Our key takeaway: Measurable indicators and metrics are the linchpin to companies monitoring their progress on certain topics. More often than not, these metrics fail to meaningfully measure companies’ progress and efforts on addressing their impacts on people i.e., the S in ESG. Why? Shift talks about indicators that inadvertently incentivise poor corporate behaviour and those that reduces complex topics into oversimplified metrics, which encourages unjustified conclusions (e.g., an indicator that states the company follows the UN Guiding Principles). Social audits indicators (e.g., the percentage of suppliers who have been audited) seldom show whether a company is taking meaningful steps to address their human rights risks and impacts. The time is ripe for companies and data providers to look at how effective their social indicators are at measuring companies’ progress on addressing their adverse human rights impacts, especially because we now have laws (e.g., the EU Corporate Reporting Sustainability Directive) that require it.
Shift published Part 1 and Part 2 of its Strengthening the S in ESG series (May 2024). The series focuses on developing stronger social indicators and metrics to measure the S in ESG: