Business and the sustainable development goals measuring and managing corporate impacts

This requires both strategic sensitivity to global sustainability challenges and sound impact measurement and management at the corporate level... The Sustainable Development Goals SDGs

Business and the Sustainable Development Goals

Measuring and Managing

Corporate Impacts

Edited by

Norma Schönherr

André Martinuzzi

Norma Schönherr • André Martinuzzi

ISBN 978-3-030-16809-4 ISBN 978-3-030-16810-0 (eBook)

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Norma Schönherr

Institute for Managing Sustainability

Vienna University of Economics and

Business

Vienna, Austria

André Martinuzzi Institute for Managing Sustainability Vienna University of Economics and Business

Vienna, Austria

Over the past 15 years, business has emerged as an important player in the field of sustainable development Concurrently, however, trust in the pri-vate sector’s ability to self-regulate and drive positive social change has been waning Negative consequences of trade and globalization, including rising inequality and stagnant wage levels, have increased opposition to global business, in particular, and globalization, more generally While many firms have responded to this by adopting corporate sustainability practices and implementing sustainability management systems, the impact

of these measures is not reflected in improvements to the state of the planet On the contrary, global sustainability challenges like climate change, biodiversity loss, and pollution continue to mount, and the roll-back of environmental legislation in some places, such as the United States, is not a promising sign If, as many executives today agree, sustain-ability is a prerequisite for continued prosperity and competitiveness, it becomes ever more urgent to understand what kind of corporate sustain-ability really impacts positively on the natural environment, on society and firms themselves

In the midst of this ongoing debate surrounding the role of business in society, there is an emerging consensus that companies can and ought to contribute to sustainability by enhancing positive impacts (e.g on liveli-hoods, health, and education) and reducing negative ones (e.g resource consumption, pollution, and human rights violations) This requires both strategic sensitivity to global sustainability challenges and sound impact measurement and management at the corporate level

Preface

The Sustainable Development Goals (SDGs) adopted by the United Nations General Assembly in September 2015 provide a comprehensive and universally applicable framework for strategic corporate engagement with sustainability issues This constitutes a good entry point for compa-nies to begin tackling their sustainability impacts in a more systematic fashion at all levels and to identify new business opportunities while con-tributing to the solution of the grand sustainability challenges facing the world today.

However, measuring and managing the contribution of business to the SDGs poses particular challenges For firms, it requires a well-founded understanding of the wider impacts of their core business, community, and philanthropic engagement, as well as of the materiality of these impacts

in a sustainability context Assessing impacts has to consider trade-offs and ambiguities arising from the diversity of sustainability issues as well as the values and interests of different stakeholder groups At the same time, the SDGs are an unprecedented opportunity for stakeholders to engage with business For consultants, measuring and managing impacts is a promising area of work, as many companies lack knowledge and data beyond their corporate boundaries And for researchers, impact measurement and man-agement has emerged as an important new field for research, as well as an application area of their knowledge and tools

In this context, this volume serves a dual purpose: On the one hand, it critically analyzes selected impact measurement and management tools and speaks to their respective benefits and limitations On the other hand,

it aims to provide guidance on management decisions that enable high- quality impact measurement and management to support companies in demonstrating their contribution to sustainability

The analyses underlying this book are the result of three years of research conducted by an international consortium in the EU-funded research project GLOBAL VALUE—Managing Business Impacts on Development (www.global-value.eu/toolkit) This highly collaborative research project involved leading universities, civil society organizations, and corporations from Europe, Asia, and Africa The research presented in this volume is complemented by concrete examples from corporate prac-tice and interviews with experts from organizations deeply involved in tool development and measuring the contribution of business to sustainability

It is our hope that this volume will be of value to academics, as well as practitioners and professionals with close links to research (including

evaluation professionals, consultants, and tool developers) working in or across the fields of sustainability management, corporate sustainability, inclusive business, and sustainable development More specifically, the work should be of relevance to readers interested in recent research on the business contribution to the SDGs, or understanding different method-ological approaches and practices for measuring corporate sustainability impacts, as well as to those who want to receive an overview of this dynamic, evolving field of research.

Funding for the research underlying this volume was provided by the European Commission under the 7th Framework Programme in the con-text of the GLOBAL VALUE project (contract number: 613295) We are grateful to the European Commission for making this research possible

We also wish to thank the GLOBAL VALUE project partners for three years of fruitful and very pleasant collaboration Their expertise, creativity, and commitment have been invaluable

Our gratitude also goes to the contributing authors of this volume, who have made their original research papers available and have borne with us throughout an extensive process of review and revision Moreover,

we wish to acknowledge the tool developers and practitioners, who have provided their insights in interviews, and our case companies for providing data and investing time into collaboratively testing existing impact assess-ment approaches, as well as for engaging with us to develop the best prac-tice cases presented in this book

Finally, yet importantly, we are grateful for the constructive feedback of several anonymous reviewers on the proposal and draft manuscript of this volume and to the Palgrave Macmillan editorial team for their patience and support

Any remaining errors are strictly our own The European Commission

is not responsible for use that may be made of any material arising from the GLOBAL VALUE project and this book

acknowledgments

1 Introduction: The Sustainable Development Goals and the

André Martinuzzi and Norma Schönherr

Norma Schönherr, Lucia A Reisch, Andrea Farsang, Armi

Temmes, Adele Tharani, and André Martinuzzi

3 Scoping What Matters: An Introduction to Impact

Florian Findler

4 Measuring What Matters: Standardized Versus

Adele Tharani

5 Managing What Matters: Integrating Impact Measurement

Armi Temmes

contents

6 Implementing Impact Measurement and Management 113

Norma Schönherr, Lucia A Reisch, Andrea Farsang, Armi

Temmes, Adele Tharani, and André Martinuzzi

Index 129

Andrea Farsang serves as a Senior Project Manager in Regulatory and

Risk Transformation at Nordea, Denmark Previously she worked as a post-doctoral researcher and project manager at Copenhagen Business School, Department of Intercultural Communication and Management, Denmark

