Thresholds of Transformation: a Common Denominator to Transcend Incrementalism

UNRISD & r3.0 Partner to Launch Pioneering Sustainability Indicators Pilot Project

By Bill Baue & Ralph Thurm, r3.0

Last month, three independent initiatives announced plans for “convergence” toward “common” standards for sustainability reporting. What these initiatives lacked was a “common denominator,” so to speak — there was no overarching logic binding all three approaches, much less such internal coherence within any of the individual initiatives. If anything, the common thread was the general support for incremental approaches to sustainability — and ironically, sustainability is the opposite of incrementalism, as it is characterized by thresholds and tipping points that delineate sustainable from unsustainable states. In the absence of such thresholds, it is literally impossible to discern where incremental movement stands in terms of achieving sustainability.

This month, the United Nations Research Institute for Social Development (UNRISD) and r3.0 announced a pilot testing of Sustainable Development Performance Indicators which UNRISD developed with support from r3.0 (Redesign for Resilience & Regeneration). The initiative invites enterprises to pilot a comprehensive set of Sustainable Development Performance Indicators that are unified by common reference to real-world thresholds that demarcate sustainability — and the transformations from business-as-usual necessary to respect the limits and demands for vital capital resources. These references to the Commons — shared resources that must be collectively managed to maintain sufficient levels to support all who rely on them for their wellbeing — provide a common-sense common denominator that harmonizes measurement across diverse resources, impacts, and organizations.

The incrementalist initiatives emerged from

  • The Five” sustainability reporting frameworks (CDP, CDSB, GRI, IIRC & SASB — see here);
  • The Big Four accounting firms (Deloitte, EY, KPMG & PwC) along with the World Economic Forum (WEF — see here); and
  • The International Financial Reporting Standards (IFRS) Foundation — see here.

While these declarations vary in their acknowledgement of sustainability thresholds (ranging from complete absence in the former to passing references to the Paris Agreement, Planetary Boundaries, and living wages in the latter two), what is striking is that they miss an opportunity to align around the ultimate harmonizing element: the external world that is common to all enterprises, with its communal constraints.

The UNRISD initiative that r3.0 supported, by contrast, seizes this opportunity, by embracing thresholds and transformation. UNRISD launched the overarching 4-year Sustainable Development Performance Indicators (SDPI) project in late 2018. r3.0 Senior Director Bill Baue authored the project’s kick-off paper, Compared to What? A Three-Tiered Typology of Sustainable Development Performance Indicators: From Incremental to Contextual to Transformational. At the heart of the paper are two key concepts:

  • Sustainability Context, the Principle introduced by the Global Reporting Initiative in its second generation (G2) of Sustainability Reporting Guidelines in 2002, which holds that reporting organisations should consider “the performance of the organisation in the context of the limits and demands placed on economic, environmental, or social resources at a macro-level”; and
  • Sustainability Quotient, introduced by Center for Sustainable Organizations Executive Director Mark McElroy in 2008, which holds that sustainability equals actual impacts on the carrying capacities of vital capital resources over normative impacts on the carrying capacities of vital capital resources (see below figure).

At the 2019 UNRISD Conference launching the SDPI project, GRI Co-Founder Allen White referenced this equation when he stated that “we need to move beyond incrementalist ‘numeration’ indicators & add ‘denomination’ indicators tied to upper (ecological ceilings) & lower (social foundations) thresholds — sustainability measurement without context is simply not sustainability measurement” (with a head-nod to Kate Raworth’s Doughnut). Previously, White has stated “Sustainability requires contextualization within thresholds. That’s what sustainability is all about. Yet to this day, contextualization rarely appears in sustainability reporting.”

A 2017 peer-reviewed study validated this last fact: of 40,000 sustainability reports issued in the first decade-and-a-half of the Millennium, only five percent mentioned ecological limits, and a mere 31 of 12,000 reporters (0.258%) applied such limits to product development or corporate strategy. Effectively, the lion’s share of sustainability reports simply fail to assess sustainability. (See below figure)

Sources: Data | Graphic

What’s more, the popular Sustainable Development Goals (SDGs) paradoxically lack reference to sustainability thresholds. Of the 247 SDG Indicators, only a handful include thresholds — such as 1.1.1, which measure the “proportion of the population living below the international poverty line by sex, age, employment status and geographic location (urban/rural)” and 6.4.2, which measures “freshwater withdrawal as a proportion of available freshwater resources.”

To fill this void, UNRISD developed its Three-Tiered Typology, introduced in the Compared to What? paper, that builds on the Sustainability Context Principle and Sustainability Quotient, as follows:

  • Tier One: Incrementalist Numeration: Numerator indicators focus on actual impacts, including absolute indicators, as well as relative or intensity indicators that are non-normative, and therefore incrementalist by definition.
  • Tier Two: Contextualized Denomination: Denominator indicators contextualize actual impacts against normative impacts. Also known as “Context-Based” indicators, denominator indicators take into account sustainability thresholds in ecological, social, and economic systems, as well as allocations of those thresholds to organizations and other entities.
  • Tier Three: Activating Transformation: Transformative indicators add the element of implementation and policy to normative denominator indicators to instantiate change within complex adaptive systems.

Since the launch of this UNRISD initiative, Baue has been collaborating with McElroy (who is a r3.0 Advocation Partner and Expert Group Member of UNRISD’s SDPI Project) on further research and publications, including part of a Manual dealing with definitions, methodologies, and equations for all indicators across the three tiers that have been discussed and decided in the UNRISD project process. Tier One is based on 33 existing “Core Indicators” introduced by UNCTAD in 2019; Tier Two builds on 19 of these indicators, adding sustainability thresholds (and “soft” contextualization via time-series trends, for example, for indicators that lack logical thresholds); and Tier Three advances 27 indicators that track necessary transformation from business-as-usual.

The SDPI pilot testing, which we at r3.0 have titled Thresholds of Transformation in keeping with our work ecosystem, invites both For-Profit Enterprises (FPEs) and Social & Solidarity Economy Organizations & Enterprises (SSEOEs) to pilot this set of indicators, which measure not only incremental performance, but also performance in reference to external constraints. We believe that such reality-based measurements will enhance real-world business performance.

We also believe that these next-generation indicators deliver on the deferred promise of the Sustainability Context Principle, and offer a common sense approach to harmonization. Want to pilot these pioneering indicators? Give us a shout!

r3.0 is a pre-competitive & market-making non-profit delivering groundbreaking Blueprints & Transformation Journeys for system value creation.

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