ESG Demystified: A Guide to Life-affirming Decision Making

[If you'd like to learn more about this topic, be sure to read the introductory post of this blog series first.]

The choices we make can have a big impact on the world around us. So, it's important that we make choices that will have a positive impact on the world. But sometimes it can be hard to feel like we have the power to change things.

That's why it's important for people and organisations who want to create positive change to focus on where they might have a more visible impact. This goes the same for making more informed and impactful decisions when it comes to understanding or investing in ESG.

What is needed for that is a simple way to understand, measure, monitor and compare how organisations are achieving better outcomes for society and the environment. Such measures would also need to be simple enough for people to follow and hold those organisations to account.

A previous post looked at how there are major differences in methodology between the six main ESG rating agencies, as found in the Berg et al. study. The last post showed how the Life-affirming model could help provide a more coherent evaluation of ESG. This model can help to understand and measure the outcomes of governance in terms of three core areas: stewardship of the land, the wellbeing of sentient life, and fairness in relationships with equity and justice.

But what is also needed is a way to position those outcomes at different micro to macro levels. This would make it easier to get an accurate ESG benchmark across many organisations of various sizes and having different levels of impact.

The following diagram may help address this with levels of impact between personal, local, regional and levels with ecozones, bioregions, and other related ecological factors aligned to life-centred design levels. This is an adaptation from the Life-Centred Design Guide.

In the Life-Centred Design Guide, Damien Lutz identified 11 design practices that support a more life-centred design perspective. These include Circular design, biomimicry, systems thinking, interspecies design, and more. The guide uses the above diagram to indicate product design, business design, society, and planet design levels of impact, from the individual (micro) to the global (macro).

Furthermore, it accounts for Donut Economics, an economic model that strives to meet the needs of people without exceeding the limits of the planet. This is represented by a diagram that looks like a doughnut, with the space between the two rings representing the safe and just space for humanity and the sustainable space for the planet.

The Donut Economics guide for cities also acknowledges the need for action at different levels of impact too, from local to global, in order to create real change. It speaks to the need to distinguish indicators of success across these levels.

There are many other models that address levels of impact similarly, for example the Socio-Ecological Model. A 2006 United Nations paper defines these levels as having local, regional, and/or global significance. Sayre et al. (2020) presents a similar partitioning of levels by analyses local (ecosystems), regional (ecoregions and climate regions), and/or global perspectives.

The "Donut Economics" planetary boundaries and social factors can also be used to group a variety of ESG related measures across impact levels and AAGs/SDGs. For example, the planetary boundary for land conversion can be linked with the goal (15) of "Half the world being wild." The taxonomy below also provides an example of how all these considerations can be aggregated to each life-affirming lens (stewardship, wellness, fairness), to form a single life-affirming rating for ESG.

The next example below shows how ESG categories can be used to further expand this goal, including indicators at the local to global levels. This goal breakdown includes different levels of impact that could be developed across the remaining goals and towards a consistent set of measures for ESG at each goal, as well as for each Donut Economics boundary and social factors.

We can see how the above example of the 'Half the world being wild' gives us a thorough overview of land management strategies for sustaining and nurturing biodiversity, including food forests. This can help organisations compare their efforts with this goal. This level of detail across all the goals could also help us more broadly understand good stewardship, fairness, and wellness, and how life-affirming the practices of an organisation is or isn’t.

As we have covered, there are many potential benefits to using the Life-affirming model, but it's important to make sure that it's approached in the right way. There are a few key questions that need to be answered to make sure that the framework is effective.?

First, we need to make sure that the lenses of stewardship, wellness, and fairness are equally balanced. If they're not, then the model may not be as life-affirming as we want it to be. Second, we need to identify the right indicators to use for each lens. These indicators need to be verified by an expert and independent third parties to make sure that they're qualified and not influenced by conflicting interests.

Lastly, we need to make sure that the indicators are aggregated in a way that gives us a balanced and separate score for each company's stewardship, wellness, and fairness. If we can answer these questions, then the Life-affirming model has the potential to be a very useful tool.

The following post will address these questions and later propose how the Life-affirming model can be used further down the supply chain for customers who are making purchase decisions.