Florian Findler is a teaching and research associate at the Institute for

Managing Sustainability (www.sustainability.eu) at Vienna  University of Economics and Business, Austria His main research interests are CSR, impact assessment, and sustainability in higher education

André Martinuzzi is Head of the Institute for Managing Sustainability

(www.sustainability.eu) and Associate Professor at Vienna University of Economics and Business, Austria He has more than 20 years of experi-ence in coordinating EU-wide research projects for the European Commission, as well as for international organizations and minis-tries He is an expert in the fields of corporate sustainability, responsible innovation, evaluation, and knowledge brokerage

Lucia  A.  Reisch is Professor for Consumer Behaviour and Consumer

Policy at Copenhagen Business School, Department of Intercultural Communication and Management, Denmark Her main research focus is on behavioral economics, sustainable consumption (in par-ticular; energy, food and health, fashion), intercultural consumer behavior, consumers and new technologies, consumer policy, and corpo-rate sustainability

notes on contributors

Norma  Schönherr is a project manager and research associate in the

Institute for Managing Sustainability (www.sustainability.eu) at Vienna University of Economics and Business, Austria Her areas of expertise include CSR, corporate sustainability, sustainable development, sustain-ability management, and responsible innovation

Armi Temmes is Professor of Practice, Corporate Sustainability, at the

Department of Management Studies at Aalto University, Finland Before entering academia, she worked in sustainability management and in execu-tive roles in the forestry industry Her main areas of interest include sus-tainability management and corporate sustainability, particularly in the energy and mobility sectors

Adele  Tharani is a research associate in the Institute for Managing

Sustainability (www.sustainability.eu) at Vienna University of Economics and Business, Austria Previously she worked for the United Nations Development Programme as a CSR consultant She specializes in cor-porate sustainability, impact measurement, cross-sectoral collaboration, and responsible innovation

Fig 1.1 The evolution of strategies for corporate sustainability 3 Fig 1.2 Certified management systems according to ISO 14001 4 Fig 1.3 Global sales of organic food and global revenues from Fairtrade

International products (1999–2016) in billion US dollars 5 Fig 2.1 Relative frequency of tools addressing specific Sustainable

Fig 2.8 Comprehensive tools—the B Impact Assessment (B Lab) 34 Fig 2.9 Specific tools—the Forest Industry Carbon Assessment Tool

Fig 2.10 Level of analysis—the Gender Equality Principles Assessment

(GEPI) 37 Fig 2.11 Level of analysis—the Sustainability Assessment of Food and

Fig 2.12 Application context—the HIGG Index (SAC) 41 Fig 2.13 Application context—the LBG Model (Corporate Citizenship) 43 Fig 2.14 Implementation requirements—the Sustainable Value Calculator

list of figures

Fig 2.15 Implementation requirements—the Measuring Impact Framework

(WBCSD) 47

Fig 3.2 Impact example: alternatives to animal testing 64 Fig 3.3 Impact example: measures for renewable energy use 66 Fig 3.4 Impact example: the PET to PET recycling manufactory 68

Fig 4.1 Level of standardization and customization in tested tools 80 Fig 5.1 Framework for analyzing tools for impact assessment in relation

to the sustainability management system of a company

Fig 5.2 Using impact assessment tools for specific management purposes 108 Fig 6.1 Seven challenges related to the shift from conventional to

impact oriented corporate sustainability strategies 117 Fig 6.2 Areas for future research on impact measurement and

management in the context of the SDGs 125

Table 2.1 Levels of analysis in corporate impact measurement and

management 36 Table 2.2 Systematic comparison of corporate impact measurement and

Table 4.2 Recommendations on standardized tools 83 Table 4.3 An overview of customizable tools 85 Table 4.4 Recommendations on customizable tools 86

Table 5.1 Possible choices of tools for different management purposes 100 Table 6.1 A comparison of conventional and impact oriented approaches

Table 6.2 Fit for purpose—features of appropriate tools for management

list of tables

Box 1.2 Interview with Pietro Bertazzi, Head of Sustainable Development

at the Global Reporting Initiative (GRI) 10 Box 2.1 Management Control: The Financial Valuation Tool (IFC) 24 Box 2.2 Management Control: The Human Rights Compliance

Assessment (Danish Institute for Human Rights) 25 Box 2.3 Reporting: The Sustainability Code (RNE) 27 Box 2.4 Information and Learning: The SDG Compass (WBCSD, GRI,

UNGC) 28 Box 2.5 Information and Learning: The Natural Capital Protocol (NCC) 30 Box 2.6 Information and Learning: The Global Compact Self-

Assessment Tool (UNGC, DI, Ministry of Business and Growth Denmark, Danish Institute for Human Rights, IFU) 31 Box 2.7 Comprehensive Tools: The B Impact Assessment (B Lab) 33 Box 2.8 Specific Tools: The Forest Industry Carbon Assessment Tool

