As a way to help socially responsible investors better target good corporate citizens, the World Economic Forum has outlined a set of universal environmental, social, and governance, or ESG, measures.
The “stakeholder capitalism metrics,” including ESG indicators and disclosures for financial markets, investors, and society, will make benchmarking sustainable business performance easier, the Journal of Accountancy reports.
A World Economic Forum publication encouraged companies to report on the full set of metrics in their mainstream reporting and to apply their own view of dynamic materiality, or what is deemed material to its business and stakeholders.
The new reporting methodology will be based on the four Ps: People, Planet, Prosperity, and Principles of governance.
Specifically, People reflects a company’s equity and its treatment of employees, which include metrics like diversity reporting, wage gaps, and health and safety. The Planet reflects a company’s dependencies and impact on the natural environment, which include metrics like greenhouse gas emissions, land protection, and water use. Prosperity reflects how a company affects the financial well-being of its community, which includes metrics like employment and wealth generation, taxes paid, and research and development expenses. Lastly, the Principles of governance reflect a company’s purpose, strategy, and accountability, which include metrics like criteria measuring risk and ethical behavior.
“This is a unique moment in history to walk the talk and to make stakeholder capitalism measurable,” Klaus Schwab, founder and executive chairman of the World Economic Forum, said in a news release. “Having companies accepting, not only to measure but also to report on, their environmental and social responsibility will represent a sea change in economic history.”
The so-called Big Four companies, including Deloitte, PwC, EY, and KPMG, have already released ESG reporting metrics that following the World Economic Forum’s guidelines, the Financial Times reports.
“Right now, there is an alphabet soup of metrics,” Punit Renjen, Deloitte global chief executive, told the Financial Times. “It is important for us to have a common set of standards and if there is widespread adoption it will lead to a change in behavior.”
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