New Metrics

Scalability:
Upshifting from Micro- to Macro-Level Sustainability

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

By Bill Baue | Published 7 years ago | About a 4 minute read

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

In a textbook demonstration of unfortunate asymmetry, sustainability problems typically develop incrementally, accreting undetected in the background. Sustainability solutions, on the other hand, generally afford us such luxury: When sustainability thresholds loom near, solutions require an exponential pace and scale totally out of sync with the standard, creeping rate of development. The mindset shift from incremental to transformative solutions is daunting for humans and our institutions, but it’s non-optional as we navigate the Great Acceleration into the Anthropocene.

Accordingly, the Reporting 3.0 (R3) community of Positive Mavericks places great emphasis on Scalability, as the focus of the sixth (and penultimate) chapter of the Reporting Blueprint (which is also the subject of this eighth article in our 10-part series on the R3 Blueprints.) This article completes our consideration of the New Impetus triangle that Ralph first introduced last year, examining the lower right corner (see Figure 1).

As with earlier parts of the series that cover these three corners of our triangle (Part 4 and Part 6, specifically), it makes sense to first set the scene:

Bill Baue and Ralph Thurm
will discuss
Blueprinting the Future
of Reporting, Accounting
and Data Management
at New Metrics '17.- In our discussions about economic system design changes, we are often astonished about the low levels of awareness about the magnitude of the urgency for transformational change. Case in point: While previous IPCC science gives humanity 2/3 probability of hitting the 2°C threshold of “safe” warming (and a coin’s toss chance of hitting 1.5°C), the latest science lowers the probability of hitting 2°C by the end of the century to 5 percent (and a mere 1 percent of hitting 1.5°C).

We are far away from the level of change needed until 2050 or 2100. How realistic can we be to reach these targets without changing the economic system design? If leaders in each industry/sector aren’t successful in making policies, strategies and ambitions that create “new-level playing fields” of their entire industries/sectors, we will have failed.
Clearly, transformative changes need to scale up, and quickly! Hence our focus here at R3 on the need for Scalability as the third component of the New Impetus triangle on disclosure (along with Purpose and Success).

Disclosing Scalability: The What

Companies can enact Scalability through specific products, services and processes to accelerate the pace and magnitude of necessary transformation. Importantly, scalability also applies to contributions organizations make above and beyond their core business activity at the micro level, particularly at the macro systems level – for example, by setting new-level playing fields that transform economic system design.

The Reporting Blueprint identifies three broad areas where Scalability can best be enacted: Education, Collaboration, and Advocation. The report asks the questions that rightsholders would like to see answered, to better assess the future-readiness of the organization that impacts their rights in each of these categories:

Education (internal and external):

How far are the worldview, transformational ambition level and related strategy communicated within the organization, and how do education/training programs consider and support this worldview?
Are there joint educational programs developed for the whole value cycle (internally and externally) and does this support joint target-setting and implementation campaigns to achieve sustainability/thriveability throughout these value cycles?

Collaboration:

To what degree is the company engaged in its own (and its industry association’s) lobbying for sustainability (and beyond)? Is the company part of networks and cross-industry initiatives to create new sustainable business models? Do those need to be created by a group of companies?
Does the organization envisage and work with rightsholders on the design of thriveable habitats?
Do employees have time for societal engagement and are they positively stimulated to help find long-term solutions in order to avoid short-term conflict? Is there slack time to ‘think’ alone, in groups, on all three parts of this new transition agenda (purpose, success, scalability)?
Is the company aware and busy with true sustainable innovation beyond existing rebound effects – e.g. in creating circular or sharing business models? Is the need to design <2°C business models implemented in the organization’s strategy?
In which thematic research networks is the company active? Does it take part in award schemes on most sustainable solutions, alone or together with other partners?

Advocation:

Is the company perceived as an active player in presenting its worldview and potential scenarios around sustainability and/or ThriveAbility?
Is the leadership actively engaged in the promotion of a regenerative, inclusive & open economy and the necessary design changes – e.g. internalization of external costs, changes towards a more sustainable tax system, creation of level playing fields in international relations – e.g. trade agreements, international accounting rules, etc.

Disclosing Scalability: The How

As if our corporate leaders do not already have enough on their plates! That is what we hear often. We answer with Plato: “The parts can never be well until the whole is well.” And the translation of Plato’s quote for the sustainability field: “There is no sustainable business in an unsustainable world.” All of which requires the scaling up of transformation from the micro to the macro level.

The Reporting Blueprint sees primary responsibility for such Scalability to reside at the CEO level in advocating for overall economic system design changes. The Reporting Blueprint cites three CEO examples to illustrate this point:

Novo Nordisk CEO Lars Sorensen recently stated: “Our philosophy is that corporate social responsibility is nothing but maximizing the value of your company over a long period of time, because in the long term, social and environmental issues become financial issues. There is really no hocus-pocus about this. (...) If we cure diabetes & destroy a big part of our business, we can be proud.”
Another example is PepsiCo’s CEO Indra Nooyi. For the second time, she is now issuing a ‘Performance with Purpose Blueprint’— she released the first when she became CEO in 2006 — but this time she is even more blunt about how her plan extends beyond Pepsi's offices and supply chain. In her opening letter, she threw down the gauntlet for other CEOs, challenging them to fill a void left by depleted governments and distrusted agencies: ‘This approach is the only way to run a successful global corporation in the 21st century,” she wrote. “We are seeing levels of political and economic volatility that we have not confronted for many years. Technological change is disrupting entire industries. Governments are facing budget shortfalls. And trust in institutions is near all-time lows, as consumers increasingly expect companies to make money in a way that does not burden society.”
A last example is Paul Polman, CEO of Unilever. A couple of years ago Polman had a sharp message for short-term shareholders: “Unilever has been around for 100-plus years. We want to be around for several hundred more years. So, if you buy into this long-term value-creation model, which is equitable, which is shared, which is sustainable, then come and invest with us. If you don’t buy into this, I respect you as a human being but don’t put your money in our company.’

CEOs of that caliber aren’t easy to find: crystal clear on the organization’s purpose, its impact on millions or even billions of people – including negative impacts that need to be engineered out of their business models.

The next step that such enlightened leaders will need to take is stronger and collective advocation for economic system design change. Leadership in that sense doesn’t mean just simply making their own organizations better, but to enable economic system conditions in which companies and the communities dependent on them can both thrive. We can’t afford losers in the value cycles.