(FICAT) 35 Box 2.9 Level of Analysis: The Gender Equality Principles Assessment

Box 2.10 Level of Analysis: The Sustainability Assessment of Food and

Agriculture Systems (SAFA) Guidelines and Tool (FAO) 38 Box 2.11 Application Context: The HIGG Index (SAC) 40 Box 2.12 Application Context: The LBG Model (Corporate Citizenship) 42 Box 2.13 Implementation Requirements: The Sustainable Value Calculator

Box 2.14 Implementation Requirements: The Measuring Impact

list of boxes

Box 4.1 Interview with John Lloyd, the Associate Director, Head of

Box 5.1 Exemplary Questions from the B Impact Assessment 102

Abstract Martinuzzi and Schönherr provide a comprehensive summary

of the evolution of corporate sustainability, spanning the range from lanthropy, via the systematic implementation of eco-efficiency and man-agement systems, product differentiation and innovation, to contemporary strategies that directly link core business and sustainability impacts They highlight successes and limitations of these strategies and discuss implica-tions for the future of corporate sustainability, which they view as impact- oriented, collaborative, data-intensive, and systemic The United Nations’ Sustainable Development Goals are introduced as a business-relevant, uni-versally applicable framework that may guide companies in better measur-ing and managing their impacts on sustainability in light of this expanded understanding of corporate sustainability

phi-Keywords Corporate sustainability • Corporate strategies • Sustainable

development goals • Impact measurement

Business in general and multinational corporations (MNCs) in particular affect billions of people across the world through their products, opera-tions, and value chains Given their immense wealth and influence over people’s daily lives, the role and responsibility of business in society is a recurring topic of discourse in academia (Carroll 2015), and also in policy, civil society, and the private sector itself This discourse has matured over the past 70 years, resulting in a comprehensive stock of literature under diverse headlines, such as corporate social responsibility (van Marrewijk

2003), business ethics (Ferrero and Sison 2014), corporate citizenship (Matten and Crane 2005), and, more recently, corporate sustainability (CS) (Montiel and Delgado-Ceballos 2014; Schaltegger 2011) Across the field, the conflicting priorities of, on the one hand, corporate aspira-tions, in terms of profits, growth, competitive advantage, and market shares, and, on the other hand, societal objectives, including prosperity, well-being, and sustainability, remain a recurring theme Notwithstanding this tension, business has received increasing recognition for its potential

to be a major driver of sustainable development (Blowfield 2012), and there is an emerging consensus that MNCs in particular can and ought to contribute to sustainable development in a substantial and measurable way (Kolk 2016) However, corporate strategies to fulfill this expectation have been only partially successful so far (Dyllick and Muff 2016)

A History of CorporAte sustAinAbility in A nutsHell

Corporate strategies for CS have continuously evolved over the past tury, spanning a range from philanthropic engagement, via the systematic implementation of eco-efficiency and management systems, product dif-ferentiation, and innovation, to contemporary strategies that directly link core business with sustainability (see Fig. 1.1)

cen-One of the most widely established embodiments of CS is corporate philanthropy (Gautier and Pache 2015), best defined as the generous donation of money to good causes The modern form of corporate chari-table giving emerged in the first half of the twentieth century It is not by accident that this period saw the emergence of some of the largest private charitable foundations that remain in existence today, including the Rockefeller Foundation (founded in 1913, in the United States), the Wellcome Trust (1936, United Kingdom), and the Robert Bosch Foundation (1964, Germany) Philanthropy is a highly visible way of returning some of the proceeds of business to society As well as being of

public benefit, the advantages of charitable giving are that it is easy to communicate and can make a real difference to the beneficiaries However,

it is also highly selective in terms of who benefits, and it is easily ued in times of austerity In addition, philanthropy is frequently far removed from core business concerns—in the case of foundations, it may even be outsourced to another organization—and it provides very little incentive or opportunity to learn or develop innovative ways in which business itself may contribute to sustainability

discontin-If the first half of the twentieth century was the age of philanthropy, the second half was the age of efficiency Increasingly visible environmental deterioration, two oil crises, and the seminal Limits to Growth report (Meadows 1972) defined the problem of the period as “how to do more with less” In other words, business began to strive for eco-efficiency in addition to economic efficiency The concept of eco-efficiency fundamen-tally links some measure of value added with environmental impacts of economic activities The higher the ratio of value added to ecological impact, the more eco-efficient a product or process is (Ehrenfeld 2005) The business case for eco-efficiency is easily made: the procurement of scarce inputs, wasteful production processes, and waste disposal all engen-der costs to businesses Eco-efficiency provides a win–win situation in that such costs are reduced along with detrimental environmental impacts (DeSimone and Popoff 1997) However, where such win–win situations

do not materialize, for example, in the case of freely available ecosystem services (such as clean air, water, or climate regulation by forests, all of

Fig 1.1 The evolution of strategies for corporate sustainability

which are frequently available to use for free), firms do not have incentives

to act to reduce resource use In addition, because rebound effects tend to reverse initial gains in eco-efficiency, this approach has not resulted in absolute resource savings in most sectors (Herring 2006)

The mid-1990s saw the rise of management systems as a systematic way of setting up targets and strategies, the assignment of dedicated roles for dealing with sustainability within companies, as well as certification systems to verify corporate environmental and social performance over time (Andrews et al 2010) Arguably among the best-known examples are two standards established by the International Standardization Organization (ISO), namely, ISO 14001 standard for environmental management (first released in 1999; see Fig. 1.21) and ISO 5001 stan-dard for energy management (first released in 2011).2 Another promi-nent example is the Eco- Management and Audit Scheme, better known

as EMAS Implemented by the European Commission in 1993 (Iraldo

et al 2009), the scheme had registered around 13,000 certified tions and sites by March 2018.3 As management systems for environmen-tal, social, and quality concerns matured, hundreds of thousands of companies adopted them

organiza-Management systems provide standardized and quality-assured cesses for engagement with environmental and social issues However, they tend to be viewed as bureaucratic exercises, thus failing to become part of organizational culture and practice (Boiral 2011) The rather static

pro-Fig 1.2 Certified management systems according to ISO 14001

nature of management systems, once they are established, as well as the regular need for re-certification, may lead to audit fatigue Furthermore, management systems have been shown to foster a checklist mentality (Boiral et al 2018) This may prevent the development of innovative solu-tions to newly emerging sustainability issues and appropriate, timely responses to concerns outside the scope of the established system.

