New Metrics

Purpose + Context = Connectedness

Part Four in a 10-Part Series by Reporting 3.0. See previous parts below.

By Bill Baue | Published 7 years ago | About a 10 minute read

Part Four in a 10-Part Series by Reporting 3.0. See previous parts below.

The term “Purpose” has emerged as a business buzzword of late, obscuring its essential role in defining the sustainability journey of companies. We at Reporting 3.0 (R3) welcome the more disciplined definitions of Purpose, such as this one from a recent report from Sustainable Brands and EY (as articulated in the Introduction by R3 Steering Board Member Brendan LeBlanc):

“We define Purpose as an aspirational reason for being, grounded in humanity, which galvanizes stakeholders to drive innovation and growth. However, it is important to recognize that not all Purpose statements are created equal. Not all Purpose statements address operating in a manner that respects the limits of the environment or protects the floors of social impact. Said another way, a company may have a defined Purpose, yet not be ‘sustainable.’ To truly be sustainable, companies should consciously, and ethically, balance their financial, social and environmental resources and impacts against their desire to operate indefinitely (bold added).”

Stated slightly differently, corporate Purpose has wide latitude for creative freedom of expression, so long as companies operate within the bounds defined by GRI’s Sustainability Context Principle or Kate Raworth’s Doughnut Economics: ecological ceilings & social foundations.

Clearly, Purpose plays a fundamental role in corporate direction-setting, and therefore in corporate reporting. Consequently, Purpose is integral to R3’s Reporting Blueprint, which asks: What changes are needed from today’s disclosure and reporting if we wish to achieve a truly regenerative, distributive and open economy? And how can we distill these needed changes into the most accessible communication possible?

To help visualize these needed changes, Ralph introduced the “New Impetus” triangle last year, which R3 embedded in the Reporting Blueprint:

Contextualization:

Have you sketched an ideal situation for a ‘green,’ inclusive and open economy? What would it mean for you and what could you contribute to such an ideal state of the economy?
Where is your organization on the R3 Strategy Continuum today and where should it be in order to be minimally sustainable? What transformational capacity is needed to get you there, so what is the magnitude of the urgency that drives the change and is leapfrogging necessary in your case?
Does your organization cure symptoms by following the mainstream standards or are you having impact by tackling root causes that clarify if you are part of the problem, the solution or potentially both in a regenerative, inclusive and open economy? What process are you using to differentiate symptoms from root causes, and how are programs, capacity and budgets synchronized to reach root cause impact?

Leadership Attitude:

Do you assess the positioning of sustainability in the overall strategy development process? Is it a leading factor?
Are you aware of a potential sociocultural leadership gap in your organization? How do you know, and what do you undertake to tackle this gap?
How do you organize corporate governance to create ‘GSE’ pull effects (contrasting from the current ‘ESG’ push approach)? What governance code are you following? Are you pushing for ethical leadership (as per King IV)?
In how far does your organization’s leadership address the economic system malfunctioning at all? Do you see a generic responsibility for your leadership team to address such issues and where does that happen?

Ambition Level:

How do you address growth issues, and how do you differentiate sustainable from unsustainable growth? Is growth at all necessary for your organization?
Do you discuss the externalities of your organization’s activities? Are you compensating for any such externalities? Are you aiming at avoiding them?
Are you supporting necessary activities to learn about thresholds and allocations in resource use?
How much are you personally involved in rightsholder dialog carried out by your organization?
Are you considering implementing an Integral Materiality approach?
What are relevant preconditions for innovation in your organization? Are any of the principles for a regenerative, inclusive & open economy addressed in giving shape to innovation projects and filtering/staging processes?

“Most of our business and political leaders are unable to ‘connect the dots,’ to use a popular phrase, they fail to see how the major problems of our time are all interrelated. Their so-called ‘solutions’ tend to focus on a single issue, thereby simply shifting the problem to another part of the system. [...] Moreover, they refuse to recognize how their piecemeal solutions effect future generations’ [i].”

Identifying Purpose goes deeper than the vision or mission of an organization that leads to strategy in the end – it plumbs to the depth of a worldview of the positive contribution the organization wants to make to society and the planet in the long run. Purpose also leads to a clear legacy picture and brand identity that transcends the transactional nature of products and services, and taps into the core of corporate culture. In the end, this requires back-casting from the expected ideal in order to define what needs to happen in the short- and mid-term.

We at Reporting 3.0 rarely see this level of Purpose logically explained in a sustainability and/or integrated report. What is it that holds reporters back, we wonder? We see clear value in this extra focus on the How of Purpose as an enabler of transformation.

The Purpose chapter explores three different areas to implement the How of Purpose:

Integral Operating System

We reference the Integral Operating System described in Part 1 of this series. The four different quadrants help to define areas of exploration in order to go from symptoms to root causes, from economic to worldview, from product to contribution and from forecasted strategy to back-casted strategy. We also refer to the growing body of work in spiral dynamics, discussing different levels of leadership consciousness and the need to assess necessary ‘memes’ to allow a worldview understanding to fully develop.

King IV Code: From ESG Push to GSE Pull

We also look at the consequences for the governance approach and refer to the new developments around the King IV Code of Corporate Governance, now requiring “ethical leadership.” King IV defines ethical leadership as follows:

Ethical leadership is exemplified by integrity, competence, responsibility, accountability, fairness and transparency. It involves the anticipation and prevention, or otherwise amelioration, of the negative consequences of the organization’s activities, and outputs on the economy, society and the environment and the capitals that it uses or affects.

Furthermore, King IV defines organizations as an “integral part” of society, supported Reporting 3.0’s concept of “integral thinking.” At Reporting 3.0, we observe that governance for sustainability has so far followed an ESG Push approach in which governance always followed the developments instead of leading the developments. Governance in a Purpose-driven organization could be a potential activator of steering the organization. King IV in our view is also going along that same route. The ThriveAbility Foundation, in its research about the positioning of governance for ‘thriving’ organizations, contrasts the ESG Push with an aligned GSE Pull process. It would build on accepting the ‘3-gap problem’ (sustainability context gap, organizational transformation gap and socio-cultural leadership gap) and immerse their closure into one governance task to arrive at ethical leadership.

Universal Statement of Corporate Purpose

Reporting without a clear Purpose statement will leave the rightsholders of any organization unclear of the What and the How of Purpose. In the Virtual Dialogue and Working Group Meeting for Exposure Draft 1.0 of the Reporting Blueprint, GRI co-founder Allen White actually went one step further by asking:

“If reporting is to achieve its full potential as an agent of transformation, we must reach at least a modicum of consensus around why companies exist in the first place. An interdependent world, bound by planetary limits and a single community of life, needs the enlightened corporations to adhere to universal norms, including a statement of purpose. Such a statement would provide a North Star for shaping both the future of reporting and next chapter of Reporting 3.0 as respected navigator in the journey ahead. Isn’t it time for a Universal Statement of Corporate Purpose?”

We at Reporting 3.0 wholeheartedly agree!