Could a new set of standard ESG metrics help to improve societal trust in corporations?
The lack of snow-capped peaks is not the only difference at this year’s World Economic Forum. This year’s gathering of political and business leaders in the Swiss mountain resort of Davos marks the first time the meeting has been able to be held in person since the start of the pandemic.
For Sarita Nayyar, chief operating officer of the Forum, it could be the most important annual meeting in her 15 years with the organisation. Set against the backdrop of war in Ukraine, rising global inflation and the tail end of the pandemic, she says: “It really is a very important time in world history to bring people together, to be able to talk about some of these issues and develop solutions together.”
Although it is often criticised as being a meeting for out-of-touch elites, Nayyar still believes that the Forum can be a positive force for change. “The purpose of the Forum platform is very much about bringing together people who can work on these complex issues, so that we can help to develop common understandings, objectives and solutions,” she says.
In attendance this year are 1,300 businesses, 500 CEOs, as well as members of the G20 governments. “We have the top executives here because they are the decision-makers,” Nayyar says. “They have a lot of influence in the global ecosystem, and it’s important for them to play a leadership role in driving systemic change and creating equitable, sustainable ways of working.”
So far, much of the discussion has focused on the war in Ukraine, with the country’s Prime Minister Volodymyr Zelensky calling for more sanctions on Russia, while the UN warned of an impending global food crisis.
But another key topic for Nayyar is that of trust, claiming that it’s an issue that repeatedly comes up in the WEF’s conversations with business. “There is definitely a constant need for business to do more,” she adds. “To be able to drive that trust amongst their own employees and wider citizens.”
In Edelman’s most recent Trust Barometer, societal trust is at a low ebb, with 60% of people surveyed saying their default position is to distrust something, until proven otherwise. The majority (64%) also believe we’re at a point where trust is so low, people are now incapable of having constructive and civil debates about issues they disagree on.
Despite this wider decline in trust, business remains the most trusted institution the report studies, coming above NGOs, government and the media. Nayyar believes that the actions of many employers during the pandemic have helped to keep levels of trust in the private sector high.
“Through the pandemic businesses worked very hard to ensure they moved in directions that were more accommodating of employees, while continuing to deliver on their business goals,” she says. She contends that, at the individual level, people may have felt better supported by their employers and the business sector than government over this period.
But there is still a widely held sentiment that business is not doing enough to address societal problems. More than half of people surveyed by Edelman think that businesses could be doing more to prevent climate change, while 49% think companies are not sufficiently addressing economic inequality.
Nayyar believes that better transparency is crucial to improving trust in these areas. “People are looking to see that organisations are playing a bigger role than just delivering bottom line profits,” she says. “This is where transparency around ESG performance is critical.”
The issue was raised by Unilever CEO Alan Jope during one of the sessions in Davos. As a number of jurisdictions look to launch their own regulations on ESG reporting, he claims that it is becoming more onerous for companies, particularly for multinationals, to monitor their progress in these areas. “We are at a point of great danger right now of letting perfect get in the way of good, of letting complex get in the way of simple and of letting local get in the way of global,” he says.
Jope went on to admit that the consumer goods giant was “struggling with the most basic ability to measure these difficult-to-measure areas” – despite Unilever’s size and prior experience in this area.
This is where Nayyar hopes the Forum’s own sustainable capitalism metrics, covering the four pillars of people, planet, prosperity, and principles of governance, can help. The idea is to have a similar set of international standards for companies to measure their performance against others.
“We have a substantial project in that arena to create a globally consistent, comparable and reliable reporting and disclosure system that can really demonstrate whether a corporation is moving in that direction, and being more sustainable,” she adds. “Creating ESG metrics so that organisations across various sectors and various geographies could have common standards, can really improve trust.”
There will be a hope that improving transparency in these areas will help the private sector to retain its title as the most trusted institution.