In the last post I looked at recent research into sustainability/ESG metrics.
The research though got me to think further.
In particular: it got me to think about that funny state of things where investors complain that ESG data is not standardised, while at the same time companies – and notably their boards – complain that investors do not ask in a standardised way for the data they are supposed to compile and publish. The very same companies and boards though that tend to choose proprietary measurement systems over any other one. Based on the simple rationale that for the company’s goals and purposes (in supplier management, product design and evaluation, RSLs and MRSL as well as testing regimes, etc) the proprietary perspective is essential, and the standardised version not good enough.
A Paradox
I cannot help to notice the paradox of these statements: Please standardise where it makes our company’s life easier. But we won’t standardise to make our supplier’s (or also customers’) life easier. Because our convenience goes over that of others.
Yes, this is a bit black and white. And yes, it entirely ignores the fact that are indeed often some very good reasons as to why proprietary is supposedly to be a more suitable solution. And yet: in the bigger scheme of things … is it really necessary?
I cannot help noticing either the arbitrariness that could – and sometimes does – go with proprietary solutions. Industry standards – or anything close to it – typically are open to public scrutiny of some type or other. One may not like them, but at least it is possible to assess them, judge them, and ultimately have an opinion. The same by no means is possible with proprietary solutions, that often are not publicly available, where information on implementation is few and far between. And where comparison hence is a tough call.
It goes without saying: I am partial to streamline and standardise as much as possible. For a range of reasons: to enhance comparability, accountability and transparency. To reduce workload, increase clarity around expectations but also consequences in the case of failures.
Standardise, Standardise, Standardise
Standards of any shape are not perfect, and won’t ever be. They’re at best an 80:20 solution: a solution that does 80% of the job with 20% of the effort. That focuses on progress rather than perfection, on learning and overcoming hurdles, rather than huge planning exercises; on pragmatism rather than on nitty-gritty fringe interests.
This goes for board-level reporting (to the board, but also from the boards towards investors), as much as for operational reporting content. Quality is no doubt needed – perfection not so much. At least not always and at anytime.
The good thing about standards is: if they are truly not fit for purpose they get ultimately abandoned. And if they are ‘good enough’ for use, they get picked up and rolled out. Not always to everyone’s pleasure (cf. the fairly political arguments around the Higg Index Suite of tools in the textiles, apparel, footwear industry). But more often than not a pragmatic result comes from it.
Hence, whether you are an investor, a board member, or an operational executive in charge of product or supply chain: jump over the shadow of you ego, align with others in your industry and standardise, standardise, standardise.
