8

The New Accountability

The Marshall Plan, or as it was officially called, the European Recovery Program was as visionary as the secretary of state and Nobel Laureate who led its creation. General Marshall had experienced firsthand the human toll, environmental ravages, and economic destruction of world war. He spoke eloquently of a broken Europe, garnering support for policies that helped the region rebuild itself, in the full knowledge that this was more than a charitable act—it was pragmatic. Getting the European economy back on its feet was vital to America’s own economic and national security interests. This is as true today as it ever was. Healthy economies everywhere are mutually dependent.

Here’s the big difference today. We are no longer distant from the “plight and consequent reactions of the long-suffering peoples.” Thanks to real-time digital media, we are closer to them than ever before. The person in the street can feel direct consequences from individual and corporate financial decisions, whether it’s a product purchase, fuel consumption, or a company’s worker safety record. A virtuous and unstoppable flywheel of cause and effect is gaining momentum; easier access to knowledge about enviro-social consequences has created a hunger for it, and this conscience-driven demand fuels the innovation of solutions that deliver even more access to knowledge and insight. With such awareness comes the expectation that business will be a positive force in the world. Every business will require its form of a Marshall Plan.

In 1970, Nobel Prize–winning economist and patron saint of free market capitalism Milton Friedman made a now iconic statement in the New York Times: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” (Emphasis mine.) Notice that even the laissez-faire Friedman acknowledged a degree of moral contract between the enterprise and its ecosystem.

I personally believe Friedman’s statements were well intended, even if his comments, taken out of context, make him sound like a meanie to our ears in this, our supposedly more enlightened century. Friedman simply didn’t believe it was the job of business to proactively and directly change society. He felt business should stay out of the way but play fair. When businesses played by the rules (and the rules were set by government) and focused on a singular motivation—profit—those entities that were purpose-built to solve social ills could get on with it.

What Friedman couldn’t have imagined was the growing power of the citizen and the customer that the Internet would unleash across the world. (“He simply wasn’t,” says the CEO of an international technology provider with whom I’m debating economic theory, “a CMO.”) Despite the social upheavals of the late 1960s, or perhaps because of them, it seemed rational and even starkly visionary to suggest that open and unregulated supply and demand would ultimately stabilize society by providing a fair and balanced economy. Consumer demand itself had yet to be informed by social empathy or environmental concerns. The world had yet to experience the media and activist magnification of massive and ecologically destructive corporate accidents along the lines of the Exxon Valdez or Bhopal disasters, probably all of which created mass outrage and contributed to the increased volume of a public call for more proactive corporate responsibility. He couldn’t have imagined how virtual proximity to the suffering of others would invoke a sense of personal accountability for the purchases we make.

He certainly couldn’t have predicted the spectrum of holistic social and environmental impact analysis tools that the global accountancy and financial reporting industries would be compelled to create. There’s no question that the rules of the game Friedman refers to have changed.

The Conscience Economy will be more globally collaborative and participatory than any economic era that preceded it. This is not merely because it’s easier than ever to jump in with an opinion, or because it feels good to flex our newfound digital and social empowerment. It’s more collaborative because the world is more connected in real time than ever before. Business especially. The interdependencies and accountabilities that are the basis of productive enterprise are more clear to more people than ever before. We simply know more. And with that knowing comes an increased feeling of closeness to and responsibility for the well-being of others. This trajectory is set not only to continue but to accelerate.

Indeed, as many business leaders have already acknowledged, there is a revolution underway in the way financial performance is measured, not only in terms of the profitability, risk, and long-term value of the enterprise, but in assessing and tracking financial investments.

Measuring the consequences and outcomes of complex interactions between businesses, suppliers, transport, natural resources, communities, workers, and governments is no mean feat, especially given that much of the impact reveals itself more qualitatively. While the C-suite requires concise facts and bulletproof figures in order to make decisions, the correlations between qualitative results and financial business performance are, at best, fluctuating signals, because fluctuations in social and environmental circumstances (for example, a major storm, a factory accident, a change in political regime) shift social context, sense of urgency, and behavior. This much-talked-about era of continuous volatility that businesspeople are navigating is in no small part due to tightened interrelationships among all the factors that drive business growth. The more seemingly erratic the contingencies that impact value growth, the more unstable things seem.

