach towards ESG reporting helps fulfill regulatory requirements much faster.
Dymond said SAP is receiving an increasing number of requests from its over 410,000 customers around the globe for ESG reporting; not only are the customers conscious about their own ESG reporting, they are also evaluating SAP’s own ESG accountability during due diligence.
There is a growing interest in the investor community, too. Socially responsible investments into SAP have doubled since 2011, and total assets under management declared for socially responsible investments doubled in 2017 alone. SAP’s approach to ESG reporting has helped the company attract a growing community of sustainable investors while keeping pace with traditional investors.
The ESG integration has helped SAP develop goodwill with its employees, too; more than 93 percent employees appreciate the company’s efforts in this direction.
A connected team collaborates to put the report together, with participation from communications, sustainability, investor relations, and accounting teams. SAP does not see its integrated report as merely a compilation of its financial and sustainability reports; it establishes how the non-financial indicators relate to the financial indicators. As a result, SAP has been able to monetize non-financial KPIs. After all, “Dollar signs are a language everybody speaks.”
Breaking the mold around measuring employee motivation and engagement, and the value of a purpose-driven workforce
by Aurora Dawn Benton
In the final session at New Metrics ‘18, Imperative co-founder Arthur Woods unveiled new research on employee engagement and proposed a new economic disruption centered on fulfillment. Woods started out by reminding us of the history of work, the employee value proposition and what we measure. We went from the Agrarian (survival and strength) to the Industrial (satisfaction and efficiency) to the Information economy (engagement and knowledge), and now we are seeing the emergence of the Purpose economy, where mindset is key.
An indicator that Woods may be onto something is his point about movements: “We began to assess the fact that of so many movements happening across sectors, there’s one commonality. From sustainability to people empowerment to the sharing economy to the maker’s movement, all of these things are grounded in human value. They’re all grounded in what you could call ‘purpose.’”
A different kind of RIGged economy
Research shows 66 percent of the workforce is unfulfilled. Do we really need work to find fulfillment? 93 percent say yes! Woods observed that when we are fulfilled at work, we are better people for society and our families. So, if fulfillment is the focus, what do the data reveal? Woods shared a sneak peak of new research conducted on over 2,000 people:
- The formula for fulfillment is RIG: Relationships, Impact, Growth. The data show a strong correlation of fulfillment with these categories (96 percent or higher in each).
- The relationship between lack of fulfillment and attrition is noteworthy. 71 percent would leave their job for a more fulfilling one, with the same pay. 33 percent would take a pay cut of less than 10 percent, while 26 percent would take an even greater pay cut to achieve higher levels of fulfillment. This would certainly support Woods’ statement that meaning is the currency of this new economy.
- Two-thirds of employees who are fulfilled at work also claim to be exceptional performers.
- Who owns fulfillment? Engagement has traditionally been seen as frontline managers’ responsibility; however, 82 percent of employees feel it’s their own responsibility to be fulfilled. Woods invited us to imagine this new age where the organization is no longer responsible for our wellbeing. This has implications on how we empower employees, opening up possibilities for co-creation of fulfilling work — thus, the central role of mindset.
- Not only do employees see themselves as responsible for fulfillment, 42 percent believe they’re their own barrier to fulfillment, and 31 percent feel senior leadership creates the obstacle.
- We can no longer can say that Gen Z and Millennials are the purpose generations and Boomers are not; the data show purpose transcends generation.
For an organization ready to shift into the Purpose economy, the shift in mindset happens through RIG, which releases chemicals that make people happy and productive. To tap into these RIG benefits, leaders need to understand the personal “why” for each employee and shift their definition of success to include fulfillment. This framework can transform how we conduct performance reviews and set goals, both at employee and corporate levels.
Woods envisions flipping the equation: By 2030, he would like to see 66 percent of the workforce fulfilled. Perhaps this starts with the idea that college students declare a purpose rather than a major, something already underway at Stanford.