The World Economic Forum (WEF) and top financial firms released a set of universal key metrics for companies to use when reporting on their environmental, social and governance (ESG) impact – regardless of their industry or location.
The metrics are organised around four main themes of people, planet, prosperity and principles – or how it treats employees, the environment, its impact on communities and its governance standards, the WEF said in a statement on Tuesday.
"The social unrest, economic inequalities and racial injustice exacerbated by the Covid-19 pandemic has accelerated demand from business, governments, standards bodies and NGOs for comprehensive, globally accepted corporate reporting systems," the forum said at the fourth Sustainable Development Impact Summit, within the United Nations General Assembly annual meeting.
With the pandemic causing disruption to so many industries, investors are increasingly putting their money into companies committed to ESG priorities that uphold transparency, diversity and sustainability.
The metrics address a gap in unified reporting on non-financial issues. While companies have formal rules to follow for reporting on financial indicators like revenue or cash flow, there is little formal agreement on how to measure the impact of ESG issues.
To fill this gap, the WEF released the ESG metrics and disclosures that it developed in collaboration with Bank of America, Deloitte, EY, KPMG and PwC in a report titled Measuring Stakeholder Capitalism.
These are the result of "an open consultation process" with corporates, investors, standard-setters, NGOs and international organisations, the WEF said.
"The metrics are designed to provide a common set of existing disclosures that lead towards a coherent and comprehensive global corporate reporting system," it said.
Companies see the importance of social, climate and other non-financial factors as critical to their long-term viability and success, according to the WEF.
Some 86 per cent of executives surveyed by the forum agreed that reporting on a set of universal ESG disclosures is important and would be useful for financial markets and the economy, according to the statement.
The WEF urged companies to report on the full set of metrics in their mainstream reporting.
The first metric reflects a company’s equity and treatment of employees. This includes diversity reporting, wage gaps and health and safety.
The second reflects a company’s dependency and impact on the environment. This includes greenhouse gas emissions, land protection and water use.
The third metric shows how a company affects the financial well-being of its community. Factors include employment, wealth generation, taxes paid and research and development investment.
The final metric on governance shows a company’s purpose, strategy and accountability. This includes criteria measuring risk and ethical behaviour.
The WEF urged companies to take a “disclose or explain” approach when certain metrics are not feasible, irrelevant, or difficult to implement immediately. It also recommends that each company report on what it deems material to its business and stakeholders.
This year's Sustainable Development Impact Summit has gathered 1,200 leaders under the theme of "Realising a Great Reset for Sustainable Development".
Speaking at the summit, the chief executive of consumer goods giant Unilever stressed the need for a broader set of metrics in assessing performance, calling for “21st Century tools for a 21st Century environment”.
“Our main measures of success remain solely financial,” Alan Jope said “It’s bizarre and it's outdated.”