I say “seem” because stability, of course, is relative. It’s long past time to abandon any expectation for linear, predictable progress, comforting as the notion is. It is also long past time to abandon the debate between “pure” free market capitalism (which has never existed anyway) and government interventionist regulation. Adam Smith’s “invisible hand” is no longer invisible. It has revealed itself. The invisible hand is us, the connected citizens of the world, held out metaphorically and digitally—thumbs up, thumbs down. We like, or we don’t like, and we let everyone else know. We vote for the outcomes in which we most believe, not only with our voices but with our wallets.

Good Relationships

I fire up the BBC app on my iPhone to see the latest news from CES, the influential annual consumer electronics conference in Las Vegas, and the lead story catches my eye. Intel, the world’s largest chip manufacturer, has just announced to the world that in 2014, all the chips it ships will be “conflict free.” CEO Brian Krzanich is urging the “entire industry” to follow suit.

To be fair, Intel is not the first electronics manufacturer to sound the alarm on “conflict minerals,” which traditionally include gold, tungsten, tin, and tantalum. Indeed, Nokia, Apple, HP, and most major global electronics manufacturers have signed on to the OECD (Organisation for Economic Co-operation and Development) protocols as part of their membership in the Electronic Industry Citizenship Coalition.

Still, what’s astonishing to me is not the drama of the announcement itself, but that it garners significant column inches in the highly competitive tech news category. Microchips have joined the crusade for societal betterment. This represents a new phase of business logic: the mainstreaming of societal values manifest through business.

It will come as no surprise that I am unabashedly delighted about the increasing social zeal among business leaders, but for all the encouraging signs, I cannot shake a nagging curiosity about how business leaders rationalize this priority to their boards. When I mention this to a friend over a coffee, she says, “Talk to Kevin Murray—he’s been involved in this work for decades.”

Kevin is both an author of two books on leadership and the chairman and CEO of the aptly named Good Relations Group, a company that offers a portfolio of services including C-level leadership coaching, strategic advisory services, and brand and public communications.

We meet on a chilly day in his office in Central London, a view of dour-looking gray Edwardian office buildings in the background. But our conversation quickly takes us far from the wintry murkiness to a bright and hopeful South Africa, where Kevin is from and where his career began as a journalist for a newspaper with an editorial point of view opposed to apartheid government. There were police visitations, banned stories, threats “During the Soweto riots,” Kevin says, “we went into the township, hidden in the trunk of a car that followed the police in. You fool yourself into thinking you’re actively doing something, but actually you’re just reporting.” But one of the things he found himself increasingly reporting on was the growing trend of businesses making decisions that were counter to apartheid law. “It was,” he reflects, “the only practical thing to do for business.”

The eventual overthrow of apartheid, in no small part due to pressures exerted on the government by global businesses, changed Kevin’s life and career. He became a convert to “the whole idea that business could be a force for good.”

He moved from the newspaper into reporting for corporate and trade publications, which eventually led him into the belly of the beast: working in strategy and communications directly for some rather “controversial” industries (his word, not mine), including big pharma and nuclear energy. “Having to go out and talk to local communities on behalf of a business, and relate to their concerns about building a plant that could put toxic chemical fumes into their immediate environment—that’s front-end relationship building. It’s genuine and palpable. And at the end of the day, the only way people would let you do anything is if they trusted you,” says Kevin.

Corporations touch—and thus can either hurt, or help—so many people, whether employees, partners, suppliers, customers, vendors, or citizens and community members. “It’s not about stakeholders,” Kevin finally says to me, “it’s about relationships.” Just that simple shift in language suggests a more human and conscientious approach to business.

Stakeholder management, as Kevin says, is rational, while relationships are emotional. The corporation has the power to take a stand, establish cultural biases and moral value systems, and deploy them to deepen trust and improve the effectiveness of these relationships. I ask him if this is all a bit too fuzzy for the hard-nosed business executive to stomach. He smiles. “What’s the total value of all listed companies? Sixty trillion dollars? How much of that value is intangible?” He’s referring to things like customer loyalty, brand value, future earnings potential, risk profiles. “I believe $30 trillion of global business’s worth is in what I’d call soft capital. And no one wants a deficit in soft capital. Trust has a real monetary value and directly impacts cash flow.”

