Rather than Building Sustainable Cities, Let's Focus on Building Successful Cities Instead.3/9/2017 Cities have a unique role in sustainability where leadership requires a combination of business, policy, civil society, and citizenry, all working towards goals that benefit all stakeholders. Leadership in cities must benefit all, and the first step to cultivate leadership and working towards common goals is transparency and creating a dialogue. But are these enough to promote change in the world's cities?
There have been several pioneering cities that have adopted transparency through sustainability reporting in recent years. Several have produced sustainability reports over the past few years, such as Amsterdam, Atlanta, Chicago, Dublin, Melbourne, Warsaw, and many others around the world. While reporting on sustainability is important, getting access to an adequate amount and quality of information has been extremely difficult. Much like sustainable value chains, it has been challenging for cities to leverage company-level sustainability information to help drive policy, and their city sustainability reports often reflect a future-oriented commitment based on policies and guidelines, rather than hard data from companies. This has been due to three primary barriers. First, reporting and disclosure is often not leveraged by companies (especially smaller ones), and even when the disclosure is available, it's available in static reports where the data cannot be easily extracted. So cities have been left to build their own assessments based on more generalized data, questionnaires, surveys, and algorithms. Lastly, cities (much like companies) have treated company-level sustainability disclosures as an accounting problem rather than a data problem, leading to a complicated and expensive exercise that looks to the past and inhibits innovation rather than enabling it. In addition to getting access to the right data, promoting dialogue is equally important. There are several active networks such as ICLEI, C40, and others that create forums where cities to learn and share best practices, trends in sustainanabilty, and galvanize efforts that require cities to act as a group. So we are off to a very good start, but more must be done. Cities are like nodes in a network, where activities within the cities are amplified throughout the larger network. So leadership is the currency of sustainable innovation in the world's cities. If the role of a city is to lead, then we must start with a different kind of leadership in disclosure - using a data-driven, bottom-up approach, rather than a top-down policy-led approach. Start with ensuring disclosure, then focus on the data. Ron Conway, the renowned (and somewhat controversial) investor and philanthropist once said "Technology does more than delight, entertain, and make our lives more convenient; it's also an agent for social good." I couldn't agree more, and cities should learn leverage the economies of scale that shared sustainability frameworks and standards provide. These are useful because they standardize the data being produced, so solutions can be built on top of them to collect, integrate, and learn from this data. Technology is the indispensable tool that is required to make all of this work. Rather than reporting on a city or program level, cities should lead by promoting disclosure at the company level, and leveraging technology to aggregate the information to make it available to the public. While it's important to choose the right standard, it's much more important that all companies are using the same reporting standards to ensure comparability so the data can be aggregated and analyzed. Once you have the information, you need to be able to manage it - to aggregate and analyze the information in a coherent, shareable way. This doesn't mean using spreadsheets - this means utilizing data-driven solutions that requires technology to provide insight beyond the sustainability practitioner. Otherwise, you are only "preaching to the choir" and the learning from your city's data will not be transferred to your city's leadership, let alone to your citizenry or to other cities. And without learning, there is no progress. Embrace the bottom-up, data-driven approach to sustainability to build more prosperous, innovative cities. Rather than creating new sustainability programs, focus on using sustainability data - derived from tried-and-true standards and global frameworks - to develop new programs informed by trusted sustainability data. Don't strive to be a "sustainable city", be a successful city because you incorporate sustainability information into all your policies, lead by promoting disclosure in your stakeholders, and instill innovation by your approach to shared information. This shouldn't be about chasing yet another sustainability label or award, it should be about creating a better city based on shared values, and shared value. So let's stop trying to build "sustainable cities" and start building successful cities instead, by using sustainability data just like any other information we use to develop policy, inspire constituents, or address stakeholder concerns. Treating sustainability like a special case, silo'd away from the mainstream, will only keep us preaching to ourselves rather than helping our cities - and others - from building a better society and world.
