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Deeper measurement

Outcome and impacts are key for environmental, social and governance issues, Professor Jennifer Howard-Grenville of Cambridge Judge says in Harvard Business Review article.

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Companies need to do a better job of measuring outcomes and impacts related to environmental, social and governance (ESG) issues, Jennifer Howard-Grenville, Diageo Professor in Organisation Studies at Cambridge Judge Business School, says in a new Harvard Business Review article.

Jennifer Howard-Grenville.
Professor Jennifer Howard-Grenville

Measurement is better at capturing easily quantifiable inputs rather than “complex and messy outcomes and impacts,” so firms need to do more than simply measure. Specifically, companies need to zoom in to develop insights on processes, zoom out to see broader systems, and value curiosity and learning, says the article, entitled “ESG impact is hard to measure — but it’s not impossible.”

About a third of all professionally managed assets, or $30 trillion, are now subject to ESG criteria, an increase of more than 30% since 2016 – numbers that “reflect a growing awareness – among companies, investors, and shareholders alike – that to remain viable, businesses must think about and manage their impact on the planet in new ways.”

But inputs such as the number of women on management teams don’t necessarily capture outcomes such as decision-making that reflects diverse perspectives: for example, research co-authored at Cambridge Judge found that top management teams are better at making complex decisions when they are not dominated by either gender, and play to their collective strengths.

“The underlying processes that lead to that kind of outcome are what we need to pay attention to – which means that we have to look behind the numbers and ask how, why, and under what conditions they came about,” Jennifer says.

“Robust ESG and impact measures can help us keep score, and, when necessary, make course corrections,” the article concludes. “Ultimately, however, no matter how and what we measure, we need to act our way into greater understanding, insight, and even purpose.”