Trust, as a multiyear Global Monitor study completed by Kantar’s Futures Company shows, indeed has monetary value. A 1 percent increase in trust—as evidenced by customers’ stated perceptions of both a company’s reputation and behavior, and their feelings about brands—can generate a 3 percent increase in business value. This increase is attributable to such things as consistency of repurchase, the increased success of up-selling and cross-selling, and the effects of consumer advocacy.

But the current trust trends should be worrying, because globally, trust in corporations is going down, not up, according to Kantar’s year-on-year research. Seventy-one percent of consumers worldwide believe that companies will take advantage of them if they feel they won’t be found out. The most trusted category of business—surprisingly, this is the tech sector—enjoys a 43 percent level of trust. That means that nearly 60 percent of people surveyed worldwide state that they don’t trust companies in the sector. The least trusted category—banking—has just a 6 percent trust level. Meanwhile people’s sense of agency—the impact they can have through the choices they make—is on a year-on-year rise. Sixty-four percent of people worldwide believe that they can “make a difference in the world around me” through their purchases and actions. In the U.S., that figure jumps to 73 percent. While there’s clear decay in trust, the sense of agency—and the willingness to act—is on the rise.

Business is ultimately a network of human relationships. Some of these fall into the category of first-level, or first-order, relationships: those people who directly interact with or work for an organization and are directly impacted by its operations. These include employees, citizens, customers, investors, vendors, and even key competitors. First-order relationships have been on the radar for some time. But in our hyperconnected world, second-order relationships are of increasing importance. These relationships are indirect, and experience second-order impact. They include local communities, employees of suppliers, suppliers to suppliers, governments, local institutions like schools and hospitals, and fellow industry colleagues. In a hyperconnected world, these relationships are of increasing importance. And they can be more difficult to track. But it’s not impossible.

Measuring the Immeasurable

The classic Six Sigma adage “If you don’t measure it, it doesn’t get done” gets a slight semantic makeover in the Conscience Economy: in order to manage it, you need to monitor it. The Conscience Economy business needs a new dashboard. Future-proof businesses must reconsider and redesign their accountability infrastructure.

The paradigm of the “economic externality” is being turned on its head. In the Conscience Economy, externality becomes materiality. To put it in layman’s terms, everything a business does matters. It all impacts the bottom line.

In the Conscience Economy, a business commits to being environmentally and socially sensible for a host of reasons: because business relies on limited and often fragile natural and social capital that must be managed; because the practice exceeds customer expectations; because it is brand differentiating and builds trust; because it provides a guiding mission for innovation; because it attracts and engages talent; and, ultimately, because it’s the right thing to do. The new reality of operational interdependence, resource fragility, and individual empowerment means that doing what’s best for the whole business ecosystem (which includes natural and social capital) is just how it’s done. The correlation of environmentally and socially sensible business practices with profit is set to become a given, although the levers will be different depending upon your offering. In the Conscience Economy, as a business, you must sustain profitability, but never at the expense of social or environmental outcomes.

An historic example of businesses aligning to take accountability for social progress came in 1977, when a consortium of global businesses signed onto the Sullivan Principles, created by an American theologian. This act put pressure on the South African apartheid government to abandon the injustice of its system. But what about things going the other way? Business can impact good, in clearly measurable ways. But can good impact business in a comparably measurable way?

Establishing a link between conscientious business practice and profitability has long been, as you can imagine, the holy grail for CSR professionals and corporate idealists. The quest for a holistic set of standards began in earnest in the 1980s, when CSR was becoming professionalized. For decades, practitioners have combed through numbers, looking for correlations that prove a quantifiably defensible case for good corporate citizenship.

As the CSR discipline was ascending, this quest made perfect sense, because intuition would suggest doing good is simply good business, and good business should be profitable. Meanwhile, no department—particularly one with such missionary zeal for changing the world—wants to be perceived as a nice-to-have function but, ultimately, a cost center. However, quantifying intangibles in the same way that we can quantify hard assets—no matter how intuitively we may feel there is a value in those intangibles—is a notoriously tricky prospect, not least because most boardrooms aren’t exactly hospitable environments for qualitatively sourced evidence. Hard quantitative evidence—the kind you can break down and add—is the universal language of business accountability. Counting is what ultimately counts.

