- The new metrics provide transparency and consistency when reporting ESG goals.
- Some companies have already signed up to use the new metrics.
- The metrics represent a milestone for stakeholder capitalism.
The World Economic Forum has launched a new set of metrics that will lead to a sea-change in the way companies are run and evaluated, according to its executive chairman Klaus Schwab.
The 21 metrics - which are designed to be included in a company's regular financial updates - will tell investors, shareholders, consumers and employees how a company is doing on issues such as climate change, biodiversity, workplace diversity and good governance.
They will also help firms consistently track their contribution towards the Sustainable Development Goals.
The metrics are detailed in a new report from the Forum: Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation
The heads of the world's four biggest accountancy firms were present at the report's launch during the Sustainable Development Impact Summit, and have also worked together to develop the new standards during a six month consultation.
Brian Moynihan, Chairman and CEO of Bank of America said the metrics will help align capitalism with environmentalism, and may also influence how investment decisions are made.
"The companies who are doing best [with ESG] - and making good progress towards their goals - should attract the most investors," he said, adding that this increased clarity would benefit companies and lenders alike.
Bob Moritz, Global Chairman, PwC, agreed that the metrics will help people make decisions, whether they are investors, employees, lenders or consumers, allowing them to assess a company's progress towards their ESG targets.
"It's getting the right information into people's hands to make judgements and take action," he explained. "In order to do that we need to have consistency across the world."
The new metrics will simultaneously benefit businesses and hold them to account.
Punit Renjen, Global CEO of Deloitte, says it's proven that businesses who focus on stakeholders and the planet do better over the long term.
"It's not only the right thing to do," he said, "it is also the right business thing to do."
Another benefit for firms may be that it helps them to attract the best talent.
Companies who use this report will be able to tell their employees they are walking the talk on environmental issues, meaning that they will also attract the brightest talent, said Bill Thomas, Global Chairman and CEO of KPMG.
The need for consistency
The project was first launched at the World Economic Forum Annual Meeting 2020 in Davos as companies agreed on the need to find a way to disclose non-financial factors to investors and stakeholders.
The whole concept was not to create new metrics, but to take all the existing frameworks and information, and consolidate them into 21 core metrics which we feel incorporates everything that is already out there, said Carmine Di Sibio, Global Chairman and CEO of EY.
The metrics are grouped around four key pillars as seen below.
Investors, Stock Exchanges, regulators and NGOs have all contributed to the consultation, although companies themselves - and members of the Forum's International Business Council in particular - have played the greatest role.
It is hoped that the metrics will be implemented in next year's financial results. Some IBC companies have already signed up to start disclosing information. Momentum should build, encouraging other firms to join in, so that these metrics become the new normal of capitalism.