“You can’t manage anything you can’t measure.”
It’s an oft repeated truism and a mantra of business schools around the world - but when it comes to sustainability reporting, this familiar phrase only tells a fraction of the story.
Delegates attending day one of the 2021 European SDG Summit heard Giulia Genuardi, Head of Sustainable Planning at the Italian energy giant Enel, use the phrase to set up a discussion that drilled deep into the complexities of reporting on business progress towards sustainability targets.
There was broad agreement that clearly defined ESG reporting standards will enable businesses to meet their own sustainability targets, fulfil the demands of investors and shareholders, and act as good corporate citizens in the communities and societies they serve.
Defining metrics for sustainability
But, there’s a problem; and it goes to the heart of the climate and biodiversity crisis, according to Hakan Lucius, Head of Corporate Sustainability at the European Investment Bank. “Let’s be very clear”, he said, “sustainability reporting is so different to financial reporting because first of all, what is your unit of measurement?”
It’s a question that highlights the fact that sustainability reporting is still in its infancy, unlike traditional accounting.
“Measuring climate is one thing,” said Lucius, “measuring air pollution is another thing. What's the unit of your assets, about people being stakeholders? It’s multi-dimensional and that makes it inherently difficult”, he told delegates.
The European Financial Reporting Advisory Group (EFRAG) is working to develop a framework for sustainability reporting that will provide answers to many of the questions above. EFRAG’s aim is to deliver a consistent set of metrics against which companies can measure progress on sustainability. In April 2021, the European Union issued a proposal for a Corporate Sustainability Reporting Directive (CSRD) which will require all companies falling within its scope to issue audited, machine readable sustainability reports.