The problem is, counting looks backward, not ahead. Counting is something you do after the big decisions have been made. How much product is still in the warehouse? How much sold? How much didn’t? How much cash is in the bank? How many employees are on the payroll? If counting were an accurate predictor of future business success and not just an assessment of past performance, then theoretically, no big business would ever fail unless it truly botched on execution. Of course, we know that great big hairy intangibles—like sudden shifts in consumer expectations—are what ultimately drive customer demand, the “utility” motivation that underpins all current economic theories. That which is hardest to count or hardest to measure is also that which is most fundamental to the assessment of future business performance.

Meanwhile, for the last ten years, the meme of “true cost economics” has been gaining ground. A manifesto propelled itself onto the web around 2005, proclaiming the necessity of calculating the hard financial costs of environmental and social consequences of business production—and converting the results of the calculation into corporate tax liability. However that makes you feel, it’s worth noting that the idea has steadily moved from the progressive sidelines into mainstream conversations—not only in academia, but across the accounting industry—about financial accountability, particularly as it relates to mitigating future risk and creating more stable growth forecasts. In the future, smart businesses will track a wide range of costs and benefits that are consequent with its various operations and strategic decisions, in addition to its bottom line. These might include, for example, environmental impact and its potential to augment or compromise profits as well as workforce well-being and its impact on near-term productivity. The ultimate intent: a more accurate picture of both the current and future bottom line.

What if we’ve been looking at measurement principles from the wrong angle? The very search for a pattern of correlation between improved corporate citizenship and a rise in profit implies that doing good is an “add-on,” a “nice-to-have” incremental investment of time and resource. An enterprise initiates a program that diminishes negative environmental impact, and then it asks, “Was it worth it?” as it looks for evidence of a correlating rise in profitability or value share.

This, the typical approach to measurement and reporting, is firmly entrenched in looking back on the comfortable certainties (even if they depict uncomfortable truths) of past performance. It’s the proverbial driving-by-looking-in-the-rearview-mirror. It’s a well-used crutch. Metrics illustrating past performance are used to rationalize decisions. Too often, measurement gets in the way of understanding rather than enriching it. Nassim Nicholas Taleb has famously stated that the past is no accurate predictor of the future. In the Conscience Economy, business expends the bulk of its energy looking forward, using a real-time dashboard of analytics that support its mission to do its part in making the world better for all humanity. Just as an actual dashboard shows when we’ve breached the speed limit, the new accountability dashboard will show when we’ve begun to do harm.

What every future-proof business needs is a redesigned accountability infrastructure.

That infrastructure includes a clear map of the relationships that are being tracked and forecast, a set of tools for monitoring performance and making business decisions, and a reporting framework for upholding accountability to customers, investors, employees, and indeed, everyone else.

Dimensions of Accountability

You won’t be starting from scratch: when it comes to measuring and monitoring social and environmental impact, the challenge is not one of scarcity but rather one of overabundance. Indeed, once you start looking, there are an almost overwhelming number of industry associations, reporting pilot projects, codes of conduct, political affiliations, certification standards, and analytical frameworks. None is perfect. All are works in progress. Several openly compete for legitimacy. Regional variations of enforcement methods are generally linked to regional cultural stereotypes—er, norms—i.e., the Europe-based associations bake in strong government involvement, while North American–founded alliances and certifying bodies place the power of enforcement in the hands of businesses themselves.

Here’s an example of a quibble between two business citizenship alliances in the apparel industry that would be humorous if the circumstances that gave rise to them weren’t so serious. In 2013 the Rana Plaza factory collapse in Bangladesh, which killed more than 1,100 people, catalyzed nearly all the mainstream “fast fashion” retailers in Europe to sign the Accord on Fire and Building Safety in Bangladesh, stating that they won’t condone manufacturing in unsafe conditions and will directly involve themselves in safety inspection. April 24, the anniversary of the tragedy, has even been declared Fashion Revolution Day by an international consortium, with impressive marketing support and publicity. Are these initiatives signifying accountability or savvy brand building? It’s the fashion business, after all.

