The five reasons benchmarks work
With an ambition to benchmark companies against their contributions to the SDGs, the WBA has the privilege of wading in tested waters. The Access to Medicine Index was a pioneer in its approach to corporate benchmarking, soon to be followed by the Access to Nutrition Index, the Access to Seeds Index, the Corporate Human Rights Benchmark and others. The WBA can draw upon these examples to display both how and why this idea works. They have shown that benchmarks work for five core reasons: First, benchmarks clarify what society expects from industries and companies. Second, they clarify where and how companies can contribute to sustainability. Third, they promote a race to the top. Fourth, they help track progress. Fifth, they are a proven and effective engagement tool.
1. Benchmarks clarify what societies expect from industries and companies
Companies often deal with a wide range of stakeholders with diverging expectations and priorities. Through an extensive multi-stakeholder consultation process, benchmarks can identify common ground among key stakeholders and build consensus around these expectations. Benchmark methodologies can then translate these expectations into clear metrics, providing companies with a path forward. As one corporate participant in the New York consultation noted, “a benchmark would help us understand where the gaps are for us and what stakeholders want us to focus on.”
Experts agree that promoting smallholder farmer productivity holds the key to achieving SDG 2 #ZeroHunger. The seed industry can contribute significantly to achieving this goal. But how to change the mindset of an industry that long has overlooked or ignored the needs and demands of small-scale farming? The Access to Seeds Index choose to take a regional perspective and included smaller, regional seed companies from Africa and Asia in its benchmarks that demonstrate that inclusive business models are possible that work both for seed companies as well as for smallholder farmers. By shining a light on this segment of the seed industry these regional companies not only set an example for their global peers, it also provided them a platform to demonstrate their strengths and track record to a global audience of donors, financer and other potential partners.”
– Access to Seeds Index on how benchmarks clarify what societies expect from industries and companies
2. Benchmarks clarify where and how companies can contribute to sustainability
The potential contribution of an industry to sustainable development is influenced by an industry’s core business and position in the value chain. This both determines and limits the influence of industries and companies. Benchmarks clarify the role of companies in achieving particular SDGs, but also highlight the responsibilities of other stakeholders. This in turn helps companies prioritise action, which maximises their contribution in a way that is efficient and effective. “You can spend hundreds of millions of dollars on CSR without having much of an impact,” noted one participant in the Nairobi consultation. Provided they are robust, credible, and provide a fair and scrutinised analysis, benchmarks are powerful tools to raise awareness on an issue and shape the debate around what industries can do about it.
“The overarching aim of the Access to Nutrition Index is to provide anyone who is concerned about addressing issues like obesity or undernutrition with an objective picture of what companies are doing. Both what they are doing well and where they can improve. With that, it is possible to identify where additional interventions may be needed. This may be by companies, or by identifying areas of further research for academics, or changes to government policy. Although, because there are so many different factors, it is difficult to attribute changes companies make to the Index itself the Access to Nutrition Foundation (ATNF) tracks impact through verifiable corporate actions and then measure behaviours as well. There is quite a bit of dialogue between ATNF and the companies, and this shows how the index is an effective engagement tool and not just about putting out results for companies to include in their annual report. ATNF engages with companies beyond just publishing the index. Companies are offered the opportunity to speak with experts on the ATNF team and receive input on how they can improve and why they think they scored the way they did. ATNF has produced three global indexes in 2013, 2016 and 2018. Looking at progress over that time whereas the average company score in 2016 was 2.5, in 2018 this jumped to 3.3.”
– Access to Nutrition Index on how benchmarks clarify where and how companies can contribute to sustainability
3. Benchmarks promote a race to the top
The league tables that are derived from benchmarks leverage the forces of competition to improve corporate performance; leaders are motivated to do more, while laggards are motivated to catch up. The cyclical nature of benchmarks provides companies with a strong incentive to improve and show progress over time. For top-performers, the results can be used as a source of competitive advantage while low rankings can act as a “wake-up call”. Used in the SDG context, this effect could give companies a powerful incentive to improve their sustainability performance and promote alignment with the 2030 Agenda, as well as help reduce the SDG investment gap.
