How many times have you been tasked with charting a new course, only to be overwhelmed by the number of choices when picking a direction? Already there is a lengthy list of “S in ESG” metrics that relate to people and community initiatives. Each company is on a journey of narrowing its focus on those most critical for the company’s strategy, which will, of course, be different from corporate peers. However, if our collective goal is to solve some of the world’s most pressing challenges, we need to find a way to measure the whole picture.
If we consider the range of “S in ESG” metrics a representation of the bricks, steel, and materials needed to create a better a better world through business, how can we build a (metric-driven) bridge to the future together?
Take, for example, community-driven initiatives. These types of programs do not have broad consensus around a metric or two that are the most common. Or, in the case of the environment, it might be Greenhouse Gas Emissions. In the case of governance, it might be a Board diversity metric. Based on challenges our network continued to repeat and with all the current standards and reporting in mind, it’s time to pivot and prepare for the future of “the S in ESG.”
This week CECP released What Counts: The S in ESG, New Conclusions, a paper that centers on a bold goal for companies to report Total Social Investment using a shared definition by 2020.
Why do we need Total Social Investment?
First, companies set business strategy individually; CECP looks across individual strategies to find ways to compare one company with another. Teams seek to benchmark their work for internal reporting, CEOs want to understand their market position, and investors need to examine performance across industries to decide how to invest. Clearly, we need a numeric, common unit of measure that everyone understands and agrees upon – for Total Social Investment, that’s a dollar.
Second, people in all departments throughout a company should be able to reasonably easily understand the measure. Why? Because social strategies are increasingly integrated across the business. Showing the resource level of social efforts is an approach that takes advantage of a unit of measure everyone can understand. As we all know, numbers are very good at counting money.
Numbers being good at something might sound like an odd phrase. Consider, though, whether numbers are good at counting happiness, knowledge, or feeling safe. The pursuit of using numbers and data to measure things numbers aren’t necessarily good at measuring is a noble body of work that must be customized to the project or initiative itself. For the job of comparison, we are all best served by focusing on letting numbers be numbers and do the jobs they are most naturally designed to do.
CECP discussed the S in ESG approach and Total Social Investment goal with dozens of stakeholders before this release. Here are some of the discussion threads to supplement what you’ll see in the paper itself.
“Where do Total Giving and Employee Programs go?”
Total Social Investment is an expansion. It’s holistic. It is inclusive of current, foundational work like that of philanthropy, employee volunteering, and all social categories (e.g. human rights, labor relations). The definitions of Total Giving in CECP’s Valuation Guide will remain the same and will continue to be reported in Giving in Numbers each year. They are one important component of the “Communities” category of Total Social Investment.
“That seems like the least interesting number about how a company is driving social value”
Picture a child being asked to draw a rainbow with a #2 pencil. Yes, the child can draw the shape of a rainbow and shade the stripes to differentiate, but the kaleidoscope of colors is lost. So, while that #2 pencil might be the wrong tool for drawing a rainbow, it’s certainly the best tool for a dozen other tasks that child will do on a regular basis.
Total Social Investment has been designed as a metric that can be used and compared across many companies thus requiring a common unit (money). Fundamentally, it must be a measurement that makes the most sense to the most number of companies and stakeholders. And while it may be true that outcome, results, or value-based numbers would be more exciting to report or better are judging effectiveness, those numbers are often company- or initiative-specific, a barrier to larger comparisons. Total Social Investment offers an opportunity to benchmark across companies.
“It doesn’t seem like it would always be a good thing for that number to go up”
Imagine a company that was committed to improving equity within the business and, finally, after five years, their efforts on closing the pay gap are now hitting their targets. What happens to the resources invested in achieving those targets now that they are no longer needed? Total Social Investment might indeed go down, which may be troubling for external stakeholders that did not understand the context. CECP advises that when reporting Total Social Investment, increases and decreases should be considered alongside company performance on the ESG metrics specific to progress on social issues most critical to the business and its stakeholders. Companies can use the narrative components of their reporting as an important partner to their metrics to explain resource fluctuations and strategy.
The iterative dialogue with corporate leaders and issue experts will continue in 2018 as we document the “shared definition.” We will spend 2019 partnering with corporate early adopters setting up operations to report Total Social Investment. Based on this adoption, we will collect Total Social Investment data for the first time in 2020 among the leading group of companies who see value in the metric for their stakeholders. If you are one of these, join us!
This is the third in a series of four blog posts sharing CECP’s approach to measurement, focused on the S in ESG. Here’s the first: Next Steps in Improving Measurement and the second: Building Your Scorecard or Raising Your Ranking. Next up, our Guide to Social Scorecards work. This focuses on increasing use of measurement and helping companies determine their next step. Stay tuned! Please reach out to share your point of view.