These kinds of responses to what is inarguably inhumane may sound good to the general public and generate positive press, but it’s tough to live up to in the often more byzantine business systems of developing economies. Differing concepts of accountability, corruption, and governance make it challenging to monitor and enforce even the most strict and well-intentioned codes of conduct. North American companies like Walmart and Gap refused to sign the European document, creating their own accord for the Alliance for Bangladesh Worker Safety, which, according to the Europeans, lacks legally binding accountability, relying instead on the goodwill of the business itself to uphold the principles of the accord. In time, however, citizens and their wallets will be the enforcing body. The tragedy of compromising worker safety in the interest of cost savings are as old as industry itself, but the noise level is rising, and it’s becoming front and center for people.

Today, market research suggests that although people find these stories appalling and expect business to do something about them, most are unwilling to make a sacrifice—and this includes paying a higher price—for badness-free products. And you know what? I wouldn’t either. The key here is the statement “pay more.” Why should we? Shouldn’t conscientious business operations be a given? I know no business leader who wouldn’t agree that worker safety is a business responsibility, not an add-on.

Still, Primark, one of the world’s leading “fast fashion” retailers, has seen profits rise by 14 percent in the year since the disaster. It’s tough to reconcile competitive pricing pressure with the cost of safer business practice, at least today. Passing on the cost of conscientious business practice to the customer, unless you’re a luxury brand built upon the margin of meaning, is likely to backfire. But in the Conscience Economy, the cost of environmentally and socially sensible business practices is likely to fall as new technologies make conscientious operations easier and more efficient. For example, “near-shoring” and even “re-shoring” manufacturing is on its way, eliminating some of the current challenges with enforcement of codes of conduct.

The ability to enforce is the biggest issue when it comes to holistic accountability, particularly when it comes to suppliers that operate in cultures with radically different value systems around health, safety, and physical infrastructure. The undeniable reality is that cheap manufacturing environments are rarely situated in high-functioning, low-corruption democracies. Supplier codes of conduct are tougher to enforce than those at a company’s own factories. But the combination of market demand with new, connected monitoring tools and technologies—coupled with innovation that generates new manufacturing capabilities that increase efficiency and lower cost—will take friction out of the process. Progress toward holistic, trackable, enforceable accountability will be unstoppable, because it will be driven by the ultimate source of value—human motivation.

Reporting Frameworks

Despite the proliferation of different techniques and methodologies for measurement, three terms have risen to the top of the pile in the quest for a consistent approach to categorizing and analyzing metrics: triple bottom line; ESG, which stands for environmental, social, governance; and integrated reporting. Every business leader across every function should be as conversant in these three concepts as they are in profit and loss.

Triple bottom line typically refers to an internal enterprise accounting framework that acknowledges real-cost economics. In other words, it includes the environmental and social costs of company operations as part of the balance sheet. “People, planet, profit” is an easy mnemonic device for remembering what the triple stands for. Companies that ascribe to the triple bottom line concept pay at least passing attention to their environmental and social contribution in their financial reporting, although triple bottom line is largely a term and a philosophy, rather than a standardized methodology.

ESG is a term that refers to a data gathering and reporting framework used by impact investors and those assembling and tracking vehicles like ethical or environmentally focused mutual funds. The concept of ESG is more commonly used when assessing company performance across these dimensions from the outside, but the categorization can also be applied internally.

Integrated reporting is simultaneously a reporting framework, an analytical methodology, and a movement in the global accountancy field. It’s a buzzy, and I’d even say chic, term; drop it into conversation with your CFO or your accountancy firm and see what happens. The integrated reporting movement aims for integrated reporting to be adopted as the global standard for financial reporting with near missionary zeal. Born out of the aforementioned concept of true cost economics, an integrated report includes not only a holistic set of costs associated with the environmental and social consequences of business operations, but also includes assessments of future innovation potential, the stability of future resources, the well-being of employees—essentially, all the components that provide a picture of the overall health of the enterprise. It has emerged from an impressive coalition of companies participating in a pilot of its framework, and is facilitated by an international professional organization called the International Integrated Reporting Council (IIRC).

If you’d like to speak like a Conscience Economy native, know that these three terms can be used interchangeably. As in “Our business is driven by the triple bottom line. We’re proud of our track record on ESG issues, and we’ll be including them in our first quarterly integrated report.”

