Thresholds and Allocations
Contextual Statistical Quote
"A 2017 study of 40,000 sustainability reports issued since then found that only 5% make any mention of ecological limits, and only 31 of 9,000 reporting companies (0.3%) integrate such limits into their strategy and product development."
- Ralph Thurm and Bill Baue [1]
Description
- Thresholds: "“ecological ceilings” (i.e. Planetary Boundaries), or “do-not-exceed” limits of resource use beyond which natural systems start to collapse."
McElroy also proposed a Sustainability Quotient for expressing thresholds, whereby sustainability (S) equals actual impacts (A) over normative impacts (N) — think carbon footprint over carbon budget.
- Allocations: "a “slice of the pie” is the best way to envision allocations, or a proportionate share (slice) of the full stock of a resource (pie). Think of water in a watershed, which needs to account for natural processes (e.g. evaporation; plant, animal & human consumption, etc…) before being divvied up between commercial / industrial users."
Examples
List from [2]:
"A number of initiatives have spawned in the past decade to help operationalize thresholds and allocations:
- Employ Context-Based Metrics, such as Science Based Targets for greenhouse gas emissions reductions and Context-Based Water Stewardship Targets;
- Implement the UN Guiding Principles on Business & Human Rights;
- Utilize the Vital Capital Index in agriculture and assess synergies between sustainability impacts;
- Consult the Embedding Project’s Road to Context for guidance;
- Set “break even” and “positive pursuit” goals using the Future Fit Business Benchmark;
- Apply systems-level considerations and measure influence in investment decisions, as advocated by The Investment Integration Project;
- Conduct scenario analysis (with guidance at the TCFD Knowledge Hub) and produce transition plans to <2°C business models (as advocated by Preventable Surprises);
- Use the MultiCapital Scorecard."
Policy Proposals
The strategy proposed by Ralph Thurm:
"True sustainability reporting requires:
1. Positioning ESG as necessary ingredient, but not the end goal, in an information infrastructure that delivers true sustainability performance.
2. Recognising Thresholds & Allocations as the new supply and demand in an age of scarcity. Without them, true sustainability reporting doesn’t exist yet, and will never exist in the future. It simply misses any connection to the real world.
3. Accepting a learning curve and consolidated action around delivering Thresholds & Allocations. The r3.0/UNRISD project is the prototype collaboration now underway to do so. Already more than 70 participants have joined and are now experimenting with this new generation of indicators. Several new organisations joined since I published the first article, last seats are still available, just PM me if that sounds exciting for you.
4. Letting go of attempts to converge amongst ‘pure ESG’ numerator data initiatives. This is wasted time and energy! I know, the Big 5, the existing standard setters and IFRS won’t be happy with that, but well… Better spend time in harmonizing around Thresholds & Allocations, as these are science-based and/or ethical norm-based. This is what r3.0 also instigates with a ‘Global Thresholds & Allocations Network’ at this moment. All those that feel attracted are asked to join and support this idea. It is necessary that this becomes a network of many voices.
5. Help to develop necessary education and new governance models that actually don’t obstruct but deliver on the necessary components of a regenerative & distributive economy and scale this learning through education, collaboration and advocacy. The r3.0 Transformation Journey Programs are one starting point to get you there." (https://www.linkedin.com/pulse/big-sustainability-illusion-how-escape-esg-bubble-finally-thurm/)
Discussion
Ralph Thurm:
"The idea of thresholds & allocations isn’t new. In fact, the concepts grew out of the notion of “capitals” as stocks of resources that generate productive flows, which are vital to support well-being (see below for a visual overview of the history of novel contributions to this thinking).
The key to achieving sustainability is to respect the carrying capacities of the capitals, as Reporting 3.0 Advocation Partner Mark McElroy established in his 2008 Doctoral Dissertation (applying the carrying capacities concept from the field of ecology). And McElroy also proposed a Sustainability Quotient for expressing thresholds, whereby sustainability (S) equals actual impacts (A) over normative impacts (N) — think carbon footprint over carbon budget.
And Reporting 3.0 notes that most practice in the so-called sustainability space (think CSR, ESG, etc…) amounts to numerator-only work, focused on incremental improvement that falls short of sustainability thresholds. As Reporting 3.0 Steering Board Member Brendan LeBlanc of EY notes, “the only thing more dangerous than no progress is the illusion of progress.” We at Reporting 3.0 also like to point out that thresholds and allocations are always being employed (resources always have upper or lower limits of viability, and use of a shared resource alwaysrequires parsing it out); the main question is how consciously resources are used and shared.
The key “marriage” of thresholds & allocations started with the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines in its second generation (G2) released in 2002, which introduced the Sustainability Context Principle that tied micro-level organizational impacts on the multiple capitals to macro-level economic, social, and ecological systems viability. Ideally, this would have inspired companies to make this vital micro/macro link in their management, performance, and reporting in order to operationalize sustainability.
Unfortunately, a 2017 study of 40,000 sustainability reports issued since then found that only 5% make any mention of ecological limits, and only 31 of 9,000 reporting companies (0.3%) integrate such limits into their strategy and product development. Reporting 3.0 calls this the Sustainability Context Gap.
In its 2015 Raising the Bar report, UNEP succinctly summarizes what companies can do:
- 'All companies should apply a context-based approach to sustainability reporting, allocating their fair share impacts on common capital resources within the thresholds of their carrying capacities'. " (https://medium.com/@ralphthurm/what-are-thresholds-allocations-and-why-are-they-necessary-for-sustainable-system-value-fe127483c407)
More Information
- see the Global Thresholds and Allocations Council, a part of the proposed Reporting 3.0 Platform framework
- An Intellectual History of Thresholds and Allocations http://www.sustainableorganizations.org/TA-Timeline.pdf