When it comes to influencing decisions what chance did our beautifully crafted CR stories really have against those well-established, robust and assured financial metrics? It’s not to say that we in the sustainability world have not been working hard; protocols, indices and socio-economics reports have all made a difference and non-financials metrics are now often found in reward packages, but we all know that when it gets to a board room decision, we need something more. Welcome to the new metrics!
At The Crown Estate our response is Total Contribution, but before I explain what that is, I want to explain how we got there.
We realised that having a brilliant business strategy that allowed us to outperform the market and a separate award winning sustainability strategy meant that the objectives did not always match and so we dismantled both and started building a new integrated approach. Whereas we were previously attempting to answer separate questions we now agreed on one question for the entire business: ‘How do we create value in the short, medium and longer term?’ We set out our business model and identified material issues, but we still needed to work out how to measure this value.
Total Contribution set out a way to measure value across the triple bottom line. It goes beyond financial return to include the many other ways we contribute and the dependencies we rely upon. The indicators that we used can, and I expect will, change over time, and could definitely change if used by another company. It is the principles of transparency that we set out that are the most important aspect of Total Contribution.
The first principle is credit. We know that we do not have control over all of our value chain, but we have to measure it to understand where we can have the most impact. Total Contribution clearly sets out not only our direct contribution but also the indirect contribution of our supply chain and the contribution delivered on our portfolio by others (what we call Enabled).
The second principle is confidence – we cannot collect primary data for every indicator and we have to often use modelling and assumption. Therefore it is important we are clear about the level of confidence we have in the data.
The third principle is more difficult but even more important - capturing the positive and negative contribution and making sure this takes account of displacement and what would have happened anyway.
So what difference does this make?
Well, first of all, allocating responsibility across the entire value chain highlighted that the majority of the impact on our estate is derived from the activity of others and not us. Now this may not be a surprise to many of us, but having a robust way to measure this has helped us to start thinking more about the influence we have and our role as a catalyst for improvement.
We now have a common language to engage with our customers and other stakeholders that goes beyond financial outputs to include broader value. A good example is the 118 unemployed that we helped get permanent employment on Regent Street. A great CR story, but through Total Contribution we are also able to identify a £1.1m contribution to individuals and the nation.
Understanding the broader value, dependencies and impact, also helps us to make better decisions. Total Contribution identifies areas of our business where we need to do more to achieve a positive impact and the plans we develop to address these areas are now incorporating broader value creation.
So what’s next? We are piloting natural capital accounts and developing better ways to capture social value; we are updating methodologies and modelling and bringing the process in house; but most importantly we are updating our KPI’s to make sure that these new metrics make it to the board room and influence the way we do things, ultimately making us a more successful business.