New Metrics

Reporting 3.0:
Global Common Good R&D Market-Maker for a Regenerative, Distributive Economy

“There is no sustainable business in an unsustainable world.”

This saying — a kind of Reporting 3.0 “motto” — is simultaneously contrarian and common sense: contrarian in the sense that it counters the prevailing tendency in the corporate sustainability field to focus on incremental progress toward sustainability at the company (“micro”) level. Common sense in that sustainability applies holistically (not just atomistically), such that company-level impacts “roll up” to the systemic (“macro”) level.

By Bill Baue | Published 7 years ago | About a 8 minute read

As Raj Thamotheram and David Murray of Preventable Surprises — a Reporting 3.0 (R3) partner — recently wrote (in a piece worth reading in its entirety):

"Making our planet slightly less uninhabitable is simply not good enough, nor can we be happy with slow incrementalism when it comes to major systemic risks like climate change."

This quote exemplifies the “Positive Maverick” ethos that Raj first coined, and that R3 embraces as a defining characteristic of our community of collaborators who “seek transformative (not just incremental) change” and “think and act at systems levels” (among other attributes). At the end of May, we gathered this community at the 4th International Reporting 3.0 Conference at KPMG in Amsterdam, where we soft-launched the final reports of Reporting Blueprint and Data Blueprint, the first two of four Blueprints that are taking a Working Group approach to designing next-generation practices that are fit-to-purpose for spurring the emergence of a truly regenerative and distributive global economy (the Accounting Blueprint released its Exposure Draft 1.0 at the Conference, and the New Business Models Blueprint launched into the 12-month development process).

To mark the final publication of the Reporting and Data Blueprints, we are initiating a ten-part series here on Sustainable Brands (for bundling into an e-book, and to tee up presentations at Sustainable Brands '17 Copenhagen and New Metrics ‘17 in November this year) to share the key concepts and Recommendations of both reports. The “table of contents” listing themes covered in this series appears at the bottom of this article.

In this introductory article, we briefly lay out background on Reporting 3.0 and the rationale for our four Blueprints under the following headings:

Reporting as a Trigger for Economic System Design Transformation

Reporting 3.0 was launched in 2013 to test for broad support of a simple hypothesis: that reporting can play a trigger function for necessary economic system design transformation. Beneath this hypothesis is an assumption that the current economic system design, predicated as it is on perpetual (compounded) economic growth on a bounded planet with finite resources, is inherently unsustainable, so it must be transformed.

And drawing on the leverage points wisdom of Dana Meadows, this hypothesis assumed that reporting can serve as a strong fulcrum for leveraging this change, as it lives at the intersection between companies and their stakeholders (or as we call them, rightsholders — but more on that later in the series). To make a long story short, 3 years of testing proved that there is a sufficient community of experts globally who agree that reporting can trigger needed economic system design transformation. Accordingly, the decision was made at the 3rd International Reporting 3.0 Conference to:

Spin off Reporting 3.0 from its incubation by BSD Consulting into an independent non-profit (under OnCommons, agGmbH registered in Germany in January 2017); and
Launch a series of four Blueprint Projects on Reporting, Accounting, Data and New Business Models that define a ‘work ecosystem’ in which progress could be perceived and then activated (see Figure 1)

“Not another standard!” is a common refrain we hear when introducing Reporting 3.0. We wholeheartedly agree! Existing reporting standards and frameworks — the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), the Sustainability Accounting Standards Board (SASB) — have all set a strong foundation of progress for integrating sustainability into corporate performance metrics and reporting. But the level of progress these initiatives can achieve has plateaued, short of what’s needed to catalyze economic system design transformation. GRI co-founder Allen White (a R3 Advocation Partner) described this gap in a Sustainable Brands article (and e-book):

Sustainability requires contextualization within thresholds. That’s what sustainability is all about. But to this day in the reporting world, Sustainability Context is incipient, uneven and occasional. We don’t have decades to get serious about Context in light of the ecological and social perils that lie ahead. I think the time for procrastination has passed and the time for aggressive movement is upon us.

At the R3 Reporting & Data Blueprints Working Group Meeting at EY in Boston after New Metrics ‘16, White validated the need for R3 to play a “global common good” R&D role for innovation that applies across the reporting field. In other words, the last thing we need is for R3 to set up shop alongside the existing players; instead, R3 takes a meta-approach that transcends and includes the existing initiatives (for example, IIRC serves on the R3 Steering Board). In order to spur the kind of “aggressive movement” toward transformative change that White calls for, R3 Blueprints create Recommendations that apply to all players in the field, essentially setting the agenda for innovation.

Reporting 3.0 as “Market-Maker”

The other thing we often hear is that the market isn’t generating demand for the kinds of solutions R3 identifies. Of course not! Because the current economic system design externalizes the problems, and hence fences off solutions from the market. The irony, of course, is that neoliberal economists’ wishful thinking does not trump thermodynamic reality, so the problems do not disappear, but rather, they spread across the economy as systemic risk that seems invisible until it bites us in the ass. So, the market will continue to demand incremental solutions instead of “fit-for-purpose” transformative solutions until “market-makers” generate demand — just like there was no demand for iPhones or in-home “hotel rooms” until Steve Jobs and Airbnb came along. Only more difficult, because these “solutions” met current economic system design constraints (would the iPhone have succeeded with full cost accounting?)

The silver lining is that the need for these solutions is real, even if the “invisible hand” doesn’t yet register them as “demand.” So, positive maverick first-movers will gain competitive advantage by creating this market. In this sense, R3 is playing a catalyzing role in bridging from the current “business case” environment, which “artificially” disadvantages sustainability solutions that fall outside the scope of our current economic system logic, to the transformed economic system that internalizes these so-called “externalities” (and thereby eradicate this illogical linguistic sleight-of-hand.) Who’s game to join us in making this market?

What’s “Integral,” Anyway?

Sustainability calls for holistic (not atomistic) approaches, as stated earlier; accordingly, Reporting 3.0 draws on work from the Thriveability Foundation that applies Integral Theory to corporate sustainability. Among many tenets of Integral Theory is the synthesis of four quadrants of human experience, ranging from individual to collective on one axis and from interior / subjective to exterior/objective on the other axis (See Figure 2).

Instead of explaining this in depth now, let’s leave this as a “teaser” to draw you back to the later installments of this series, where we will provide examples of our integral approach.