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Despite the dozens of standards, frameworks, questionnaires, surveys, and approaches, investors still don't have the information they need. Despite decades of disclosures and an ever-growing number of sustainability disclosures, standards, frameworks, surveys, and questionnaires (not to mention consultants), the investment community needs more. As Jean Case of the Case Foundation put it, "For impact investing to move from niche to mainstream, it needs a fully formed, robust ecosystem driven by transparent data". I couldn’t agree more - and I believe this is the single greatest barrier to successful impact investment.
That's not to say the data isn't there. Over the years there have been some admirable approaches to disclosures (those of you with acronymophobia may want to look away) such as Global Reporting Initiative (GRI) (a full disclosure of my own: I was once the CEO of the GRI), The Sustainability Accounting Standards Board (SASB), CDP, and many others. There are even more approaches to bringing these general guidelines into alignment with investors, often through principles-based approaches such as Principles for Responsible Investment (PRI), or consortium approaches such as the Global Impact Investing Network (GIIN). Today, more targeted efforts are underway, such as the Task Force on Climate Related Disclosures (TCFD) led by FSB, and attempts to integrate all of these efforts to increase corporate value (for companies and their investors), such as the IIRC and various efforts focused on the natural, social, and human capitals that support and advance business such as the Natural Capital Coalition (NCC) and work by the WBCSD. There are, of course, many more organizations chipping away at the business of disclosure - so why aren't investors able to get the information they need? Why do they feel (79% of them, according to PwC) that they aren't getting quality data? Because there is too much data, and not enough intelligence in the market. There are too many attempts at disclosure, too many standards, too many reports, too many questionnaires and surveys. There are too many frameworks trying to carve out a new niche in disclosure when the real challenge is translating the data that already exists into meaningful information the market can use. I'm not talking about sustainability reports, or investor questionnaires or surveys. And I'm certainly not talking about impact criteria baked into investment documents or the limited and unlikely inclusion of sustainability criteria into market regulators or exchanges. Though all of these things are important efforts, we are ignoring the most important resource that we already have: data. Arthur Conan Doyle once said, "It is a capital mistake to theorize before one has data". Yet that is what we do all the time - we decide on impact criteria (or policy, or business strategy) without the right set of information - often deciding on criteria before understanding if our portfolio companies even have the information we need, or have the capacity to get it for us (the Achilles heel of value chains). So we ask for more data, more information, more surveys, more reports. Yet a critical disconnect remains between what our portfolio companies produce, and what we want to know. That's why decades of disclosure has failed to close the information gap. It's important to remember that data is largely worthless; it only becomes valuable when combined with other data - and it is here where we are failing. A sustainability report out of context of the rest of the organization's performance (e.g., financial) is of little value. Data on CO2 emissions without an analysis of risks and/or reduction/abatement costs is incomplete and inspires inaction. To know a fact is one thing, but to be able to take action one must have enough facts to work with. And our silo'd thinking on sustainability issues, we have all the facts, but not enough to make them relevant to investors. Over the years, I've been amazed at the sheer amount of corporate sustainability data out there, and even more amazed at how little we leverage it. We just produce more. As CEO of the Global Reporting Initiative, still the primary way this kind of data is created and communicated around the world, I felt that the standard setters had an obligation to promote transparency to inform and engage, rather than just report. But the industry continues to focus more on a physical report rather than liberating the information within to inform, and is too often only valuable to sustainability practitioners, consultants, and those we hire to help us to quantify and verify our facts, the accounting firms. What's missing from this group are the people who know how to combine information to give investors what we are asking for: not more information, but relevant information. Through the lens of impact investment, we must start with the data, not our impact statements. We must first look to our portfolio, assess what information is available, what could be made available, and how it could be leveraged to inform our impact investment strategy. We must choose among a variety of standard disclosures to ensure we have a consolidated approach where data can be compared, analyzed, and - most importantly - integrated with other information to inform our decisions. The flow of information from our portfolios needs to be uniform, and it needs to inform. Choosing the right strategy based on the data available is a great place to start. Only then can we design impact portfolios that work. |
Michael MeehanMichael is the former CEO of the Global Reporting Initiative, Carbonetworks, and other sustainability organizations. He has been an advisor and CEO in sustainability for almost 20 years, and writes about technology, sustainability, and social innovation. Archives
March 2017
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