Kalle reflects on the new EU directives for Corporate sustainability reporting – European Commission

Given the EUs stance in sustainability matters, this is a huge opportunity for the World. However, an ever so strict administrative structure will turn out to be toothless, unless it is applied to monitor contents that are as strictly structured. For real change to happen, the contents need to follow an overview-structure of being Systemic (World), Systematic (Organization’s Processes) and, not the least important, Strategic (Organization’s bottom lines). If not equipped with an operative system fit for purpose, also the new directives will lead into “more of the same” – sustainability as a pure administrative burden and cost, not an opportunity for business and regions to innovatively learn and benefit strategically from this. It is also easier and more fun to plan with a good strategic overview. A feeling of extra-work without meaning disappears, since the reporting trains the Organization to act strategically for the common good in a way that directly improves also on Organization’s own bottom lines. At the same time, the reporting gets easier.

More in detail:

1. Why should organizations report cohesively on sustainable development at all?

The reason should be easy to understand. If we were to have a uniform EU system for reporting, it would be possible to compare the quality of each organization’s sustainability work overtime, as well as comparing them with each other. Cohesion in this regard is of great interest to the organizations themselves, as well as to investors, savers, markets and people everywhere. However, “cohesion” should not be only about an administrative structure for impact-driven data and the fixing of such. It should also provide a strategic structure so that measures to manage impacts can bring Organizations stepwise to a success that is sustainable – designed for scalability. This is a huge opportunity for the Framework for Strategic Sustainable Development (FSSD), with its operating system ‘ABCD in the Funnel’. It is unique in its kind, fit for purpose.

2. FSSD to assist the EU directives

With the FSSD, it is possible to evaluate whether actions and measures can work as stepwise progress towards organizational goals that are scalable within systemically robust sustainability constraints. Which would naturally lend itself well to a reporting of “Good”. As opposed to “Bad”, if measures only look good in a perspective that is so constraint in time and space that disparate “fixing” lulls organizations astray, leading them into costly suboptimizations and blind alleys.

Or, in other words, if you must take the “bad” with the “good” in a clever plan, i.e. making trade-offs for certain investments, then this is not necessarily “bad” from a transition perspective. Which should follow from clever reporting. It is only bad, if there are no robust and sustainable goals towards which planning and reporting are heading. Just like you can consciously sacrifice a piece of chess in a chess game, which may be a “good” move. But only if it is clever in helping you arrive at the boundary conditions for checkmate.

Furthermore, with FSSD as the core operative system, the benefit of all well-thought-out “apps” out there increases, to the benefit of reporting. Examples are the UN’s sustainability goals, Rockström’s planetary boundaries, McKinsey’s circular economy… and… the current EU directives. With FSSD, we can make informed decisions about the selection and application of any tools/concepts/frameworks to support any organizational plan. This happens ideally by just cross reading App’s with organization’s own tailor-made ABCD plans, and then picking the App’s that may add important ideas under A, B, C and D respectively. This is contrary to how the United Nation’s Sustainability Goals (UN SDGs), to mention but one example, are currently used. In the absence of FSSD, Organizations arbitrarily “pick” a few of the goals that “appear to be” relevant to operations. But still without knowing how even the selected UN goals could be made part of the organization’s strategic plan, let alone why the other goals were jumped. A lost opportunity for all of us, and for the leading geopolitical institution of the World. But now back to the EU.

3. Understanding the difference between two different types of indicators – strategic and impact-driven.

Outside the realm of FSSD, both types of indicators are generally poorly understood, as well as confused with each other:

(i)Strategic Indicators. These are mostly missing altogether. How would a structure look like, that helps Organization design their tailor-made step-wise plans including a relevant choice of strategic indicators for monitoring of the plans? This would assist each Organization to stepwise and with improved returns on investment reach business goals that are robustly modelled within sustainability constraints for the World (systemic); otherwise, goals are not scalable by any means. So, strategic indicators measure and monitor how an organization follows its own plan towards such goals. That is, whether it moves systematically (ABCD process), strategically (D-step) towards goals that have been modelled within systemically robust global boundary conditions for sustainability (A-step). To that end, FSSD is a uniquely designed, tested and scientifically validated Operative System. And then we have…

