New Metrics allow businesses to quantify previously-ignored risks, costs and revenue potential associated with sustainability impacts. Smart executives use #NewMetrics to understand the full picture of their companies’ interactions with the rest of the world, improve stakeholder relationships, and steer innovation toward the products and services of the future.
The field has evolved steadily and produced many significant milestones over the past decade. Below are three big trends businesses need to be on top of if they want to gain early-mover advantages and maximize the respective upside that awaits.
Nº 1: The Transition from Mono-Capitalism to Multi-Capitalism is Happening Now
After several hundred years of focusing solely on financial capital to calculate value and make executive decisions, the economy is starting to wake up to the fact that traditional mono-capitalism has critical limitations – above all, the limitation of not accounting for and managing other crucial capitals (including human, social, relationship, intellectual and natural capital), and therefore running the risk of throwing them, along with the broader prosperity that depends on them, out of whack.The economy is starting to wake up to the fact that traditional mono-capitalism has critical limitations. #NewMetrics Click To Tweet
Just last month, in an influential piece published by Thomson Reuters, the International Integrated Reporting Council (IIRC) and Reporting 3.0 announced the beginning of a collaboration on a new white paper on multi-capitalism, with the goal of formalizing a deep understanding of the implications of a multi-capitalist approach to running a business. This comes on the shoulders of multiple excellent existing resources, including IIRC’s International Integrated Reporting Framework, Reporting 3.0’s Blueprints for Integrated Accounting and Integral Business Models, the MultiCapital Scorecard, the Future-Fit Business Benchmark, as well as earlier pioneer work by John Elkington, among others.
Early adopters of multi-capitalism stand to build competitive advantages on at least three important levels: first, by developing a more complete understanding of how organizations can create (and destroy) value and how to avoid risks due to the interactions of all capitals; second, by getting an early start on adjusting or transforming business models to future-proof with respect to all capitals; and third, by moving quickly to cultivate leaders who approach executive decisions with an integrated, multi-capitalist mindset and who can represent the company well in front of multi-capitalist investors, customers and other stakeholders. This may seem far-fetched to some, but companies such as Unilever, Procter & Gamble, Danone, IKEA, Ford, eBay and Target, among others, are already taking specific steps to change their business models with this thinking in mind. Add to that disruptors-at-scale a la Tesla, the rapidly growing B Corp community and the inherent multi-capitalist nature of the UN Sustainable Development Goals, and the immediacy of this paradigm shift becomes apparent.
Nº 2: More and More Intangibles are Being Studied, Quantified and Managed Better
It is now widely understood and accepted that over 85% of the current market value of S&P 500 companies – 87%, per the latest research – consists of intangible assets. That’s why it comes as no surprise that the last few years have seen a proliferation of ambitious efforts to define, study, measure and manage multiple types of intangible value on micro and macro levels alike – especially management-critical intangibles such as the benefits of purpose, the value of individual and societal well-being in a variety of contexts, the value of employee engagement and human capital, the benefits and risks of taking a stand on hot-button social and political issues, as well as various trade-offs between the upside and downside of artificial intelligence and automation. Three current sub-trends are particularly noteworthy and evolving almost by the day.
First, we’re seeing critical mass and lots of momentum around harmonizing approaches to measuring social and human capital. In many ways, this is culminating in the newly-launched Social and Human Capital Coalition, as well as the Social and Human Capital Protocol the Coalition is developing. The founding team, with WBCSD at the helm, saw that there was little consensus on how companies should measure and value social and human capital, which resulted in companies under-valuing and under-investing in the social and human capital they depend on. The end goal, in their words, is to start ‘a movement to help companies integrate the importance of healthy, happy people with “planet” and “profit” as key drivers of effective decision-making and consequent sustainable growth.’
Second, we’re in the midst of a wide range of research project studying the benefits and risks of companies’ taking a stand on important social and political issues of the day. In one such analysis, RF|Binder looked at the stock impact and duration of news cycle surrounding brands that were thrust into the public eye following the Parkland shooting. The study found that short-term stock impact faded when the spike in media interest leveled out. Brands that did take a stand—either for or against gun control—saw a short spike in conversation, most of which normalized in just over a week. At the same time, additional research indicates that brand affinity increases over time for brands that do take a stand on social issues.
Third, we’re witnessing the emergence of the ‘science of well-being.’ It may not be fully recognized as its own field yet, but it is coming together and it is on a quest to evaluate a wide range of impacts that businesses are having on human health and well-being. Some of the main ‘branches’ are studying the impacts of technology on well-being and mental health (see here and here), the impacts of spending time outdoors vs. indoors, the impacts of corporate culture and norms on employee lives, as well as the impacts of ‘greening’ office buildings and urban environments.
Nº 3: Blockchain Applications are Creating Entirely New Types of Value and Collaboration Opportunities
Blockchain is all the rage these days, and justifiably so. Among its numerous applications are some that enable businesses to create entirely new forms of value by creating new value exchange networks that were either impossible or too costly previously. One great example is SolarCoin – a digital currency used as a global rewards program for solar electricity generation. The currency can be claimed by (and is awarded to, after verification) individuals with solar-powered homes or commercial solar electricity producers, thus serving as an additional incentive for solar electricity generation. To make its currency valuable, SolarCoin is also working on growing a community of supporters who are willing to exchange value for ‘solarcoins’ – and thus an entirely new value-creation-and-exchange network is born.
Another promising application is being tested by The Plastic Bank, which incentivizes people to bring plastic waste to recycling collection areas around the world, in return for reimbursement via digital tokens into a bank account accessible by smartphone (which people can then exchange for goods such as food, water, phone minutes and more). By tracking recyclables and the tokens people receive on the blockchain, The Plastic Bank enables a secure, cashless method for financial inclusion – important factors in places where traditional banking is difficult or not accessible, or where cash puts individuals at risk for robbery. Working with Cognition Foundry and IBM to implement blockchain, The Plastic Bank is preparing to scale its solution to meet growing demands and secure the transactions that run on it.