A more innovative approach that became firmly established around the same time as management system is sustainability by product differentia-tion Previously relegated to specialized third-world shops, from the late 1990s, organic, Fairtrade, and other eco-friendly or ethically traded prod-ucts began to routinely appear in mainstream stores Figure 1.34 illustrates the growth in sales and revenue of two of the most widely adopted label-ing schemes for eco-friendly and ethically traded products between

1999 and 2016

Today, eco-friendly or ethically traded products are available in almost all sectors, ranging from ethical fashion, organic and fair trade foods, eco- friendly cosmetics and detergents to “green” funeral services The busi-ness case for offering eco-friendly and ethical product alternatives lies in the potential to sell such products at a premium over their conventional counterparts However, the actual sustainability of such product alterna-tives is not always clear-cut for consumers This has led to the proliferation

of labeling schemes, which aim to signal the respective sustainability- related qualities of products to consumers A stocktaking of such labels,

Fig 1.3 Global sales of organic food and global revenues from Fairtrade

International products (1999–2016) in billion US dollars

conducted in 2016, identified over 240 labels applicable to 80 sectors in

180 countries (ITC 2016) Although eco-friendly and ethically traded products have been successfully established in niche markets worldwide, firms have struggled to establish them in mass markets, and, therefore, they frequently fail to achieve economies of scale (Vermeulen 2015) In addition, many companies offer sustainable product lines as a supplement

to conventional products, yet generally do not strive to improve the tainability of their overall offerings to the same degree

sus-The early 2000s saw innovation reach the core of the discourse on CS (Gallego-Álvarez et al 2011) On the one hand, sustainability has been acknowledged as a source of innovation and new business opportunities (Bouglet et al 2012) On the other hand, innovation is increasingly rec-ognized as a potential lever to solve pressing sustainability challenges (Varadarajan 2017) For businesses, this approach offers the promise of creating and sustaining competitive advantage while helping to solve grand societal challenges (Adams et al 2016) However, successful exam-ples of sustainable innovations carried out by MNCs or at the industry level are rare Although they could fundamentally contribute to sustain-ability, it is frequently difficult to achieve such innovations because innova-tion barriers within firms must be overcome, and buy-in from stakeholders and changes in regulatory environments are also required (Boons and Lüdeke-Freund 2013)

The sharing economy has brought forth some of the most successful business models over the past decade (Stephany 2015) This economy ide-ally enables the commercialization of underused assets (such as spare rooms, cars, or tools that lie idle most of the time) in ways that produce economic, environmental, and social benefits, usually via tech platforms Uber and Airbnb are some of the most prominent examples (Zervas et al

2017) By prioritizing sharing (or rather renting) over owning, customers save money, earn supplemental income, lower carbon footprints and resource consumption, increase social capital, and build new communities However, such technological innovations have been shown to be a double- edged sword, raising ethical concerns across the globe and doubts as to their potentially detrimental impacts on both people and the planet (Ross

2016) One concern raised in relation to the previous example of the sharing economy is that it routes the largest part of the value streams gen-erated by driving Uber cars or renting out spare rooms via Airbnb away from local communities toward a few technology hubs in Silicon Valley and China, which own the platforms necessary for the functioning of the

sharing economy Such a concentration of the market, critics fear, increases regional inequality and takes away from local economies Another concern

is the erosion of workers’ rights and benefits In the absence of an adapted regulatory system, the sharing economy involves a high risk that the costs

of worker protections (such as pensions and health insurance), which in many countries are at least partially carried by business, will be pushed back toward the already strained taxpayer-funded social safety nets (Martin 2016)

impACt And tHe future of CorporAte sustAinAbility

As the previous paragraphs have illustrated, CS has increasingly become more powerful and more closely connected to core business and competi-tiveness, but also more resource-intensive and complex (see Fig. 1.1) While philanthropic engagement only requires money and a beneficiary, product differentiation requires aware consumers willing to buy, manage-ment systems require trusted third-party certification, and innovative busi-ness models, for sustainability, require additional buy-in from wider markets and governments as well as the creation of enabling regulatory frameworks As companies have expanded their arsenal of strategies for addressing sustainability, they have also built capacity for implementation and for navigating more comprehensive stakeholder demands, technologi-cal disruption, and an increasingly unpredictable business environment

In light of this increasing complexity and the continuously evolving discourse on the contribution of business to sustainability, impact-oriented

CS has emerged since 2010 as a fundamentally new approach to CS Impact-oriented CS first entered the big stage when the ISO published its ISO 26000 framework for sustainability in organizations ISO 26000 establishes a new understanding of CS as “involving the responsibility of

an organization for the impacts of its decisions and activities (including products, services, and processes) on society and the environment” (ibid., 2.18) Impact-oriented CS has been widely adopted by key global players, including the European Commission,5 the United Nations Global Compact,6 the World Business Council for Sustainable Development (WBCSD),7 and the Global Reporting Initiative (GRI) (see the interview

in Box 1.2)

