What a social business sustainability index is and why we need one

Companies that report on sustainability and their efforts toward it should be applauded because it could augur the beginnings of change within a corporation’s behaviour. But it is comical that anyone should take them seriously enough to give them awards. 

Anyone knows that the executives running most companies are in denial about the negative environmental consequences – as economists would depict them, the “externalities” – created by their actions. Most corporate decision makers would be unhappy for those consequences of their decisions to be made public.

And telling porkies on paper will always be cheaper than confessing to and fixing a significant externality within any reasonable time frame. Shareholders are complicit in such arrangements.

For such reasons, it is comical that anyone or any commercial body, such as Australia’s ACCA   should take seriously enough the exercise of sustainability reporting to mount an annual exercise to judge the large corporations that produce them. Even if presented as fact, it is an award for fiction in a corporate context. It is the reward of a fig leaf of respectability, no matter how noble and highly qualified the judges might sound, or how seriously some might take themselves in that role.

The problem with rewarding the status quo is that we end up with more status quo. So if we are to reframe the idea of reporting, we must also redefine what we expect and the framework that can deliver what we need to save the environment and ward off climate change.

I’ve stated elsewhere that quite apart from its fictional quotient and its failure to deliver any real change, the substantial problems with sustainability reporting are that not enough organisations are yet compelled to do it, too few would know how, and that the reports that get published answer questions no one is asking.

Yet pretty much all companies are vulnerable on their environmental records and the only way we will get a better result is by holding them more effectively to account.

Banks lend money to businesses that despoil the environment daily in their acts of creation and distribution, and insurers and superannuation funds invest in them. Those two acts, while creating the sometime miracle that is capitalism, are reliably propelling us towards the precipice of potentially catastrophic climate change. There is no sign of them stopping any time soon. All are greedy for growth, and their stockholders for its financial reward.

What we need is a better way of unpicking the interlocking system of actions such that each of the respective players on the stage can better reflect on how, or whether, to play their own part in preventing climate disaster.

The kind of framework that best delivers change will likely not be driven by government but constructed through activism and community pressure. It is a web-driven social business sustainability index.

In a social sustainability index, it is the concerned consumer that asks the questions of what those companies are doing for the environment in real, practical ways. Those questions will typically be guided by the best informed among them, and those best informed may be industry specialists with an insight into the impacts of the businesses in their sector, or they may be academics studying an industry. Alternatively, they may just be those who’ve studied and read widely enough to ask the sort of questions most companies will shy away from answering because of the negative consequences for reputation and profitability they create.

In a social sustainability index, it is the public that identifies the companies it thinks should be on its register. Community opinion then not only begins to drive the reputation of the organisation from without based on the plausibility its responses, it also identifies moles within who in turn are going to name the executives making the lousy decisions that foul up the planet for everyone else. And it identifies their bosses.

The index’s community then solicits those directors’ and executives’ email addresses so they may be held to account personally for their rotten decisions. It identifies their suppliers and customers so that they may also be held up for scrutiny. It creates ripples of discomfort that work their way up and down the supply chain of each industry it touches until one of its players breaks ranks and effects the changes that affect the dynamic of the competition within the chain.

The index’s community engages the blogosphere, Facebook users and the mainstream media in the pursuit of miscreant organisations and executives. Its questions give rise to other, better, more sharply honed platforms of interrogation that no organisation will be able to shrug off comfortably without serious, demonstrable, credible demonstrations of change within.

Part of that change will the reward experienced for and motivation of new behaviour toward sustainability within the organisation, because, as any good management student knows, you get what you measure and what you reward.

And that is how we drive change, because the payoff in reputation of failing to act when the public is so clearly asking your organisation to do so will be considerable, both in financial reward, or loss, and in the attraction of talented individuals who wish to work for organisations motivated to do the right thing.

One might hope that knowing such an outcome as a socially constructed business sustainability index is an inevitability because its stirrings are here and now in the words you are reading (and probably others) would be enough to precipitate change within some of our leading organisations. But don’t hold your breath.

Nevertheless, if not educated in the finer arts of sustainability management, the intelligent segment of the consuming population is now educated enough to know that their purchases have consequences for the environment. Many, if not all, are concerned about those effects.

These are the most important customers of all because their decisions and attitudes influence others. The withdrawal of their custom can have disastrous consequences for those they would buy from. And when a company loses a sale, it might be a long time until it shows up in the accounts and very much longer before it finds out why.

We must identify which companies we most want to haul over the coals and get to work on building the index. It contains the future of the businesses we know.

This post first appeared at Accelerated Sustainability.