(ii)Impact driven indicators. In a nutshell, they tell organizations what to think about when it comes to symptoms from not being systemic, systematic and strategic. But those indicators say nothing about how to think about them. These indicators are derived to display various impact driven aspects from various domains, at various scales of different systems, and to indicate/monitor the “fixing” of each of those in a disparate mode. Without considering how the “fixing” influences impacts and measures from other impacts in the same or other domains. So, emissions of CO2 from an organization’s use of energy, and the “fixing” of such, could be an example of such impacts. Or similarly, impacts from mining, sales of textiles, chemicals… The number of impacts in different domains is inherently huge, so a very large number of tools for assisting impact driven planning has evolved, and are collected under labels such as “Planetary Boundaries”, “Toxic chemicals” (lists of”), COP agreements, reports on the rates of species extinction, global health indicators, “Tripple bottom line”, “Circular economy”, “Doughnut”, “Biomimicry”, “Globing Reporting Initiative”, “Corporate social responsibility”, “Science based Targets”, “Bioeconomy”, “Fuzzy logics”, Survey barometers of wellbeing…all focusing on various parts of the sustainability challenge.

In the best of Worlds, impact driven indicators (ii) may support strategic indicators (i), but only if they are put in that context. Otherwise, the rich plethora of impact areas that need to be tackled, with impact concepts and indicators for each, rather adds to confusion.

Still, the EU directive focuses on Impact driven indicators at the cost of Strategic Indictors. A lost opportunity. There is even a commonly used, but ill-advised, excuse for this: “If you want to succeed, you must break down your mission into specific dimensions and make them concrete and measurable, while not trying to do too much”. As if clear systemic overviews had ever been a stumbling block to managing details better and easier (see conclusions at the end). Scientifically, this flaw of thought is called Reductionism.

4. The indicators put at use in a plan, an example

Say that a transport company, inspired by geo-politically decided incentives, first decided to take reduction plicates seriously for their long-term planning. Or in other words, to preparing themselves for future markets where biofuels would play an increasing role for traffic. However, before moving ahead in planning for future transports, the firm decided to apply the FSSD to make safer systemic, systematic and strategic decisions regarding this and other matters, and sharing this with their value chain, vehicle producers, and other influential stakeholders. To that end, they also learnt about what scientists had already published on the matter [1]. During their ABCD workshops it turned out, that when the global energy-, spatial-, infrastructure-, and materials- sectors were all modelled together within the systemic sustainability constraints of “A”, it became clear that biofuels had no long-term future. They were simply not scalable in the longer run, since:

(i) The energy-efficiency of plants converting primary energy from the sun into chemical energy and then used for combustion reasons is inherently extremely low (<1%),

(ii) The shrinking areas of fertile and biodiverse land, makes it imperative to apply completely different priorities regarding spatial planning. It’s about ensuring enough space for biodiverse natural cycles to provide services to all higher life forms on Earth e.g. cycles of coal/water/nutrients, climate regulation, and services to civilization such as sustainably managed cropland and forests, and not the least important – to feed a World’s population.

(iii) Infrastructurally, electrification of societies, with their traffic systems modelled under “A”, showed much higher efficiencies both in the production of electricity from eternal flows of energy that are free of charge such as sun, hydro, winds, sea-waves, sea-currents, geo-thermal etc. And for societal- and infrastructure planning at large, where grids are relatively efficient for many purposes including the transferring of energy to vehicles;

(iv) Electric engines perform so much better than combustion engines in all aspects during their lifespans, including use of energy/mileage.

So, to believe that combustion-vehicles, run on biofuels, would be an essential part of future motoring, was shown to be out of the question. Did this conclusion exclude biofuels as a transient step towards sustainable traffic systems? The answer is, again, not necessarily. Modelling showed that it can even be advisable e.g. for large transport vessels, if this happens as a conscious trade-off on the way to sustainable traffic, in order to get going towards what is scalable. This includes an understanding that the biogas and alcohol factories could later be transformed to be feed-stock suppliers to producers of materials with long life cycles, and thereby also function as a way of carbon-capture storage (CCS). And, at least as important, being a source for re-fertilizing soils and providing yet a way of CCS .

Another essential aspect that surfaced during the company’s ABCD modelling was whether the World’s reserves of metals would suffice for large-scale electrification. Metals, unlike fuels, are often recycled to a certain extent, i.e. are (unlike fossil and nuclear fuels) not wasted in the same pace as they are used. However, the current losses of metals from society to increasing waste-concentrations in natural systems, at the cost of future generations, are still far too high to admit any scalability. But, again, developments are under way to make metal flows scalable for electrification through innovations the transport company could be part of. E.g. innovations regarding new type of batteries and other components needing less metals in the production stages, and dry batteries (solid state) with much higher energy-densities while wasting nearly no metals at all during use and recycling, and finally, new structures and business models reaching close to full close loop recycling. Or in other words, through role models of clever-planning proactive companies, metal reserves will not hamper scalability of electrification.