“Our first benchmark acted as a catalyst in many areas: Consultancies have revealed that benchmarked company scores (and a need to improve) have been raised at the board level and driven improvement plans, while non-benchmarked companies like Mars Inc have brought in external support to assess them against the CHRB Methodology, establishing their performance against peers and identifying where to improve. Elsewhere, the methodology has been adapted: The Australian Centre for Corporate Responsibility publicly ranked 20 top Australian companies, since tied to successful shareholder resolutions aimed at improving human rights in the supply chain, while in Sweden the methodology was used to assess State Owned Enterprises and to push them to improve. The impact of a well-developed methodology can clearly help promote a race to the top; in and beyond the list of companies assessed.”
– Corporate Human Rights Benchmark (CHRB) on how benchmarks promote a race to the top
4. Benchmarks help track progress
The routine issuance of league tables helps to show progress both relative to peers and to societal expectations. As one participant at the Buenos Aires consultation pointed out, “the benchmark is not just a ranking; it’s also showing the gap.” This kind of exposure allows companies to learn from benchmarks and use them to progress. Participants in the Amsterdam consultation emphasised that benchmarks can bring important added value by informing and defining corporate strategy.
“Equileap was set up to accelerate progress towards gender equality in the workplace and to cut the 217 years the World Economic Forum estimates that it will take to achieve equality. Equileap scores public companies on their progress towards gender balance and equality. The aim of this is to drive increased gender equality in companies by fostering competition between them, enabling them to find out how well they are doing and where they can improve. We also provide investors with the tools they need to invest their funds with a gender lens. In this way Equileap seeks to harness the immense power of global capital to help bring about gender equality. Our data gives financial intermediaries the information they need to create new gender lens investing products, investing in companies that lead the way in this field. We can already see from Equileap’s work that public companies are gradually becoming more transparent about their efforts to achieve gender equality and that increasing numbers of them recognise that there is a strong business case to address gender equity. Regularly tracking progress is important to ensure this positive trend continues and companies are encouraged to step up their efforts to promote gender equality.”
– Equileap on how benchmarks help to track progress
5. Benchmarks promote dialogue and are a proven and effective engagement tool
Benchmarks build on extensive multi-stakeholder dialogue. “The conversation about what constitutes a good contribution to the SDGs amongst key stakeholders is as important as the benchmark itself”, noted one of the respondents of the sustainability influencers survey. This sentiment was echoed during the New York consultation: “the real value lies in the dialogue that is created before, during and after the benchmark.” Providing all stakeholders with easy-to-use, reliable and comparable information empowers individuals and organisations to exert their full influence to improve corporate sustainability performance. Both investors and civil society frequently use benchmarks and league tables to engage companies and promote corporate change.
The Workforce Disclosure Initiative (WDI) was created in response to investor concerns about the lack of meaningful, comparable data on workforce management. By encouraging companies towards a more standardised approach to workforce reporting, our aim is for investors to be able to access the data they need to engage effectively with companies on how they manage their workforce. The WDI is coordinated by responsible investment charity ShareAction, and run in collaboration with Oxfam, SHARE, RIAA and other allies. ShareAction has been carrying out benchmarks for the past decade and we find them to be a valuable engagement tool. Whether for investors, companies or wider stakeholders, they’re effective for driving attention and progress on key issues. We’ve seen them work incredibly effectively, for example when progression within the benchmark has become integrated within team and individual performance indicators. They’re a great way to help set targets for improving practical performance. The WDI’s goal is to increase the public availability of workforce data in order to help drive improved conditions for workers, both in direct operations or supply chains. It is not yet a benchmark, but both companies and investors see the value in this becoming the case.
– The Workforce Disclosure Initiative on how benchmarks are a proven and effective engagement tool
As 2030 quickly approaches, pressure is mounting to accurately measure the impact of companies in relation to the SDGs. A key insight from the WBA consultation phase is that benchmarks are expected to play an increasingly greater role in helping to deliver corporate alignment with the SDGs. Results from the online surveys suggest that benchmarking and other rating exercises are going to be increasingly important in the future, with around two-thirds of sustainability influencers expecting them to play a more important role over the next three years. Inputs from the consultation phase, combined with the WBA’s existing knowledge of benchmarks already in effect, have confirmed the five hypotheses surrounding the advantages of benchmarks when it comes to aligning corporate action with the SDGs.
This article was part of the final publication we published in September 2018, prior to our launch. You can read the entire publication below, to find out what we have learned, what insights people gave us and how we experienced our consultation phase.