In addition to measuring impact, business need a clear and easy methodology for transformation that focuses on key structures and processes towards sustainability. We asked the impact measurement expert Justin Lyle to explain why the Public Value Self-Assessment Tool© is useful to companies when they already need to comply with so many existing performance indicators.
When thinking about the role of business in an increasingly sustainable economy, we often fixate on the topic of measuring impact. Understanding measuring impact as assessing and reporting the effects of business activities on people and the planet, we often face a plethora of impact management frameworks. This creates significant complexity that can be overwhelming for companies looking to transition to sustainability.
By contrast, the nine Public Value Principles© and the Public Value Self-Assessment Tool© for business offer a simple methodology for transformation, focusing on key structures and processes companies need to implement to become sustainable.
A Plethora of Frameworks
The Sustainable Development Goals, the IRIS+ catalogue of indicators, and the Impact Management Project (IMP) have boosted coherence in investor and business thinking about how to define and measure social and environmental impact. Still, impact management practice remains fragmented, with different investors and companies using different frameworks.
Voluntary sustainability standard-setters such as the Global Reporting Initiative have created extensive environmental, social and governance (ESG) or Sustainability reporting standards that companies can choose to adopt. Meanwhile, the Sustainability Accounting Standards Board has created voluntary sustainability standards for specific industries, focusing on business impacts on the planet that may directly affect the value of the company or investment.
These efforts have gained momentum recently, as the IFRS, the body behind the globally recognised international accounting standards (IFRS Standards) which are legally binding in many jurisdictions, is now revising its statues with a view to issuing binding sustainability accounting standards in consultation with those voluntary standard-setters, and drawing on the earlier work of the Task Force on Climate-related Financial Disclosures (TCFD). Unlike the broader voluntary standards, the IFRS Sustainability standards will focus initially at least only on climate-related effects which have a direct bearing on the company’s own economic value. The standards will not encompass all environmental, social and governance-related impacts of the company.
The nine Public Value Principles© and the Public Value Self-Assessment Tool© for business offer a simple methodology for transformation towards sustainability
Measuring Impact Independently
As companies and asset managers start to align with best practices and performance standards, independent verification of reported impacts is also set to become increasingly commonplace. There is also a move towards independent verification of impact reported by companies. The Operating Principles for Impact Management (OPIM), launched in 2019 and adopted by more than 100 investor signatories, explicitly require such verification, and the four major US accounting firms have also introduced sustainability and impact assurance services.
However, the obsession with measuring and reporting sustainability results can obscure both the deep transformation a company may need to undertake to become sustainable, and the systemic sustainability challenges a company may be involved with.
As this Harvard Business Review article highlights, we often draw the wrong boundaries around the problems we seek to address, so that we incentivise companies to side-step the core challenge. The author gives the example of the US government’s efforts in the 1970s to increase fuel-efficiency standards for passenger vehicles, which led car manufacturers to shift to producing fewer cars and more SUVs and Trucks, as these faced less stringent fuel efficiency standards. In this way, the lack of a deep transformation in the company, with the focus instead on reporting results, can lead to piecemeal or cynical approaches that fail to address the key issue.
Why a Public Value Self-Assessment Tool
The Public Value Principle© and Public Value Self-Assessment Tool© for business provide a uniquely clear and light approach for the transformation to sustainability and long-term economic value creation. While it is fully compatible with traditional impact measurement and reporting approaches, the public value approach considers society and the environment as active stakeholders of any company, and focuses on the key structures and processes a company needs to implement to become sustainable and be perceived as such.