“Perfect Is the Enemy of Good”: Practicing Grace During Sustainability’s Messy Middle
Sustainability is entering its messy middle. For trailblazers of the modern-day version of sustainability, this stage has emerged from their years of tireless effort. They have worked through enormously complicated ideas, concepts, and scientific principles to create practical standards for incorporating sustainability into business practices and reporting. Now, as the largest global corporations begin implementing International Financial Reporting Standards (IFRS) International Financial Reporting Standards (IFRS) for climate reporting, we are in the first year* of gathering consistent and validated climate data on a broad scale.
The CFA Institute recently released its report Climate Data in the Investment Process: Challenges, Resources, and Considerations which highlights the importance of climate investing to minimize the risk and maximize the opportunities associated with climate change. The report also recognizes data gathered to this point is inconsistent and unreliable. As more companies – large companies, as gathering and reporting this data is resource-intensive – adopt IFRS S2 reporting, quantification of climate opportunities and risks for companies will become more robust and dependable. Robust and reliable information can then be used to create proxies for greenhouse gas (GHG) emissions information which can be used by smaller companies. Smaller businesses will then need to transparently explain why their GHG emissions intensity differs from these proxies.
The journey toward standardized and verifiable climate-related information on a broad scale will take several years – most likely a decade or more. Still, investment practitioners have a history of working with imperfect information as financial reporting standards for accounting information have evolved and improved over several decades. In their report, CFA Institute suggests the following for investment practitioners:
“Until regulations and standards can provide meaningful solutions, investors should not be deterred from using climate-related data. Instead, investors must (1) use their judgment to make effective use of the data available to them and (2) be conscious of the limitations of those data.”
Judgement… Limitations… The messy middle indeed!
It is important for sustainability advocates and skeptics alike to practice grace during this messy time. Patience and understanding of where we are in this process is important. So is consistency and a willingness to try and fail. Brene Brown says, “The middle is messy, but it’s also where all the magic happens, all the tension that creates goodness and learning.” We still have so much to learn. Expecting this process and outcomes to be perfect – either to punish companies for perceived inadequacy or to avoid sustainability all together – holds us back from all the learning we have yet to gain about the environmental, societal, and economic risks and opportunities for businesses in this world. The messy middle is where engagement and understanding among companies and investors can create sustainable impact.
If your business needs any guidance moving through the messy middle or embarking on your sustainability journey, we can help. Get in touch!
*If you don’t count the years these companies reported using the TCFD framework, which are the foundation of IFRS S2 – Climate-related Disclosures.