The fundamental question of CS has shifted from what companies do in pursuit of sustainability toward what they ultimately achieve for sustainabil-ity The underlying rationale of impact-oriented CS is that all companies

have impacts on the environment and society by their very nature Whenever activities are undertaken, inputs are processed and transformed into mar-ketable products and services These are brought to market, bought, used, and eventually disposed of Each step in this value chain uses resources, generates waste, and affects stakeholders outside the company (Searcy

2016) Impact orientation expands the remit of CS to account for these impacts, including direct, indirect, positive, and negative impacts, as well as local and global impacts (Dyllick and Muff 2016) This marks a new stage

in the development of CS

The fundamental challenge of impact-oriented CS is linking tional activities undertaken along the value chain with macro-level changes

organiza-in the environment, the economy, and the society Such macro-level effects

or impacts accrue outside the boundaries of the organization, sometimes far away from the physical location of an activity, and can materialize with significant time lags Take, for instance, the example of climate change Business has been a major contributor to rising greenhouse gas emissions, which lead to climate change At the same time, business contributes to climate change mitigation and adaptation by using renewable energy, and developing and deploying new low carbon technologies No single busi-ness is responsible for climate change, but all businesses will be ultimately affected by it Understanding the phenomenon of climate change and the contribution of corporate activities is a prerequisite for tackling the issue This requires an understanding of the complex dynamics of the social and biophysical systems in which companies are embedded as well as collabo-ration with a multitude of stakeholders (Whiteman et al 2013) Measuring

up to this ambition is a challenging task in the absence of integrated retical or managerial frameworks that guide MNCs in measuring and man-aging their impacts on sustainability (Starik and Kanashiro 2013)

theo-The Sustainable Development Goals (SDGs), a global agenda ing 17 aspirational sustainability goals, may fill this gap The SDGs define the most pertinent global sustainability challenges up to 2030 Moreover, they break down these aspirational goals into 169 actionable targets and thus provide an integrated reference framework for impact-oriented CS

compris-enter tHe sustAinAble development GoAls

In the context of impact-oriented CS, the SDGs may prove beneficial in three distinct ways First, they contain a universally applicable, yet delim-ited, set of sustainability issues, many of them broken down into targets

that are directly relevant to business (Muff et al 2017) Second, the SDGs fully acknowledge the integrated and systemic nature of sustainability issues (Le Blanc 2015) and thus can help businesses to broaden the scope

of their measurement efforts, while simultaneously limiting the number of material issues to be considered and paying attention to systemic interlink-ages between them Third, the SDGs provide a common set of goals around which multiple sets of stakeholders, including companies, govern-ments, and civil society organizations, may rally and build partnerships This may be helpful in identifying common interests, where it is necessary

to jointly tackle sustainability issues that are beyond the direct control and influence of individual companies (Scheyvens et al 2016) Indeed, such partnerships are promoted as one of the major levers of business involve-ment in the SDGs

The SDGs open up new business opportunities by flagging areas in need of investment and innovation for sustainability The Business and Sustainable Development Commission,8 a high-level forum of business leaders and private sector and civil society organizations, presents a strong business case for corporate engagement with the SDGs New business opportunities within the remit of the goals are estimated to amount to at least US$12 trillion across the four economic systems investigated by the Commission, notably food and agriculture, cities, energy and materials, and health and well-being (BSDC 2017) Indeed, the report argues that the total gains across the global economy by 2030 could be two to three times this amount

Awareness of the SDGs among businesses is high; for instance, 92% of respondents to a 2015 survey indicated that they were aware of the SDGs (PwC 2015) However, many businesses struggle to deliver on these commitments In a 2017 survey (KPMG 2017), only 43% of Global Fortune 250 companies refer to the SDGs in their sustainability reports

In the same vein, the World Business Council for Sustainable Development (WBCSD) reports that 79% of their members acknowledge the SDGs but only 6% measure their contribution to their achievement (WBCSD 2017) This discrepancy between commitment and action can at least partially be explained by the lack of appropriate impact measurement and management systems that enable businesses to demonstrate their contribution (Mori

et al 2017) In 2015, only 13% of businesses surveyed stated that they had appropriate tools to measure and manage their impacts in the context

of the SDGs (PwC 2015) This lack of effective impact measurement is reducing the credibility of corporate claims and the reliability of disclosed

information Although tools for impact measurement and management have proliferated in recent years, managers are frequently left to resolve unassisted the critical questions that need to be addressed to obtain reli-able and actionable knowledge Notably, these critical questions include:

1 Scoping what matters: defining the scope of assessment and

iden-tifying material issues along value chains

2 Measuring what matters: choosing tools fit for specific objectives,

meeting data requirements, and making results actionable through transparent evaluation criteria

3 Managing what matters: integrating more comprehensive impact

measurement with existing management systems, without ing organizational capacity to handle complex sustainability issues.This book presents timely research and guidance on how these chal-lenges can be addressed

overtax-Box 1.2 Interview with Pietro Bertazzi, Head of Sustainable

Development at the Global Reporting Initiative (GRI) 9

What was the role of the GRI in the run-up to the adoption of the SDGs?

