Environmental, social and governance (ESG) risks are found in corporate practice in many ways, for example forest and bush fires in Australia, social unrest in other countries caused by lack of opportunity and perspective, and the changing role of corporations. With the global pandemic, the differences between the various social classes in terms of equal opportunities and economic possibilities have been emphasised even more. Companies can strengthen their resilience to these challenges by increasing their commitment to long-term, sustainable value creation that takes into account the broader needs of people and the planet – stakeholder capitalism.
The International Business Council of the World Economic Forum (IBC) is considered a leader in delivering on the promise of stakeholder capitalism. As a joint project of 120 of the world’s largest companies – it sought to develop a core set of common metrics and disclosures on non-financial factors for their investors and other stakeholders. Thus, after a lengthy consultation process with over 200 companies, investors and interested parties, its report Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation was published in September 2020 as a result of this process.
Developing a Stakeholder Capitalism Metrics
The Stakeholder Capitalism Metrics is a set of universal, comparable environmental, social and governance (ESG) metrics and disclosures. The metrics and disclosures are based on four pillars (Figure 1). The four pillars focus particularly on people, planet, prosperity and governance. These issues are considered particularly critical to the economy, society and the planet. Companies have the opportunity to report on these issues regardless of industry or region.
However, performance in one pillar is highly dependent on performance in the other pillars. There are up to seven themes in each pillar that are critical to a comprehensive understanding of the pillar. The four pillars include one or more corresponding indicators or disclosures to measure business performance and sustainable value creation. They are also composed of existing frameworks and standards (e.g. SBT, GHG Protocol, GRI etc.). The metrics and disclosures have been recommended by the World Economic Forum (WEF) and its IBC for adoption by both IBC members and non-IBC companies and exist as a voluntary standard for reporting.
Driver of non-financial reporting
The goal the IBC and WEF want to achieve with this project is to advance the convergence, simplification and standardisation of the non-financial reporting ecosystem. The developed set of stakeholder capitalism metrics will help companies to ensure that they track their reporting on performance on ESG indicators and their contributions to the SDGs on a consistent basis. This is intended to improve the ability of companies and investors to track their sustainability progress and strengthen related decision-making, as well as increase transparency and accountability around the shared and sustainable value that companies create.
Adoption across industries
In January 2021, 60 top business leaders across industries announced their commitment to the Stakeholder Capitalism Metrics. This signals that the private sector views environmental, social and governance factors as critical to the success and long-term survival of all businesses. By adopting and reporting on these metrics and disclosures, the business community continues to promote greater collaboration and alignment of existing standards and is making progress towards developing a systemic, globally accepted set of common standards for reporting on sustainability performance.
The published report is a follow-up to the draft consultation, Towards Common Metrics and Consistent Reporting of Sustainable Value Creation, which was presented at the World Economic Forum Annual Meeting in January 2020.