In the world of social enterprise and impact investing, perhaps the most universally accepted guide is the UN’s Sustainable Development Goals. Introduced in 2015, the 17 inter-connected goals now form an organizing principle for many entrepreneurs, as well as investors.
At the same time, achieving those goals is going to cost trillions, literally, and won’t happen without heavy participation by the private sector. And to monitor and track how successful all that activity is, you also need consistent benchmarks for measuring and comparing just how all those companies are doing.
That’s where the World Benchmarking Alliance comes in. Recently announced at the United Nations General Assembly, it will develop free, publicly available benchmarks which will rank companies on their contributions to achieving the SDGs. With that in hand, everyone from consumers and investors to governments will have a comprehensive tool for deciding where to spend their money, allocate their investments or direct their policy and advocacy efforts.
Ultimately, the goal is to clarify what society expects from business and how best companies can meet those expectations. “Benchmark methodologies translate societal expectations into metrics, providing companies with a clear path forward,” says Mark Wilson, group chief executive of Aviva, a multinational insurance company and one of the members of the Alliance. Others include the nonprofit Index Initiativeand the United Nations Foundation. Funding is also coming from the governments of the Netherlands, United Kingdom and Denmark.
Plus, the ranking could inspire a healthy competition among businesses and create a market that rewards corporate leadership. “CEOS, especially in the U.S., are a competitive bunch of people,” says Wilson. “You want to appeal to that competitive spirit, so they and their shareholders take sustainability seriously.”
Of course, pinpointing all the important factors that need to be taken into account involves a lengthy process—consulting with people in government, academia, sustainability and business. The announcement was preceded by a year of consultations with more than 10,000 experts.
Some examples of factors in various benchmarks: For the SDG category of food and agriculture, they would include whether companies are producing food in an environmentally friendly way and ensuring acceptable livelihoods for farmers. For climate and energy, they would show to what extent companies in high carbon-emitting industries are contributing to the Paris Agreement.
The aim is to develop all the benchmarks by 2023 to assess the world’s largest 2,000 companies. The first crop, due to be published in 2020, will address food and agriculture, climate and energy digital inclusion and gender equality and empowerment.
Regulators are also important in this equation, says Wilson. That’s because their prevalent short-term thinking means they don’t generally take into account long-term risks. Thus they might introduce, say, prohibitively high capital charges that penalize investments in wind farms and, as a result, discourage sustainability efforts. So there also will be benchmarks for regulators globally. “To move the needle on a lot of problems in society, we also need to rate the regulators,” says Wilson.