All of this is contrary to the current societal flows of metals (B-list of the company’s ABCD exercise). Large parts of mining are needed to cover for growing losses from dissipative use over the life cycles of components towards an electrified future – the vehicles themselves, batteries, computers, wind power, photovoltaics and so on.

Again, if the above considerations are part of systemic, systematic and strategic planning, some transient losses of metals are “bad”, of course, but still feasible as short-term trade-offs on the way to future technologies and business models where metals are contained within the Technosphere. No new technical innovations have ever been perfect at all scales from upfront, so the two crucial questions are: (i) Are new innovations scalable on the condition that technically possible improvements will take care of the trade-offs later? The answer to that is shown to be “yes”. (ii) Will leaders from the public and private sectors understand the full scale of opportunities with electrification in time, and then act on this? The answer is that we don’t know. But the FSSD Global is set up to make it happen.

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[1] *A strategic approach to sustainable transport system development, Part 1: Karl-Henrik

Robèrt, Sven Boren, Henrik Ny, Göran Broman. Attempting a generic community planning process model; Journal of Cleaner Production 140 (2017) 53-61. And…

*A strategic approach to sustainable transport system development, Part 2: Sven Boren, Lisiana Nurhadi, Henrik Ny, Karl-Henrik Robert, Goran Broman, Louise Trygg. The case of a vision for electric vehicle systems in southeast Sweden. Journal of Cleaner Production 140 (2017) 62-71

5. Back to the EU directives

So, are the EU’s directives on environmental reporting good? Yes. And like any other app the EU directives needs an Operative System to work. Otherwise, it can even be downright bad. Partly because it may lead to falsely positive reactions like “now, finally, something is happening at the highest level of authority”, with a diffuse follow-up of thinking: “And then maybe something good may happen in the long run and in a larger perspective”, perhaps according to the motto: “It’s better to do something, than nothing at all”. Bad thinking in a complex system. Or the other way around, strategically thinking leaders and managers may mistrust the usefulness of the new reporting directives, and regarding them as “yet another burden”. The historic tracks of piecemeal legislations are terrifying.

If you have no overview, no clear goals, no strategic thought structure, and no clear business model to go with it, a sole ambition of carefully measuring and reporting in a clichéd manner, then pure intuition may be a better option for proactivity. Many businessmen really are attentive and tend to feel when something new is about to break through. Be it about computers instead of calculators, copiers instead of copy paper… Or electric vehicles instead of fossil vehicles. But to achieve sustainability together between sectors, and in time, well, no intuition and/or trial and error will suffice there – at least not fast enough for survival of Civilisation.

6. Conclusion

It is easy to use the EU’s directive on reporting in the FSSD way. Very easy, yes easier, than without it. A robust administrative structure like the EU directives does in no way contradict a robust structure also for well thought-through planning, monitoring and communications. It is, of course, the opposite way around. It is also easier and more fun to plan with a good strategic overview. A feeling of extra work without meaning disappears, since the reporting trains the Organization to act strategically for the common good in a way that directly improves also on bottom lines. At the same time, the reporting itself gets easier. Impact driven data are “poured down” into one and the same logical and strategical “mold”. The resulting “casting” contains well-structured impact driven data as well as innovations, both forced to be strategically relevant for stepwise progress. Whereas “leftovers”, i.e. impact driven data that are strategically irrelevant to the Organization, are excluded to not blurring the picture.

Maybe someone could offer to tell the right person in the EU committee for reporting this? We are many FSSD experts and advisors who would be only happy to help…

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[1] See FSSD reference in previous reflection about the World’s situation

[2] *A strategic approach to sustainable transport system development, Part 1: Karl-Henrik Robèrt, Sven Boren, Henrik Ny, Göran Broman. Attempting a generic community planning process model; Journal of Cleaner Production 140 (2017) 53-61. And… *A strategic approach to sustainable transport system development, Part 2: Sven Boren, Lisiana Nurhadi, Henrik Ny, Karl-Henrik Robert, Goran Broman, Louise Trygg. The case of a vision for electric vehicle systems in southeast Sweden. Journal of Cleaner Production 140 (2017) 62-71