At the GRI, we see our role as a bridge builder between business and governments, more specifically between the government- adopted SDGs and the many businesses globally that are taking action on sustainable development and are reporting on sustainabil-ity issues Actually, one target in the SDGs, target 12.6, is precisely about this—governments encouraging companies to report on their sustainability impacts

Why is business a particularly important stakeholder in the quest to achieve the SDGs?

The private sector is crucial for the achievement of the SDGs We need the force of the private sector to create infrastructure, to create jobs, and to create the conditions for people to fulfill their potential

We have seen a tremendous uptake of the SDGs by business The engagement of the private sector has been much stronger than at any time before But this is not just about the private sector While we stress the role of the private sector, it is equally important that other

constituencies—civil society, trade unions, governments, and zens—are involved.

citi-What is the importance of a business case for motivating corporate engagement with the SDGs?

The SDGs are opening a space for new business solutions However, each business you ask would probably give you a different answer; motivations can vary from company to company Some com-panies are really driven by a vision and the ambition to contribute to the overall agenda For others, it is about legitimacy and license to operate—this is linked to risk management Another motivation can

be to use the SDGs as a shared purpose and common language to build relationships of trust with stakeholders and to anticipate the needs of these stakeholders For some companies, it is also about exploring new market opportunities Finally, there will probably be changes in the policy environment, which will have a direct impact

on businesses, and the SDGs are a first indication of what is ahead

The GRI is increasingly focusing on corporate sustainability impacts What is the relevance of really focusing on impacts?

The core business of the GRI is the continuous development of the GRI Standards,10 which are the most widely used sustainability reporting standards in the world Thousands of companies use them

to disclose and report about their impacts In our work, we are ting much more focused on impacts because we really feel that it should be about capturing the effects that the company has on the economy, the environment, and the society, be they positive or nega-tive When there is a substantial effect on sustainability, it should be addressed and disclosed It is about those impacts that are impor-tant, whether inside the company or along the supply chain Companies should do a materiality assessment to identify such impacts and to really understand where they occur and what are the perceptions by other stakeholders

get-What is needed now that the SDGs are actually being implemented

to ensure that the role of business is fully realized?

We have noted that there is still a lack of understanding on what the SDGs really mean for business We are therefore partnering with the United Nations Global Compact and others to map for each

WHAt to expeCt of tHis book

The future of CS will be impact-oriented, collaborative, data-intensive, and systemic This introduction has set the scene for this book by briefly revisiting the evolution of CS strategies, outlining the relevance of the SDGs to business, and introducing impact measurement and management

as a prerequisite for improving the business contribution to sustainability

SDG and target the expected contributions of business.11 We also have the ambition to link corporate reporting with the official progress- monitoring of the SDGs, so that the business contribution becomes visible For this, we are working with NGOs (non- governmental organizations), business, but also statistical offices to identify appropriate indicators, develop guidance, and align the GRI Reporting Standards with the SDGs.12 Our ultimate ambition is to make data accessible to users We are working on mining and aggre-gating data to show the overall private sector contribution to the SDGs One of the primary audiences for such data could be govern-ments, who go through annual voluntary reviews13 and meet in New York to discuss progress It would be great if they could see and assess the contribution of businesses under their jurisdiction

So, this is also about inclusion of business in the overall monitoring and evaluation of progress on the SDGs? What exactly does this entail?

There are still huge data gaps Companies generate a lot of data in their reports, but it is hidden in the PDFs In addition, we do not have indicators for every goal and target, yet those are relevant to business We are therefore working together with the United Nations Global Compact and a multi-stakeholder Advisory Committee on identifying those gaps and developing appropriate indicators.14 We have also made recommendations to the GRI Standard Setting Council to make sure we include such new indicators so that we can achieve full coverage of the SDGs

Ultimately, reporting is a means to an end—reporting is the way

we can understand what companies are doing in this space It will be difficult to assess the contribution of business to the SDGs without the requisite data So this is a process which will continue to accom-pany us throughout the coming years

Chapter 2 provides an overview of the different approaches for impact measurement and management that are available to companies today Recognizing the need for actionable knowledge about economic, environ-mental, and social impacts to adequately address sustainability, many orga-nizations have developed tools to assist business in this endeavor Such tools have proliferated in recent years, developed by business, multi- stakeholder initiatives, partnerships, international organizations, academics, and, last but not least, consultancies This has become a global phenomenon.

By introducing an exemplary set of 14 different tools and their tive defining features, the chapter seeks to inspire both academics and potential users of these tools to think about building smart toolboxes that allow a comprehensive assessment of corporate impacts in the context of the SDGs The chapter also introduces basic challenges in contemporary impact measurement and management, notably defining the scope and materiality of the sustainability issues to be addressed, aligning the pur-pose of assessments and methods of measurement, and integrating impact measurement and management approaches into existing management sys-tems to improve contributions to sustainability

respec-The subsequent three chapters provide in-depth analyses of how ent tools may help address these challenges In Chap 3, Findler addresses the question of scoping and introduces impact mapping as a promising approach to bridging the gap between core business activities and the global SDGs Using case studies, the chapter demonstrates how impact mapping can support materiality assessment, scoping, and the building of

differ-a bdiffer-aseline differ-agdiffer-ainst which future progress cdiffer-an be mediffer-asured In Chdiffer-ap 4

Tharani deals with the question of how to select appropriate tools to meet specific impact measurement objectives More specifically, the chapter dis-cusses the benefits and limitations of customizable and standardized mea-surement tools In Chap 5, Temmes considers potential barriers to effective integration of impact measurement into existing management systems Using the concept of decoupling, Temmes highlights critical interfaces where the effective implementation of impact measurement and management can go astray She also shows how different tools can support successful integration and enable companies to make an effective contri-bution to sustainability

