Sustainability performance classifications
This page is one of a series that describes the important role of thresholds in impact management:
- Thresholds and allocations: the role of thresholds in assessing performance on a social or environmental outcome as ‘sustainable or unsustainable’.
- Sustainability performance classifications: how thresholds are core to assessing performance against existing classification methodologies (the ABC, the EU taxonomy) and how this logic also drives assessment of SDG contribution.
- Investment classifications: the relevance of classifications for investors, who can combine the asset classification with the contribution they make, to classify the investment and portfolio.
Identifying types of impact performance
There are three broad objectives an organisation can set to improve its sustainability performance. See Set and revise objectives
Organisations can:
A. Act to reduce harm: by identifying where the organisation (or asset) is causing harm to people’s well-being and the condition of the natural environment and improving those outcomes
Usage #1 A change or event resulting from organisations’ activities and outputs, providing a causal link between the activities/outputs and their impact(s) on people and/or the natural environment Usage #2 The level of well-being experienced by people or condition of the natural environment that results from the actions of the organisation, as well as from external factors A level or range of performance that divides sustainable from unsustainable performance. These ranges are set with reference to social norms or planetary limits that have been identified through scientific research. Learn more about Thresholds and allocations. Source: United Nations Environment Programme Finance Initiative (UNEP FI); United Nations Conference on Trade and Development (UNCTAD) (The Cocoyoc Declaration, 1974); Kate RaworthOutcome
Societal or ecological threshold
B. Benefit stakeholders: by not only Acting to reduce harm for all stakeholders, but also maintaining or causing improved well-being for one or more group of people and/or the condition of the natural environment, so that it is within the sustainable range established by the societal or ecological threshold.
C. Contribute to solutions: not only Acting to reduce harm for all stakeholders, but also improving the well-being of a group of people or the condition of the natural environment so that the outcome
Usage #1 A change or event resulting from organisations’ activities and outputs, providing a causal link between the activities/outputs and their impact(s) on people and/or the natural environment Usage #2 The level of well-being experienced by people or condition of the natural environment that results from the actions of the organisation, as well as from external factorsOutcome
D. If an unsustainable outcome is not improving it can be considered: Does cause harm.
M. If there is no performance information for an outcome it can be considered: May cause harm.
Figure 1: Classifying impact based on performance information
Note that organisations might be contributing to positive and negative outcomes for the same group of people simultaneously, hence the importance of disaggregating by demographic characteristics to identify these differences and manage them accordingly.
Assessing individual impacts as A, B or C
Organisations can assess progress towards these objectives by putting sustainability performance information in context. This information informs the management decisions organisations – and their investors – make. See Integrate and act
Act to reduce harm: the partial reduction (or absence) of an unsustainable outcome caused by the organisation, to a level that is still nevertheless below the sustainable threshold.
Assessing whether an impact is an ‘A’ at a minimum requires the:
- outcome
Outcome
Usage #1
A change or event resulting from organisations’ activities and outputs, providing a causal link between the activities/outputs and their impact(s) on people and/or the natural environment
Usage #2
The level of well-being experienced by people or condition of the natural environment that results from the actions of the organisation, as well as from external factors
level; - baseline
Baseline
A starting point used for comparisons.
Source: Oxford English Dictionary
outcome level, enabling assessment of the change in outcome over time; Act to reduce harm and Contribute to solutions are impact classifications which require a positive change from the baseline outcome level. ‘Benefit stakeholders’ can be either an impact or an outcome classification because it includes the case were there is no change versus the likely counterfactual. and - the societal or ecological threshold.
This data may be disaggregated by stakeholder characteristics/geography if relevant to explore if different impacts are occurring for different groups.
Figure 2: Classifying an impact as Act to reduce harm
Benefit stakeholders: a sustainable outcome is created or maintained by the organisation.
Assessing whether an impact is a B at a minimum requires the:
- outcome level; and
- societal or ecological threshold.
Figure 3: Classifying an impact as Benefit stakeholders
Contribute to Solutions: a sustainable outcome caused by an organisation for people or the natural environment who were previously experiencing negative outcomes not caused by the organisation (e.g. caused by market failure or policy failure).
Assessing whether an impact is a C will often require the:
- outcome level;
- baseline outcome level, enabling assessment of the change in outcome over time;
- societal or ecological threshold;
- outcome counterfactual
Counterfactual
The situation or condition which hypothetically may prevail for individuals, organisations, or groups were there no intervention. Measuring the counterfactual answers the question: what would have happened to people or the natural environment if they/it had not interacted with the organisation?
Source: OECD Development Assistance Committee
, to assess whether the people/natural environment would likely be experiencing an unsustainable outcome in the absence of the organisation - number of people affected; and
- stakeholder characteristics/geography of the group experiencing the outcome, if relevant to the type of need being met.
Figure 4: Classifying an impact as Contribute to solutions
The EU Taxonomy
The EU taxonomy is a classification methodology that uses this same logic. The EU has a policy objective of achieving net-zero emissions by 2050 and so the taxonomy lays out thresholds for economic activities which are significant contributors to global warming and climate change to help organisations assess whether they are sustainable (B) or unsustainable (A) on this sustainability topic.
As they represent a pre-defined set of important outcomes, this same logic can be used to assess SDG contribution.
Assessing types of SDG contribution
The Sustainable Development Goals (SDGs) are global and national goals needed to achieve a sustainable future for all by 2030. Most SDG targets are set at global or national level, and so the indicators are designed to measure the percentage of population or resources that have met the societal or ecological threshold referenced in the target. Not all SDG indicators and targets are relevant to organisations.
For assessing an organisation’s contribution to SDG targets three pieces of contextual information are needed:
- The societal or ecological threshold
Societal or ecological threshold
A level or range of performance that divides sustainable from unsustainable performance. These ranges are set with reference to social norms or planetary limits that have been identified through scientific research. Learn more about Thresholds and allocations.
Source: United Nations Environment Programme Finance Initiative (UNEP FI); United Nations Conference on Trade and Development (UNCTAD) (The Cocoyoc Declaration, 1974); Kate Raworth
referenced by the SDG indicator, which also requires consideration of local or national differences (e.g. living wage) - The local and national target relating to the indicator (e.g. 100% of women)
- The contribution that the organisation has made towards (or detracted from) that target, net of other contributing factors
Figure 5: Assessing contribution to SDG targets: an example
Akin to the ABC classification, there are three ways to consider performance of a single sustainability topic against an SDG target:
- Negative SDG contribution: the organisation is detracting from SDG progress by causing negative outcomes in relation to one of the SDG targets (e.g. by paying any employee less than minimum wage, SDG 8.5.1). Note that to be classified as Act to reduce harm, the negative outcome would need to be improving towards the threshold.
- SDG aligned: the organisation is maintaining an existing sustainable outcome in relation to an SDG target (e.g. by continuing to pay employees above the minimum wage, SDG 8.5.1).
- Positive SDG contribution: the organisation’s activities generate new sustainable outcomes for people or the natural environment which were previously outside of the sustainable threshold. The organisation itself did not cause this harm but is seeking to address the need of a specific population or ecological system. The evidence bases referenced in the Set and revise objectives action help investors identify the level of need for each SDG in different geographies.
Figure 6: Three types of SDG contribution
Where objectives have been set in relation to SDG targets, organisations can review mapping guides to understand which metrics relate to assessing SDG contribution.
Integrating the Sustainable Development Goals into Corporate Reporting: A Practical Guide
Guidance on how to integrate the Sustainable Development Goals into reporting processes.
Use this resource to:
- Communicate: Use the guidance to disclose positive and negative contributions to the Sustainable Development Goals.