Context, Lean
The Misplaced Concreteness of Sustainability Reporting
We think in generalities, but we live in details.
― Alfred North Whitehead
An unfortunate truth is that, despite their perceived importance, sustainability reports are not the means to sustainability. Unless they inform fundamental and significant process changes within the host organization, these reports—and their measurements, metrics, and KPIs—will have limited impact. The unsustainability of organizations is at heart an outcome of the prevailing management systems and thinking. Grafting a few new programs onto the old organization is not enough—the same old thinking is still entrenched.
There are growing (and justified) calls for all sustainability reporting to be ‘context-based'[1] which is essential, but what is the context for the act of reporting itself? Just how effective is the reporting process in transforming company systems?
Does measurement inform or impede process thinking?
Is the current dominance of report-driven measurement thinking impeding vital process thinking and true progress in sustainability?
- Measurement Thinking sees measurement and reporting as an end and not as lagging feedback in the means to an end.
- Process Thinking focuses on the means—the new capabilities—the how—of operating sustainably. In other words: our management systems and processes.
Measurement thinking enables a distancing and detachment from the subject system and its processes. Process thinking is how sustainability becomes concrete, relatable, and doable by everyone in their day-to-day work and not just some vague concept off in an equally vague and distant future. Process thinking is a basis for connectedness, learning, and a sense of contributing to making a difference today.
The misplaced concreteness[2] of reporting
ESG and ‘sustainability’ reports express an understanding of the prior year’s situation as represented by data filtered thru the whims of communications experts. The reports themselves are not material—they are not the company. They are maps to last year’s territory and often poor ones at that. They do not tell us how processes are changing within the reporting entity—nor whether they are changing at all. The reports are a form of feedback too far removed from their processes to be effective.
This is not a pipe ...and this is not a sustainable company
"There is an error; but it is merely the accidental error of mistaking the abstract for the concrete." ― Alfred North Whitehead
Company processes are innumerable and concrete and lie at the heart of unsustainability. They include business development and strategy, annual planning, capital expenditure, business case preparation, product and service design, operations, facilities management, customer support, hiring, performance reviews, logistics, shipping and receiving, service delivery, etc. All of which require change.
Vital business processes like finance, strategy, and business development, are often indifferent to ESG reports. This is apparent when comparing financial reports with “sustainability” reports—grow the business vs. shrink a few cherry-picked ESG metrics. In fact, finance and strategy are often absolved from concrete action simply by the publication of an ESG report—“we’ve issued our report so now let’s get back to business as usual and grow top line sales.”
Reporting in context
To those currently involved in measurement and reporting, don’t dismay. There is valuable learning in the act of assessing and reporting, but it needs perspective and consideration for business process implications. For this learning to be meaningful we need to ask; what have we learned about the current state of our management system (current condition) and what new target conditions (ways of doing things) should we be striving for informed by this improved contextual awareness? Are we favouring quantifiable objectives and targets over the real work of process changes in our management systems? By focusing on our reporting are we favouring the abstract over the concrete?
The most important things we need to manage can't be measured.
― W. Edwards Deming
Lean author, Robert W. Hall rightly refers to measurement-driven work environments as “low context”. The key to operating sustainably is to continuously ask; what is currently preventing us from operating in a sustainable manner? Focus on processes and barriers and not on outcomes. What are the obstacles and what should we be working on today to get our organization operating sustainably? All day-to-day work needs to be reconsidered in the context of how far from sustainability that we are operating.
As much as we might like to hope, improved reporting is not necessarily evidence of increased sustainability thinking and behaviour within the reporting entity[3]. Do all staff have a deep understanding of sustainability and a sense of ownership of it? The focus for improvement must turn to the countless processes currently delivering unsustainable outcomes. If your company’s ESG reporting process is not provoking profound changes to your management systems and primary operating processes, then what is it doing?
Each system is perfectly designed to give you exactly what you are getting today.
― W. Edwards Deming
Notes
[1] Context-Based Sustainability is a methodology for measuring, managing, assessing and reporting performance relative to upper and lower limits in, and demands for, vital resources or capitals. It was conceived by Mark W. McElroy & Jo van Engelen (ref https://en.wikipedia.org/wiki/Context-Based_Sustainability).
[2] The fallacy of misplaced concreteness (or reification) occurs when an abstraction (abstract belief or hypothetical construct) is treated as if it were a concrete real event or physical entity. In other words, it is the error of treating something that is not concrete, such as an idea, as a concrete thing. A common case of reification is the confusion of a model with reality: "the map is not the territory". – Wikipedia https://en.wikipedia.org/wiki/Reification_(fallacy)
[3] "…additional integrated reporting has not necessarily increased businesses’ sustainable behavior. Growth and short-term profit targets continue to dominate, supported by quarterly financial reporting. This inability to consider the long-term value of sustainability is likely to undermine the possibilities for introducing more sustainable business practices." – Cultivating Sustainability Thinkers: Analyzing the Routes to Psychological Ownership in Local Business Units of Multinational Enterprises (MNEs); Martina Kurki and Merja Lähdesmäki (2023)