The final chapter, Chap 6, summarizes the key lessons from the ous chapters and derives a step-by-step decision tree for managers wishing

previ-to systematically implement impact measurement and management in the context of the SDGs

Throughout this book, additional resources, interviews, and company case studies illustrate the application of impact measurement and manage-ment in practice This volume does not provide a one-size-fits-all blue-print but rather guides academics and professionals alike through the critical reflection and decision points required to establish effective and efficient impact measurement and management within organizations.

notes

1 The ISO conducts an annual survey among registered and accredited tification organizations to compile statistics on active certificates across the globe See https://www.iso.org/the-iso-survey.html

cer-2 For more information on the International Standardization Organization (ISO), its history, and mandate, see 1997, available at https://www.iso org/files/live/sites/isoorg/files/about%20ISO/docs/en/Friendship_ among_equals.pdf

3 For more information, see http://ec.europa.eu/environment/emas/ emas_registrations/statistics_graphs_en.htm

4 Data from Statista ( www.statista.com ), based on Willer and Lernoud ( 2018 ), and Fairtrade International ( 2018 ).

5 For more information on Corporate Social Responsibility in the European Union, please see https://ec.europa.eu/growth/industry/corporate- social-responsibility_en

6 For further reading, see IMPACT: Transforming Business, Changing the World—The United Nations Global Compact https://www.unglobal- compact.org/library/1331

7 For further reading, see the WBCSD Guide on Measuring Socio-Economic Impact https://www.wbcsd.org/Programs/People/Social-Impact/ Resources/WBCSD-Measuring-Impact

8 For further reading, see the Better Business Better World Report http:// report.businesscommission.org/

9 This interview has been abbreviated and lightly edited for clarity The full interview is available at http://www.global-value.eu/toolkit/sessions/ the-sdg-compass-a-framework-for-strategic-corporate-engagement/

10 For further reading, see the Analysis of SDGs and Targets: https://www globalreporting.org/resourcelibrary/GRI_UNGC_Business-Reporting- on-SDGs_Analysis-of-Goals-and-Targets.pdf

11 For further reading, see The GRI and the SDGs porting.org/information/SDGs/Pages/SDGs.aspx

https://www.globalre-12 For further reading, see Integrating the SDGs into Corporate Reporting https://www.globalreporting.org/resourcelibrary/GRI_UNGC_ Reporting-on-SDGs_Practical_Guide.pdf

13 Business leaders assemble every year around the same time at the annual meeting of the High-level Political Forum at the SDG Business Forum; see https://www.sdgbusinessforum.org/

14 For further reading, see Measuring Progress on the SDGs: A Mapping of the SDG Indicators and GRI Standards https://www.globalreporting org/resourcelibrary/SDG-indicator-mapping.pdf

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The Corporate Toolbox

Norma Schönherr, Lucia A. Reisch, Andrea Farsang, Armi Temmes, Adele Tharani, and André Martinuzzi

Abstract In light of the continuous proliferation of tools for measuring

and managing corporate sustainability impacts, navigating the multiplicity

of available tools remains a perennial challenge for managers Schönherr

et al present a comprehensive stocktaking of extant tools and introduce

N Schönherr ( * ) • A Tharani • A Martinuzzi

Institute for Managing Sustainability, Vienna University of Economics and Business, Vienna, Austria

e-mail: Norma.schoenherr@wu.ac.at ; Adale.Tharani@wu.ac.at ; Andre.

14 selected examples to illustrate how different tools can support nies By mapping these tools against the Sustainable Development Goals, they show that extant tools are suitable for addressing sustainability issues

compa-to varying degrees, scopes, and depth In the absence of a one-size-fits-all approach, they argue that companies need to develop skills to compara-tively assess tools in order to build smart toolboxes for measuring and managing corporate impacts on sustainability

Keywords Sustainability impacts • Measurement tools • Comparative

assessment • Smart toolboxes • SDG mapping

Companies have long been facing expectations to engage with societal stakeholders (Hörisch et al 2014), act responsibly and transparently (Gray

et al 1988), and to make an active contribution to sustainable ment (Baumgartner 2014) This also includes accountability for the impacts of core business on society and the natural environment (Whiteman

develop-et al 2013; Dyllick and Muff 2016), especially since the adoption of the Sustainable Development Goals (SDGs) in 2015 (Scheyvens et al 2016) Consequently, many organizations have started to adopt and/or develop tools with the aim of supporting companies in this endeavor (Gilbert et al

2011) These tools have continuously proliferated, diversified, and evolved

to the extent that there are now at least several hundred schemes available, many of them applicable across several sectors and country contexts (Marx and Wouters 2014) The increasing multiplicity of tools has led to the emergence of “markets,” in which tool developers compete for adopters, but also collaborate at the level of overarching principles for corporate sustainability (CS) (Reinecke et al 2012)

Especially for managers, navigating the multiplicity of available tools remains a perennial challenge This is because tool markets are currently opaque, and information costs for comparing different tools are very high

As Wijen (2014, p. 302) notes, “opacity exists when observers have culty identifying the characteristics of prevailing practices, establishing causal relationships between policies and outcomes, and measuring the exact results of implementation.” This has negative consequences for managers (who struggle to decide which tools to adopt), stakeholders (who do not know which tools are appropriate and legitimate), and tool developers themselves (who have to compete for adopters and legitimacy while continuously improving their offering) It is therefore of high

relevance—for both researchers and practitioners—to gain greater clarity

as to the design and functionalities of different tools for measuring and managing impacts (Behnam and MacLean 2011; Rasche 2009)

