Take yourself back over 500 years to a market in the middle of any medieval town.
Farmer Giles is trying to sell his goats when along comes Farmer Bob. “How many goats will you give me for my woolly sheep?” he asks.
Farmer Giles strokes his chin. “Two,” he replies and the deal is done.
Then along comes Farmer Harold, leading a cart full of apples. “How many goats will you give me for my apples?” he asks.
Farmer Giles looks surprised. “Apples?!” he asks. “Yes, apples,” replies Farmer Harold. “You gave him two goats for his sheep, how many for my apples?”
Now Farmer Harold has a cunning plan. His wants to sell his cart of mouldy apples to Farmer Giles by pretending the mould is really some new form of wool.
However Farmer Bob gets there first. “Don’t be daft, you can’t compare apples to “pairs”, especially if it’s a cartload of apples and a pair of goats. Silly man!”
Thankfully, before the scene becomes too Pythonesque, a guard intervenes and the farmers all go their separate ways.
An Inadequate Approach
Although the trade system of barter has been largely replaced by the monetisation of goods and services, the principle of comparability is as relevant today as it’s ever been.
It is especially important from the point of view of both business consumers’ and stakeholders’. They need to be able to compare different products and services in order to determine which is best for them.
In the whimsical example above, two goats are roughly equivalent to one sheep because of the relative difference in wool yield each gives. Apples, on the other hand, don’t produce any wool (unless you’ve kept them for far too long…)
Similarly, making their good and services comparable in terms of sustainability is one of the greatest challenges facing companies today.
For instance, as reported in Pricking the Balloon of Corporate Hot Air, the top 500 companies in the world use 34 different methodologies to collate and verify their greenhouse gas emissions.
Not surprisingly, investors have branded this scatter-gun approach as “inadequate” and the WWF has called for “increased standardisation among industry sectors”.
A Principled Approach
However, there would not be an issue if all of these companies adopted the Institute for Social and Ethical AccountAbility’s AA1000 standard.
Key in this standard is the principle of comparability, which is defined as:
the ability to compare information on the organisation’s performance with previous periods, performance targets, or external benchmarks drawn from other organisations, statutory regulation or non-statutory norms.
This principle ensures that any sustainability report which meets the AA1000 Standard has had its key metrics examined to ensure they are comparable to other businesses.
In addition, the standard goes on to say:
if the indicators chosen … are unique to the organisation, comparability of performance with other organisations may not be possible
This means companies should engage with the wider community of their peers and other organisations in order to determine how their performance should be measured.
It also links very well to the principle of Materiality. In the AA1000, this requires that companies consider which indicators are normally used by other organisations operating within its sphere.
No more mouldy apples
Standards such as AA1000 are not a silver bullet and, as with all human activity, rules and standards can be circumvented by any concerted effort to distort appearances or withhold information.
However, as the concept of Collaborative Governance starts to take hold, many companies will start to realise that it is in their best interests to ensure that they can be directly compared to their competitors.
This is because if companies in the same sector report different indicators or use different methodologies, it will act as a lens and increase the perception that something is being concealed.
So, returning to the medieval market at the start, companies need to move to assure stakeholders that their sheep and goats are truly comparable and not mouldy apples in disguise.
If they don’t it will only breed distrust, which is unlikely to go down well with investors and regulators alike and could well lead to the intervention of more than just a friendly guard.
Lucy is Editor at Corporate Eye
