• Tom Brown, Partner |
2 min read

The summer of 2020 has been strange for us all and difficult for many. Hospitality and businesses have re-opened their doors, but your morning cappuccino comes with a face covering and a healthy dollop of hand sanitiser. The nation’s favourite sporting events have re-started, but they take place to the echo of empty stadiums. For many, life is disrupted and uncertain. This is the so-called ‘new reality’.

A cornerstone of this new reality is an added focus on the ESG agenda. Supply chains have become more localised, treatment of employees is under scrutiny like never before, and the need to ‘grow back better’ is a once in a generation opportunity. Yes, COVID may have re-balanced and re-focused ESG, but it’s long been a consideration for many businesses.

77 percent of CEOs believe the primary objective of their organisation is purpose or societal driven. Perhaps even more crucially, this concern is shared by their customers with 1/3 of consumers now choosing to buy brands based on their social or environmental impact, according to Unilever.

However, the key question in all of this is how do companies measure and report ESG impact? Well, this week the World Economic Forum – in collaboration with KPMG and the other Big 4 - released a set of universal ESG metrics and disclosures that companies can report on, regardless of their industry or region, to help measure stakeholder capitalism.

The WEF recommendations are welcomed by companies and investors alike because they cut through the “alphabet soup” of hundreds of potential frameworks, standards and data points and provide clarity and simplicity. The WEF ESG recommendations require a core set of 21 metrics and disclosures all drawn from existing standards and already adopted by many companies.

Organised around four pillars, the identified metrics draw on existing standards and measures, enabling companies to report against non-financial aspects of their business in a way that’s transparent and comparable.

The pillars focus on:

  1. People – reflecting a company’s treatment of employees
  2. Planet – looking at a company’s dependency and impact on the environment
  3. Prosperity – how a company’s financial wellbeing affects the financial wellbeing of its community
  4. Principles of Governance – a company’s purpose and how it manages risk and ethical behaviour

So, why does any of this matter? Well, ultimately, for businesses to create long-term, sustainable prosperity for all stakeholders, companies need to act now on the big challenges facing society as expressed in the UN SDGs. Having companies report on a common set of ESG-focused metrics will help ensure that businesses can collectively make a real difference where it counts most.

The ESG agenda isn’t going away. For businesses here in the UK and right across the world, robust non-financial reporting is a crucial element of the systemic economic and social reform needed to address and tackle head-on issues like climate change and social inclusion and fairness.

2020 will be remembered as a crossroads for ESG. As a society, we all need to make sure we take the right turn.

Read the full report ‘Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation’.