Oftentimes the value of sustainable actions goes unnoticed. When measuring progress or growth, companies, organizations, and even world economies, focus primarily on consumed and produced goods and services. But is this all there is to social and economic advancement?
We believe this is merely the surface of progress, and that the current system tends to overestimate and reward short-term assets while underestimating more ambiguous yet long term social and environmental assets that traditional metrics can’t grasp.
We have analyzed the current predominant methodology for measuring progress in order to understand how sustainable actions are being left behind given the lack of standardized metrics.
Sustainability is not measured in GDP
GDP (Gross Domestic Product) has long been the primary indicator for a country’s growth and progress, and still is to this day. But even Simon Kuznets, the economist credited with the invention of such an indicator, warned that GDP was not the appropriate measurement technique to benchmark a country’s economic development or wellbeing.
What constitutes a sign of economic productivity does not necessarily amount to societal or environmental well-being. Let’s take for example the production and consumption of cigarettes, which can inflate GDP, but the negative impacts on people’s health are not captured in the metric and are therefore insufficiently recognized and easily ignored.
The consequences of this approach are quite relevant; if metrics fail to mirror societal and environmental costs and benefits, then the policies, measures or initiatives taken for the overall well being of a sustainable planet and an inclusive society will inevitably fall short to the reality of our needs.
Moreover, this failure to recognize the whole picture of value creation beyond monetary terms, eventually translates in a lack of relevant information about the negative or positive impacts of economic activities. In this regard, investors, for example, are not being rightly informed about the potential of a given company to create value and assess risks.
What you measure affects what you do
The idea that economic outcome is the only relevant indicator for an organization is long overdue. ESG criteria, SDGs and other similar indicators have taken the market by storm, prioritizing societal and environmental questions more than ever before. The changes that have come from it are undeniably significant and positive for the most part.
Nevertheless, some of these initiatives still fail to meet other relevant factors for the planet’s and society’s well being that are just as important to value creation as monetary results. New approaches are needed to measure human, social or cultural capital, for example.
When we fail to understand the cost and benefits of social and environmental capital, due to the lack of more complete and accurate information and metrics, the consequences often come as inefficient economic decisions and poor outcomes to the much needed human well-being and natural sustainability.
Therefore, creating better measurement systems and standardized metrics would give a deeper insight into social and environmental costs and benefits, shaping decision making towards developing a more sustainable economy and a healthier society.
In other words, we need to measure progress in a more comprehensive way. Companies and investors should reflect human and environmental capital principles in their business model as an essential part of their value. The market needs to shift from purely creating wealth, to creating wealth and wellbeing.
You can’t manage what you don’t measure
Understanding the value of sustainability through the development of better metrics is just the beginning; managing what we find is the necessary next step, but it will take time to improve and integrate them in a more standirez manner.
Willingness and cooperation from all sides of the economic arena is essential, from companies to investors, institutions and governments, efforts need to be put onto finding new ways to track and measure impacts on sustainability and social well-being in order to first understand and then assess the necessary policies, sanctions or incentives.
In DoGood we believe that you can’t manage what you don’t measure, and we are convinced of the need to understand and manage sustainability inside an organization for the correct and efficient functioning of the business. We alone cannot achieve the substantial changes necessary, but we do work on the basis of collaboration, transparency and accuracy in order to bring light to sustainable actions.
In this regard, it is essential to our work to promote good corporate governance, meaning that the processes of disclosure and transparency are followed so as to provide regulators and shareholders as well as the general public with precise and accurate information about the financial, operational and other aspects of the company, including a more accurate definition of the ESG performance.
We have developed a corporate government tool that helps establish ESG impact quotas for employees in regards to the sustainability strategy of the company. Through our SaaS technology we are able to activate and track employees’ impact, creating engagement that translates into improved ESG metrics, reputational value and an overall positive impact for the environment and society.
If you want to know more about how we work to create a positive social and environmental impact, click here