Global Reporting Framework 433
Balanced scorecard 435
other ratings and metrics 436
Label types 440
reveal rating system 443
426
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s we learned in the discussion of frameworks in Chapter з (especially for LCA and SROI), not only are there no standards of measuring sustainability progress, but also where there are mechanisms in development, the data and process are quite difficult to decipher (as with a deep Life Cycle Assessment).
This leaves developers at a loss as to how to weigh alternatives, and it leaves customers at a loss as to how to choose between them. In addition, it makes it difficult for organizations to track their progress.
Where the best measures exist so far is in the Socially Responsible Investing (SRI) sector. SRI funds have been around since the 1970s, and they measure publically-traded companies on their activities and investments in order to choose those whose values fit the fund investors’. As such, there are many different funds that measure and rate companies along a different set of values.
For example, some of the earliest SRI funds started as a way for religious investors to put their money to work in the service of their religious values. These funds might not invest in companies that support gambling, alcohol, or tobacco in their products and services or in their own investments. These funds exist in many religious communities, although the largest SRI funds have no particular religious affiliation.
The Calvert family of funds (with over 30 different varieties) represents some of the oldest SRI funds, and it screens companies on the basis of issues such as labor policy, corporate governance and transparency, product safety, human rights, weapons manufacturing, and so on. Calvert doesn’t invest in companies that don’t meet these baseline criteria. On top of these, however, it offers funds that focus on a variety of other criteria, such as alternative energy and global development. Other well – known funds from organizations like
Highwater,1 Domini, Parnassus, and Morn – ingstar offer different mixes of criteria. The growth in this investment approach has even spawned a backlash (though a small one). The Vice Fund purposely invests in everything that most SRIs won’t invest in, such as gambling, pornography, weapons, and so on.[72] [73]
The point of this discussion is to show the variety of issues and measurements used by SRIs (the most sophisticated measurers so far).[74] These funds compile their list of investment companies in two ways: the first is to screen companies for certain behaviors. These might be positive screens (such as having an equal opportunity hiring program) or negative ones (such as investing in or owning nuclear power plants). These screens are binary: companies are either in or out based on whether they pass the screen. The second mechanism these funds
use are ratings on various other criteria. Companies might get a high, medium, or low, or an SRI might apply a point system that reflects the degree of activity for a particular criteria.[75]
In the end, all of these funds develop a list of approved companies to invest in, and only then do these funds research the financial performance of those left on the list to decide which to include in their portfolio. (SRI funds are still looking for the biggest financial returns they can get, just not from companies that actively work against their values.)
A last issue to acknowledge in the SRI investment world is one of the enduring controversies. Some investors don’t ever want to invest in a company doing “bad” things (from their perspective). However, others acknowledge the influence they can have by investing in (and, thereby, rewarding) those companies that are making the most changes in their industry. This reward, they feel, sends a more powerful message to the entire industry to change rather than alienating them altogether. For example, many sustainably-minded investors would never want their money to be invested in McDonald’s because they feel it is the epitome of an unsustainable, unhealthy business model. (As a result, McDonald’s doesn’t show up in many SRI funds.) Others, however, feel that by investing in McDonald’s, a company that has changed more than probably any of its competitors in terms of environmental, human rights, and animal rights issues, they are rewarding the very behavior they want to see and creating pressure for other companies to follow suit.
The SRI approach illustrates a possible path for organizations to develop their own mechanism for measuring progress. They can set positive and negative screens for everything from product or service category (safety, usability, meaning, etc.) to material and energy use to partner strategies. Each organization needs to create its own set of screens, based on its on values, however. There are also many other things that can be measured and rated, such as material and energy impact, toxicity, quality, durability, recyclability, and so on. They can even adopt the criteria (screens, ratings, and all) from some of the most popular SRI funds as a start. For public companies, it would be smart to assess which funds they already qualify for (or not).
It would be great if someone created a standard that we could all refer to and measure against. It’s probably not realistic, however, at least for the social criteria. Life cycle assessments are an attempt to do this for the material and energy flows throughout a product or service’s life cycle, but because values are so different for individuals (not to mention organizations), SRIs may be the closest we can get to standards on the social side.
There are a few attempts to create scorecards for different subsets of these issues. Some are industry specific (like the Pharos measurement tool for building products), while others try to be more universal.
Most of the existing popular scorecards were developed before sustainability issues became as popular as they are today. Some, like the Balanced Scorecard, developed in the 1990s, integrate some human capital issues with the traditional financial capital issues. But none of these is complete.