Industry Alliances

A host of well-intentioned and sometimes even visionary industry alliances and coalitions are a potentially effective means of driving conscientious change. Your business may already be a member of such an alliance; the question is, is it a checked box or is it representative of your business’s truest intent? Membership in the best of these organizations requires more than a subscription fee; in order to be impactful, the business must commit to the creation and deployment of a “management system” that ensures compliance with stated goals of the coalition. Management systems include such requirements as the assignment of accountable individuals within your organization, clearly stated objectives for improvement, regular documentation and reporting, audits, and procedures for corrective action should goals not be met or violations occur. For example, the initiative for conflict-free minerals that Intel so proudly advocates is a product of one such alliance, the EICC—the Electronic Industry Citizenship Coalition.

Codes of Conduct

Another modality for establishing at least the basis for and intent of Conscience Economy business accountability is codes of conduct authored by individual companies or agreed to by a set of signatories to a coalition. Whether a business chooses to go it alone or join the force of a broader alliance, codes of conduct establish useful principles not only for reporting, but for making strategic, enviro-socially sensible management decisions.

They are usually emotionally stirring documents replete with imagery of healthy forests and well-cared-for workers. They read like the American Bill of Rights, but because they span transnational boundaries, they are theoretically only enforceable through contractual agreements with local suppliers. They can overcome local custom, but not local law. They can, however, exert pressure, and indeed, are a core weapon in enlightened business’s fight to make the world fairer and more amendable to the innovation that accompanies democracy and personal liberty. A simple Google search will pull up nearly any publicly traded company’s supplier code of conduct, just as the corporate website features a page on core values. In the Conscience Economy, such codes of conduct will become ever more front and center as statements of a business’s value system made manifest in its operational approach. Indeed, these codes will be a key tool for matchmaking not only customers with brands and products, but for incentivizing innovation for social good.

Measurement Tools

The field of impact investing has yielded some of the most sophisticated trackers and metrics in the space, because by definition, impact investing is “pure” Conscience Economy. Its very existence is to drive positive and sustainable change while upholding the highest standards of reporting accuracy. Indeed, it’s pragmatic for tools from the field of impact investing to be deployed within the enterprise as part of management decision making.

Impact investing as a growing category has begun to adopt more broadly accepted standards and principles. Currently, commonly used reporting standards with impressive lists of signatories include the social and environment risk-management framework called the Equator Principles; the Impact Reporting and Investment Standards (IRIS) put forth by the Global Impact Investing Network; and the Principles for Responsible Investment, which were established and ratified by the United Nations.

I have no incentive to push any particular company’s portfolio, but as of this writing, one of the most complete suites of proprietary investment analysis tools is provided by MSCI; these tools provide a broad range of proprietary indices for investors to customize, based on performance benchmarks in relation to a range of ESG issues, from weighting companies based upon a positive environmental record to excluding companies involved in human rights abuses or even the manufacture of “controversial weapons.”

If you don’t regularly research investments by screening for particular aspects of a company’s operations, you will find MSCI’s website an eye opener. Indeed, the list of screens offered for filtering their research would look right at home on an ironic hipster tee shirt. But it’s anything but ironic. You might even find it slightly unnerving. It goes straight to a wide range of values—some of them polarizing—that many people hold close.

“Clients can set screens on any degree of involvement in these businesses, or set revenue thresholds:

• Abortifacients
• Abortion Provider
• Adult Entertainment
• Alcohol
• Animal Welfare
• Cluster Bombs
• Contraceptives
• Firearms
• Gambling
• Genetic Engineering (GMOs)
• Land mines
• Nuclear Power
• Pork
• Predatory Lending and CRA Research
• Stem Cell
• Tobacco
• Weapons Producers”

And so on. It got me thinking—as it should you—about the many potential positives of big data, particularly the conscientious application of business and operational intelligence. If investors today can screen companies for any degree of involvement with pork, consumers will soon be able to screen for anything that matters to them.

In the Conscience Economy, the effectiveness of an ecosystem of interdependent accountabilities is not only more business-critical—explicitly demonstrating the impact of your actions on each of these accountabilities is vital. The conscientious company sees itself as equally answerable to more constituencies than ever before. Today, the new accountability remains a choice for enlightened organizations and leaders. But tomorrow, it will be as much a business requirement as profit itself. In South Africa, listed companies are already legally required to submit an integrated report on a “comply or explain” basis. And the global accountancy field is beginning to adapt its offering to address the growing demand from investors for visibility into longer-term financial performance, and factors including environmental and social capital are indicators of stable growth.

