Sustainability Reporting Today

Sustainability Reporting Today:

 With the advent of sustainability reporting, various indicators and standards have been developed to measure and evaluate sustainability and to anchor it in corporate reporting on value creation. A sustainable commitment to stakeholder relations on an economic, social and ecological level has a proven positive impact on value creation and ultimately also on the strategic success of a company. To make this transparent, the following principles for an integrated sustainability reporting - which are to a certain degree also part of standards such as the Global Reporting Initiative, Integrated Reporting and the European Foundation for Quality Management (EFQM) - can lead the way:

 

-         Strategic Focus: Sustainability should be embedded in a company’s purpose, in its derived vision and in its strategic objectives. This forms an essential basis for a periodic corporate sustainability reporting at a strategic level.

-         Embeddedness: Not only singular projects, but the entire strategy development and revision should be communicated comprehensively to make the company’s attractiveness visible for current and future partners. It is deliberately not about retaining information to calm down stakeholders and to secure competitive advantages over competitors, but about gaining strategic stakeholders for a mutual corporate value creation process.

-         Inclusion: When different stakeholders contribute to value creation, it is crucial to also recognize these stakeholders as owners of their contributed values. This is based on an extended understanding of ownership. Here, the concept of ownership refers not only to material goods or financial resources, but also to intangible issues such as knowledge and experience. With their knowledge and experience, stakeholders provide property for a company in a broader sense. Like the financial owners, they have therefore the right to be adequately involved in processes regarding their property and to be informed accordingly.

-         Commitment: In a purely economic view, profit distribution (residual profit) primarily targets shareholders. This is also predominantly reported on. Especially because the management has to make discretionary decisions about the shareholders’ compensations, e.g. how much of the profit is being distributed and how much is being retained (pay-out-ratio). When other stakeholders, in the sense of a broader concept of ownership, contribute significantly to the corporate value creation process, these stakeholders should also be a compulsory part of the distribution of tangible and intangible values as well as receive information accordingly.

 A sustainability reporting based on these principles suggests that companies can create more values with and for stakeholders.

 Sybille Sachs

 

Humanistic Perspectives in Management

This June, the Humanistic Management Network organized a conference at the University of St. Gallen, Switzerland, with the topic “Happiness and Profit – Wellbeing as Alternative Objective Function for Business?”. This network has as its objective to promote an economic system which operates in the service of human well-being in the larger context. Out of the many ideas that one could reap at this occasion I would like to highlight the following three:  

1.      Professor Binsweanger, an economist, reminded us that the original economic theory made the comprehensive concept of utility as the goal of our dealings and not the narrow objective of the multiplication of money as has been brought to prominence in both theory and practice these past years. Such a broader understanding of utility is incompatible with both the narrowly conceived shareholder value thinking as also the notion that the gross national product accurately reflects the prosperity, much less happiness, of a society. The financial crisis and the bonus discussion have shown that narrow monetary goal conceptions lead us astray and are nefarious to our common good. This understanding is fully in line with the people for people project espoused here. http://stakeholder-peopleforpeople.blogspot.ch/

2.      Various conference contributions elucidated possibilities as to how the use of multidimensional criteria grids could create indices which reflect the utility of economic as well as ecological and social dimensions. They complement already available approaches in this direction as for example the Global Reporting Initiatives. The utility contribution of a firm or a project is thereby reflected in a more sophisticated manner then a mere monetary measurement. A considerable number of firms already today produce such common-wealth balance sheets and common-wealth reports. Such firms should in the future be privileged by their customers or by the attribution of public commissions, as they serve the common good in a more deliberate fashion. Regrettably, there were no representatives of public institution at the conference; they would, however, have a model function with the promotion of such a common good thinking.

3.      I was especially impressed by an entrepreneur (Mörkisches Landbrot – a bread bakery) who conducts a consequential stakeholder management which is rarely seen in practice. Through a systematic cultivation of the interactions with important stakeholders (for example suppliers or co-workers) he could not just attain a high degree of motivation and loyalty, but also valuable impulses for the increase of innovation and quality. Thereby his operation is also oriented towards a broad segment of the society. This understanding of value creation which he has pragmatically developed reflects to a high degree the theoretical concept which we also elucidated in our book http://tinyurl.com/8ay79k7. He would be a valuable interview partner for our new leadership project http://tinyurl.com/88qqpxy

The most valuable aspect of the conference was the orientation towards practice. The conference also showed me that there is a considerable need to bring these pragmatic approaches onto solid theoretical basis, so that they will not drift off to arbitrariness.

Edwin Rühli