Organizations are scrambling to develop easier and more exact ways to measure and report on their environmental, social and governance (ESG) activities, and now they have one.

Pioneering new work by renowned Harvard Business School Professor Emeritus Robert S. Kaplan and Professor of Business & Public Policy at University of Oxford Karthik Ramanna – offers a robust model for measuring ESG impact. They were just honored with the 2021 HBR McKinsey Award for their seminal November-December 2021 Harvard Business Review article “Accounting for Climate Change.”

“About 90% of companies in the S&P 500 now issue some form of environmental, social, and governance (ESG) report, almost always including an estimate of the company’s GHG [greenhouse gas] emissions,” write the authors. “But ESG in its current form is more a buzzword than a solution. Each of its three domains presents different measurement opportunities and challenges, a fact not adequately addressed by existing disclosure standards. As a consequence, few ESG reports engage meaningfully with the moral trade-offs within the three domains and with the company’s profits.”

Pointing to errors in GHG protocols, they present their solution, which integrates recent advances in measuring emissions developed by environmental engineers, the introduction of blockchain technologies to accounting and auditing, and two centuries’ worth of progress in financial and cost accounting practices.

“If implemented, our solution will enable companies to take effective actions, with measurable impact, to reduce GHG emissions in their own operations and those of their suppliers,” the authors explain. “They can also use our approach to quantify and manage the societal impact of their products and services, for instance, by eliminating modern slavery from their supply chains. In essence, our accounting approach allows companies to compete with credibility on environmental and social excellence.”

Optimize ESG Reporting and Become a Better Corporate Citizen

Professors Kaplan and Ramanna are available to teach their new model to your organization via virtual and in-person advisory meetings, interactive workshops and customized keynotes through the exclusive representation of Stern Speakers & Advisors, a division of Stern Strategy Group®. Contact us to learn more. We’d be happy to co-create a customized advisory engagement and/or training program that uniquely meets the needs of your organization.