There’s no question about it: it’s hard work to engage and support a complex and interdependent ecosystem of relationships to achieve customer delight, profit, and measurable enviro-social impact. Indeed, a common CEO complaint, when confronted with the range of relationships and accountabilities that should be considered not only for quarterly reporting but regular management decision making, is, “That’s creating more work.”

But a blend of sensors, smart monitoring, improved quantitative data integration, and real-time qualitative feedback delivered through automated systems as well as social media will make it not only possible, but easier, to construct new management dashboards. As more operational processes become digital and therefore trackable, new analytics will laterally correlate performance outcomes of a broad range of business factors, from customer satisfaction and advocacy to pricing elasticity to environmental and social impact.

Good Intentions

Like any step in a new direction, it all starts with intent. In his work with C-suite executives, Kevin Murray has observed “a new wave of leader, ready to make bold decisions about social and environmental issues.” Such a leader has a clear vision for the proactive role her business can play in improving human life, society, and the environment.

In other words, before you dive in and build your Conscience Economy business dashboard, establish your business’s accountability principles. Is accountability only a means of managing employees and satisfying shareholders, or are you committed to satisfying a broader array of relationships? You make the commitment to monitoring more than just the traditional bottom line, and you commit to reporting on what you monitor.

Every organizational culture is unique—some organizations are highly fact driven, while others place a high degree of trust in intuition. It’s up to you to determine not only what you measure, but how measurement is used, and specifically how it factors into forward-looking business decisions.

Get started. Establish a task force for building a new accountability dashboard. Do not consign it solely to the office of the CFO. The new accountability crosses all functions, and cross-functional participation is vital, because increased cross-functional information sourcing will be at the heart of monitoring, forecasting, and reporting.

• Go straight to your vision. What is your most conscientious objective? Based upon that, catalogue the key dimensions you’ll need to observe, measure, forecast, and understand.
  
  
• Assess your current culture of measurement. Every organization has one. Be brutally honest with yourself: is it a means of rationalizing a decision after the fact, a guide to future choices, a check in the box, a go or no-go gateway for all decisions?
  
  
• Map your key accountabilities and relationships. Sort them by first order—those constituencies you directly engage—and second order—those who are not directly engaged but are indirectly affected by your operations. Encourage line employees to catalogue their relationships inside and outside the business as well.
• Identify natural and civic resources that your business uses, impacts, or could help restore.
  
  
• Correlate existing industry bodies, monitoring, and certification benchmarks and standards with each of these relationships. If you aren’t already, get involved in them. Do not consign this to a CSR department. Assign each member of your leadership team sponsorship of a particular accountability.
  
  
• Invite people from the range of external relationships you’ve mapped to tell you how they’d like your performance to be assessed. How will they be assessing you as a corporate citizen?
  
  
• Prototype your own “integrated reporting” scorecard and conduct your own internal pilot.
  
  
• Assign a rock star statistician to create a proprietary predictive index that correlates the measurable success of specific conscientious initiatives with an increase in customer trust, engagement, loyalty, and sales.
  
  
• Establish principles for how your integrated reporting scorecard drives not only operational strategy and daily execution, but promotional communication and employee incentives.
  
  
• Don’t fear the “soft stuff”—the qualitative, observation-based, and intuitive information. It can be the most powerful.

Even in the Conscience Economy, no business will ever be perfect. But the quality of your business relationships can be measurably improved by transparency about your intent and your progress toward achieving it.

A final and vital note: the outcome should not be reams of reports and presentations full of stats. Ultimately, the convergence of new trackable accountabilities can and should tell a powerful and motivating story. Involve communications talent—it’s probably in your marketing department—who can find meaning in the figures and translate it into a story people can understand and use in their everyday decisions.

Business operates in the service of human lives. Life generates infinite data. But life is not made of data. Life is made of experiences, sensations, and emotions. Of course the facts matter. But only when you put them in a meaningful context. Thus, stories are always more effective than stats. Because stories are more human.