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No progress is ever made without ways of evaluating and measuring that progress. The measurement of business responsibility has been encouraged by two forces. The first are the critics who sought to make the corporation accountable, but worried they might give only lip service to their commitments or backslide when the spotlight turned elsewhere. The second force is a managerial reality—nothing actually gets done in a modern organization if it is not measured and someone held accountable. This led companies themselves to pioneer systems to measure and track their own social behavior. There is a rich history of recent efforts to measure business responsibility and to report it to the public, but little was accomplished until the mid-1970s. One exception was the creation of several activist services which collected information on corporate misdeeds. One, on which I relied heavily in my early career, was The Data Center in Oakland, California. Founded by Fred Goff, a campaigner for social justice in Latin America, The Data Center compiled an extensive collection of clippings, reports and books on all aspects of business responsibility. (The Data Center’s files are now archived at California’s Bancroft Library.) As noted in an earlier newsletter on the social investment movement, Campaign GM, launched in 1970, presented the first social shareholder resolution asking a major company to report on its social performance. General Motors, acutely aware that it would continue to be pressed for such information, set out to compile and publish what became known as a “social report” documenting its actions regarding racial equality, operations in South Africa, and clean air and water. The report was introduced at a conference GM held in Detroit in 1973, inviting several dozen individuals, including me, to witness the unveiling. By later standards, the GM report revealed little, featuring glowing descriptions of company behavior but presenting limited actual data. During the same period, a management consulting firm in Boston, Clark Abt and Associates, started to offer evaluations of the social impact of specific corporate, government, and nonprofit actions it called “social reports.” Marc J. Epstein, a young consultant at the firm (and later my frequent co-author), was appointed Director of Social Measurement Services. Epstein later returned to school to do his doctorate in accounting and taught at Harvard, Stanford and Rice Universities as a leading commentator on corporate social measurement. The concept of a comprehensive social audit, still an elusive goal, was touted by an increasing number of commentators and even executives as essential to the responsible business movement. In 1975, UK IBM executives John Hargreaves and Jan Dauman featured a chapter on the social audit in their book, Business Survival and Social Change: A Practical Guide to Responsibility and Partnership, written for executives. The American Institute of Certified Public Accountants published The Measurement of Corporate Social Performance in 1977. Two developments in the 1970s and 1980s significantly increased the demand for accountability data and standards. Universities and other investors, seeking to respond to and vote social shareholder resolutions inundated companies with requests for specific data to evaluate the demands of the shareholder activists. Secondly, investment managers developed so-called clean investment funds which invested only in companies with specific social profiles. While early funds typically used negative screens (no defense contractors, no pornography companies, no companies operating in South Africa, etc.), investors increasingly requested investment funds which featured firms with good social records. To provide these investment opportunities, mutual fund companies experimented with a variety of measures of good behavior, sometimes focusing on one or more dimensions of responsible business (i.e. best record of promoting minorities into management, fewest clean air and water violations, etc.). Some tried to construct a broader measure of corporate social performance. Of particular influence in the 1980s and 1990s were “principles” organizations. In 1977, Rev. Leon Sullivan, a General Motors director, defined a set of principles of behavior for companies operating in Apartheid-era South Africa. Companies were asked, and then pressured, to sign the Sullivan Principles. After a time, the signatories’ compliance with the principles led to measures of their compliance. “Principles organizations” proliferated. One of these, initially created in 1989 as the Valdez Principles, addressed environmental performance in the wake of a major Alaskan oil spill caused by the Exxon ship Valdez. Led by Joan Bavaria, a social investment pioneer, the Valdez Principles were later renamed the CERES Principles, and are considered by many to be the first broad corporate code of environmental conduct. The CERES Principles have been influential in the development of corporate measurement and accountability, extending in the 2010s to measurements of environmental risk in financial investments. In 1997 CERES played a leading role in launching the Global Reporting Initiative which is today the most widely used template for corporate social reporting. Simultaneously, corporate efforts at social reporting advanced. In 1995, under fire from charges that it was not living up to its social commitments, the Body Shop, a UK cosmetics firm, conducted two “social audits” of its activities, one conducted by its own employees and the other by an independent outside auditor, myself. During this era, companies saw the rationale for performing their own evaluations of their social behavior, leading to increasingly extensive and sophisticated “social reports.” Corporate attention to accountability was aided by the development of measures of “corporate reputation.” The first such survey, likely Fortune Magazine’s “Most Admired Companies,” was followed by several dozen other ratings sponsored by media and later by private companies offering reputation consulting. Other reputation ratings included “Best Companies To Work For in America,” “Best Companies for Black Managers,” and “Best Companies for Women.” The United Nations gave encouragement to the social reporting and accountability movement in two major initiatives. In 2000, Secretary General Kofi Annan launched the Global Compact which defined nine (and later 10) key principles of responsible business behavior. After operating for several years with no measurement, the Compact adopted standards and measures to evaluate actual company behavior. The other initiative was to create broad social goals for the international community, including companies. The Millennium Development Goals (MDGs) and the Social Development Goals (SDGs) promoted significant social goals and encouraged companies both to contribute to the goals and to report on their activities. By 2020, corporate social measurement had become an established expertise in corporate practice. Growing corporate staffs evaluated a company’s environmental performance, its employee culture and working environment, its contribution to UN social goals, and many other dimensions. By 2020 the term ESG (environment, social, and governance) had become a shorthand for the dimensions of corporate social performance to be measured. Since 2000 the European Union has increasingly been at the forefront of the movement for measurement and accountability standards. The most important recent developments have been the Corporate Sustainability Reporting Directive (CSRD - 2023) and the Corporate Sustainability Due Diligence Directive (CSDDD- 2024). The CSRD required the largest firms to produce a first comprehensive sustainability report in 2025 or 2026, and a larger group of firms to do so later. The CSDDD requires companies to establish procedures to assure that their entire supply chain has adopted human rights and environmental standards by 2027. At the same time U.S. President Donald Trump has attempted to limit environmental goals and programs, the EU has been re-examining these two key directives. Just last week, the EU released its “Omnibus” review. The review recommends that the number of firms to be covered by the reporting requirements be reduced dramatically and for some timeframes for compliance to be stretched out significantly. In both the EU and in the U.S., companies will respond to anti-business responsibility initiatives in multiple ways. Some, particularly the largest firms, will likely proceed with enhanced social performance measurement and reporting, both because they have committed to it but also because they have found it critical to effective management. Other firms, particularly those who have never embraced the responsible business agenda, will curtail or even cancel their reporting activities.
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