, September 27, 2021

How to anchor values and ethics in your company: Using the Common Good Matrix and Balance Sheet


  •   5 min reads
How to anchor values and ethics in your company: Using the Common Good Matrix and Balance Sheet

Companies have to assume greater responsibility for the wellbeing of society and nature. The Common Good Matrix, developed by the Economy for the Common Good (ECG) initiative, offers a proven tool for holistic corporate social responsibility (CSR).

Throughout the pandemic, there have been numerous headlines about US billionaires - such as Amazon's Jeff Bezos and Tesla's Elon Musk - growing their net worths to the tune of nearly $1 trillion altogether. The growing wealth gap is not new, but it is accelerating - and becoming more visible as a result of the Covid 19 crisis.

Already in 2011, a study by Swiss university ETH Zurich found that 147 global corporations control 40% of the world economy - many of them larger than mid-sized countries in terms of GDP. Similarly, Oxfam research found in 2019 that less than 1 per cent of the world population owns 51 per cent of global wealth - and thus more than the remaining 99 per cent..

This dramatic income inequality coupled with the increasingly visible environmental crises (climate change, loss of biodiversity, polluted oceans, etc.) leads to a rising recognition that growth and profits may not be the best of goals for a healthy society and planet. In particular, demands are growing that companies should assume greater responsibility for the wellbeing of society and nature.

In the previous article, I introduced the economy for the Common Good, a holistically ethical economic model, which makes the common good, a good life for everyone on a healthy planet, the economy's primary goal and purpose.

The Economy for the Common Good - Of means and goals and constitutions

A key aspect of this concept is that businesses should be values-driven rather than driven by profit maximisation and financial growth. According to the ECG's vision, a company can only be successful if it simultaneously makes society more successful, i.e. contributes to the common good. To assess this, the ECG has developed a concrete and proven tool: the Common Good Matrix. It measures to which degree a company lives and promotes constitutional values such as human dignity, sustainability and democracy. These are analysed in detail concerning its five main stakeholder groups, as shown in the graphic.

Figure: Common Good Matrix: Assessing business contribution to society and planet

The Common Good Matrix is a model of organisational development and evaluation of ethical business activity. It describes 20 common good topics and provides guidance for evaluation according to common good standards. Together with the matrix, the ECG has produced a 100+ pages manual with detailed explanations on how to conduct the evaluation in each of the 20 common good topics.

In the process, a 'Common Good' report is prepared, i.e., a comprehensive documentation of a company's common good orientation. Each theme describes how the individual values are lived out vis-à-vis the respective stakeholder groups. Additionally, a points-based scoring is conducted along the matrix. A maximum of 1,000 common good points can be obtained. Negative points are assigned for practices that harm the common good, with the lowest at minus 3,600 points. A net of 0 points represents the minimum legal standard for the industry.

Sustainability efforts of DAX companies fall short and thus endanger their future

The ECG balance sheet involves a two-stage process. The company drafting the report first evaluates itself (optionally supported by an ECG consultant), and an outside assessment through an external ECG auditor follows. The detailed report and the rating combined constitute the Common Good Balance Sheet. Once audited, it is published so that the company's contribution to the common good is demonstrated, transparently.

More than 600 companies worldwide have completed their Common Good Balance Sheet. Among those is Elobau/Ensian Group, an international producer of sensor technology, machine safety and operator controls, with 950 employees. Its ECG report and rating, scoring high at 602 point, can be viewed online (in English).  Other certified companies include outdoor fashion producer Vaude , data centre infrastructure provider Prior1, Sparda Bank Munich or the German national daily newspaper Taz.

The common good balance sheet serves companies as a tool to holistically, sustainability and to practically implement it in the company.

In a German Global Compact Network survey, 72 per cent of respondents consider the SDGs relevant for their organisation. But only 13 per cent have identified suitable tools to help them implement the SDGs. The ECG, with the Common Good Balance Sheet, offers such an instrument. It is well-established, proven, measurable, comparable and transparent. Moreover, it is open to further development and improvement.

Producing the ECG balance sheet, in addition to a financial balance sheet, is a useful tool to analyse a company's status quo, and focus on improvement potential: it forms the beginning of an ongoing, value-driven development process. The goal is a continuous improvement process for all areas of the company and its stakeholders.

Today, ECG certified organisations see the primary benefit of their ECG certification being that they are assuming responsibility for people and the planet and are actively contributing to positive societal change. Additionally, companies are using the matrix as an organisational development tool which gives them a 360° view of the organisation. And companies also state further benefits, such as greater attractiveness for new applicants, higher employee satisfaction and retention rates, and increased productivity (simply due to greater motivation, lower stress levels and reduced sick leave).

External benefits include stronger supplier relationships, marketing opportunities (showcasing genuine CSR commitment) and better customer relations and retention, leading to greater resilience of the company.

That sustainable companies are more resilient in market turmoil was confirmed by recent BlackRock research.

Last but not least, companies strive for innovation and future orientation. With the Common Good Balance Sheet, companies become pioneers through sustainability innovation.
In select municipalities or regions (e.g. Valencia, Spain, or South Tyrol, Italy), ECG certified companies receive political support and gain further advantages such as funding for research projects, priority in public procurement and support from economic development agencies. Through its work at the political level, the ECG initiative aims to achieve more such rewards for positively certified companies, including tax advantages or preferential loan conditions.

Today, there are many sustainability reporting methods, including the Global Compact, EMAS, GRI, OECD Guidelines, B Corporations, ISO 26001 etc. They all have slightly different focus areas and objectives and while intentions to make positive impact is the same, they have varying levels of required commitment.
The risk in this approach, without a level of commitment to transparency, is that such assessments and scorecards become empty marketing tools, rather than instruments for change management (e.g. human rights violations, health risks or the violation of labour standards are often ignored while companies choose to expose their good actions only). The arbitrariness with which reporting standards can be chosen creates competitive inequality. Those who voluntarily report more and meet ethical requirements line up next to those without the same level of transparency, confusing consumers, customers and investors. It's scary, after all, no company is perfect but the commitment to 'do better' is essential if we are serious about sustainability.

Sustainability reporting needs to be holistic, measurable, comparable, binding, independently audited and even offer the possibility of legal consequences.

Economy for the Common Good strives to be the gold standard and aims to raise the bar in ESG scoring and commitments. It is working at the political level to drive a harmonisation of sustainability reporting standards, aiming to establish a global ethical balance sheet.

There is little doubt that this would establish a new corporate culture driven by cooperation, appreciation, respect, solidarity and recognition of our planetary boundaries.

For more information on the economy for the Common Good and the Common Good Balance Sheet, visit www.ecogood.org - or contact me directly (k.grimme@perspectivesahead.com).

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