This 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 their latest tools and findings regarding measuring the risks and impacts of previously unmeasured forms of value, 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 Strategy and Stakeholder Engagement — and several sessions provided pertinent insights from practitioners on the evolution of Operational metrics.*
Lessons from Novo Nordisk on the first-ever full adoption of the Future-Fit Business Benchmark
Novo Nordisk is the first company to complete the FFBB. In a plenary session on Tuesday, Cora Olsen — Global Lead for Integrated Reporting at Novo Nordisk — shared the company’s learnings from this exercise. Later, in a breakout session, Olsen and Future-Fit Foundation co-founder Martin Rich walked participants through the FFBB and the full set of findings from Novo Nordisk’s first benchmarking report.
“We need to get away from the ‘less bad’ model we have been working on, because the metrics are wrong,” Olsen explained. Future-Fit is different because “it’s not about cutting up the pie [e.g. how many GHG emissions does each organization get to produce]; it’s about not eating the pie at all,” she said. It sets aspirational goals that define the break-even point that companies must reach to credibly claim that they do no harm.
Accounting for your extra-financial performance ...
Future-Fit Foundation co-founder Martin Rich will share lessons learned during the transition from conventional accounting to integrated multicapital accounting — at Integrate '20, Nov. 9-11.
They were developed by the Future Fit Foundation through an extensive consultation process with subject matter experts that translated complex, science-based thresholds into clear, understandable goals.
In addition to identifying what it takes to do no harm, the FFBB builds on the same scientific foundation to define all of the ways companies can do some good at a systems level.
How did Novo Nordisk perform and what was the value?
The company performed well in some areas and identified gaps in others. In some categories, such as whether business is conducted ethically, they scored 100%. In others, such as whether operational waste is eliminated, and whether operations emit no greenhouse gases, they scored poorly. Olsen said the categories in which they did poorly — such as greenhouse gases and operational waste — were the most interesting, because many were real eye-openers.
For Novo Nordisk, the value in the assessment is that it offers a clear picture of what a company needs to work on: “The real value for our company,” Olsen said, “is the conversations this will help us drive internally.”
The Benchmark looks at the full value chain, which means companies can’t just outsource the bad stuff and suddenly bump their score to 100%. Novo Nordisk knows there is no way it will be able to score perfectly across these goals; there are many for which they simply don’t have the technology or processes in place. But companies can get credit for putting in place rigorous processes and procedures for improvement.
Call to action
What’s great about the Future-Fit metrics is that they allow a true comparison. The methodology is formula-based and the score is a percentage, so companies can be compared within or across sectors; this could transform the way companies measure and track and the conversations we have about sustainability.
Novo Nordisk alone is not going to change the world, Olsen said: “We need everyone to do this — so get busy, everyone, and let’s reconvene in a year!”
Materiality Is Broken: Here’s How to Fix It
The panelists eagerly shared their grievances:
- Too many reporting organizations ask the wrong questions.
- They don’t involve a broad enough range of stakeholders.
- They focus on too short a time horizon.
And that’s just for starters. But most of all, the panel concurred that context is critical and it’s missing from most materiality analysis.
Reporting 3.0 Managing Director Ralph Thurm complained that organizations only report against their own previous performance or industry standards, rather than against global limits of capital, citing both personal experience and research: “I have not yet seen a sustainability report. I have seen ESG progress reports,” he asserted.
On the bright side, panelists were equally vocal and specific about the ways that materiality analyses could be repaired.
Revive the concept of context. Reporters need to consider context instead of over-emphasizing stakeholder inclusiveness. Performance data and goals need to be placed in context of the carrying capacity of an ecosystem. “Context is absolutely essential. Any organization that is not looking at sustainability context is missing the point,” Thurm asserted.
Redesign the materiality matrix. Using a 3-D materiality matrix with a third axis of “Material to living systems” instead of the traditional four-quadrant, 2-D materiality graph would better reflect the complexity of the world, suggested Gil Friend, founder and Chair of Natural Logic. Using this format would likely move climate change to a position that better reflects its importance and will drive a different type of conversation, he maintains.
Invest the necessary time and resources. Live polling of conference participants revealed that 65 percent of participants budgeted less than $10,000 and most spent less than 20 hours determining materiality. This is a woefully insufficient amount of resources, panelists agreed, while conceding that asking for more resources can be difficult.
Use a tool to facilitate the process. For those who have limited time or money for assessing materiality, panelists shared several tools. Moderator Daniel Aronson showcased his firm, Valutus’s, online tools for surveying stakeholders with ready-made questions and lists of stakeholders to select from. Using these ready-made tools can help organizations overcome their reluctance to embark on a what seems to be a daunting process. Thurm proposed using a 3.0 Integral Materiality Process, based on the familiar Plan-Do-Act-Check quality model (see below). Friend pointed participants toward a 25-step Transformation Journey approach to organization thriveability and system value creation.
Be forward-looking. Frame your questions to get stakeholders to take a more long-term view. For example, panelist Rose Perkins, Associate Director Sustainability at The Dow Chemical Company, asked her stakeholders: “What do you want to see in the next six to 10 years?”
Ask different questions. “We ask what stakeholders care about, but ‘What does the world need?’ is the question we ought to ask,” Aronson advised, and questions need to be more provocative to yield insights that are truly valuable. Materiality is a “a process of engaging humans in an exploration about what is important, an iterative dialogue where we get smarter and open up opportunities,” Friend stated. A good materiality assessment should provoke something new, he continued. It should reveal what's wrong and create the clear sense that you can do something about that in your organization.
Generate involvement and excitement. Thurm recommends using the Reporting 3.0 Integral Materiality Process (shown below) as an approach that is truly embedded throughout an entire company rather than driven by just a few people. Involving the whole company can help rekindle excitement about sustainability and create truly inclusive companywide effort.
By following these steps, reporting organizations can conduct meaningful materiality analyses that can help them find their focus and have far greater impact.