Sustainability performance classifications

This page is one of a series that describes the important role of thresholds in impact management:

  1. Thresholds and allocations: the role of thresholds in assessing performance on a social or environmental outcome as ‘sustainable or unsustainable’.
  2. 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.
  3. 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.

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 so that they are getting nearer the sustainable range established by the societal or ecological threshold. This objective is set when the organisation will improve performance on the outcome, but will not achieve a sustainable outcome within the period for which the objective is being set.

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 is within the sustainable range, where the outcome had been unsustainable prior to engaging with the organisation through no fault of the organisation itself. These unsustainable outcomes might have been the result of market or policy failure, leaving a group of people without access to something they need for their well-being or putting the availability of natural resources at risk.

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 is 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.

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 level;
  • baseline outcome level, enabling assessment of the change in outcome over time; 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, 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:

  1. The societal or ecological threshold referenced by the SDG indicator, which also requires consideration of local or national differences (e.g. living wage)
  2. The local and national target relating to the indicator (e.g. 100% of women)
  3. 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).
  • 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.
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

Last updated: 2018

Guidance on how to integrate the Sustainable Development Goals into reporting processes.

Use this resource to:

  • Disclose: Use the guidance to disclose positive and negative contributions to the Sustainable Development Goals.