These tools, in the broadest sense, can be understood as “voluntary predefined rules, procedures and methods to systematically assess, mea-sure, audit and/or communicate the social and environmental behavior and/or performance of firms” (Gilbert et al 2011, p. 24) As such, impact measurement and management tools are instruments that companies can use to design, structure, and implement impact assessments to support sustainability management, organizational learning, and reporting Such tools can take very different forms

A stocktaking of impact measurement and management tools ducted with the input of an expert crowd1 in 2016 and 2017 collated more than 200 individual examples, ranging from simple guidelines and checklists, via fully fledged analytic software applications, to specific proce-dural requirements that companies can implement, frequently in collabo-ration with their stakeholders.2 While many of these tools predate the SDGs, they all address core sustainability issues that are reflected in this global sustainability agenda (see Fig. 2.1)

con-Fig 2.1 Relative frequency of tools addressing specific Sustainable Development

Goals

The good news is that there are at least a few tools available for nies to measure their impacts against each individual SDG. Indeed, most tools are broad enough to address several SDGs simultaneously, although very few enable a comprehensive analysis across the value chain or the whole organization.

compa-The bad news is that there is no one-size-fits-all approach for measuring corporate impacts against the SDGs This is because the causal pathways underlying the relationship between business, society, and the natural environment are highly complex and may vary between sector, country, and value chain contexts (Waddock et al 2015) For instance, the environ-mental impact of agriculture will vary depending not only on the choice of crops and farming practices, but also on contextual factors, such as local water availability, alternative land use options, and weather conditions

In addition, opaque market conditions and a lack of comparative mation on the merits of individual tools also make it more difficult to determine whether any given tool corresponds to the assessment needs of

infor-a specific compinfor-any For exinfor-ample, the infor-above-mentioned stocktinfor-aking of tools includes 49 examples of tools that address climate change in some form Which of these 49 tools is the best option for any given user will depend on the fit between assessment needs of the company and the design of the respective tool (Simpson et al 2012)

What Is In a tool?

The question of how to choose appropriate tools for measuring and aging sustainability impacts has mostly been addressed from a method-ological point of view in the academic discourse (Ness et al 2007) The available literature tends to focus on the soundness of the theoretical basis

man-or a sound understanding of appropriate application contexts fman-or specific methodological approaches (Gasparatos and Scolobig 2012) However, focusing on the technical features and functionalities of tools alone runs the risk of neglecting the managerial dimension of the selection process

As noted by de Ridder et al (2007), tool selection tends to be performed

by analysts and usually depends on

• constraints relating to the time, data, and budget available for impact assessment,

• the qualifications of analysts, and

• the range of tools accessible to them

Rather than dismissing these practical managerial concerns, this chapter posits that it is essential to take them seriously and consider them in com-paratively assessing the merits of impact measurement and management tools available to companies This chapter provides a broad overview of existing tools under consideration of both managerial concerns, such as purpose of impact measurement and management tools, the implementa-tion requirements they impose, as well as well-established methodological criteria, including contents, level of analysis, and application contexts.The following sections provide an overview of lessons learned from analyzing the variety of tools included in the stocktaking Fourteen case exemplars of tools that were comparatively assessed in collaboration with three multinational corporations (MNCs) operating in different industries and country contexts are introduced to highlight the key features and functionalities of different types of tools available today.3

PurPose

With the emergence of ever more impact measurement and management tools, several attempts have been made at developing useful classification systems for comparing them in a systematic manner (Singh et al 2012; Ness et al 2007) This is a difficult endeavor, not least because new tools tend to incorporate elements from their predecessors to form new hybrids, defying any attempt at developing mutually exclusive categories (Rasche

2014) This chapter attempts a classification useful to understand the main purposes for which such tools are developed,4 notably management con-trol, reporting, and organizational learning

First, management control tools support companies in achieving

management objectives, weighting strategic options, and identifying improvement measures Their focus is on enabling qualified management decisions and facilitating action toward sustainability Such tools frequently rely on sophisticated analytical software applications Assessments tend to

be largely quantitative and often include aggregation and monetary ation methods Certain management control tools also enable the weight-ing of strategic options or scenario building to support concrete decision-making processes Because of their focus on strategic decision- making and management support, they frequently allow managers to be selective about the sustainability issues addressed and tend to provide methods for forward-looking assessments A typical example of a manage-ment control tool is the Financial Valuation Tool (FVT) developed by the International Finance Corporation (IFC)

valu-Box 2.1 Management Control: The Financial Valuation Tool (IFC)

The Financial Valuation Tool (FVT) helps companies model tial sustainability risks and financial returns associated with sustain-ability investments The FVT aims to demonstrate how sustainability investments can create business value in addition to positive sustain-ability impacts It was developed to help companies identify sustain-ability investments that can contribute to the bottom line, while making a positive contribution to issues that are important to the company’s stakeholders, including environmental sustainability, social well-being, health and safety, and others

poten-The tool can be used to assess risks and financial returns of tainability investments related to a facility or a project within a spe-cific geographical location Tool implementation requires scenario building, risk assessment, cost/benefit analysis, and modeling exper-tise, and can take six months or more, if done rigorously External stakeholder engagement is required, and consultant support may be useful The tool is free to use and is available for download (after registration) (Fig. 2.2)

sus-Fig 2.2 Management control—the Financial Valuation Tool (IFC)