The Taskforce on Inequality and Social-related Financial Disclosures (TISFD) is a global initiative to develop recommendations that enable businesses and investors to effectively identify, assess, and report on their inequality and social-related risks, opportunities, and impacts.
Their aim is to reduce the systemic risks of inequality, strengthen the stability of financial systems, and improve outcomes for all people.
The working group behind the initiative sought feedback on its approach. Their work is divided into the following topics:
- Thematic scope
- Materiality approach
- Alignment with international standards of conduct
- Interoperability with existing standards and frameworks
- Governance principles
- Outputs
SHIFT Environment gave feedback on the “outputs” section which includes discussions on which metrics to use. The current text is:
“The Working Group recognises that, while existing standards contain useful disclosure indicators and metrics, there remains a perceived need for meaningful and decision-useful metrics and indicators on companies’ and investors’ social and inequality related impacts, dependencies, risks and opportunities. Please share your input on specific gaps or weaknesses in disclosure indicators and metrics that you would like you would like to bring to the attention of the Taskforce through the feedback form. These suggestions may serve as inputs for consideration by the Taskforce as it starts its work.”
Here is what we wrote:
Thank you for the opportunity to feedback on your timely and important initiative. Below is a summary of my responses to the issue of metrics:
- I suggest that the thrust of metrics should focus on the social side with inequality metrics as secondary. While it’s clear that inequality contributes to many societal issues, as highlighted in studies like “The Spirit Level” by epidemiologists Kate Pickett and Richard Wilkinson, focusing too heavily on inequality metrics could potentially lead to unintended consequences. If the ultimate goal is to maximise wellbeing for all, it’s important that the approach reflects this.
- I have observed that many reports on social value appear more as data dumps than cohesive narratives. Whilst it’s promising that such data is being collected, it’s crucial that these metrics are aligned toward a unified objective of overall wellbeing. This approach ensures that the data tells a meaningful story rather than just presenting isolated figures such as gender splits, voluntary hours worked, or ethnic splits.
- I have also observed conversion of Social Value to monetary values. The practice of converting wellbeing activities into monetary value can be a double-edged sword. While it might attract attention due to the large financial figures, it also has limitations:
o The financial benefits are not directly accessible, which can lead to scepticism from financial directors.
o There is often no benchmark to determine what constitutes a “good” outcome—for example to identify whether generating £1,000,000 of social value is sufficient or not.
If this approach is to be used, I propose a dual reporting system that includes both the monetary value and a wellbeing metric, such as WELLBY (Wellbeing-Adjusted Life Years). This would provide a more comprehensive picture of the impact.
- I suggest exploring the emerging science of wellbeing measurement. This approach is straightforward, scientifically grounded, and quantifiable. For example, a simple survey question such as “On a scale of 1 to 10, how satisfied are you with your life?” can yield valuable insights. The UK Treasury’s Green Book already uses the WELLBY metric where a one-point change in life satisfaction for one year is one WELLBY. My article in IEMA’s Transform Magazine [1] expands on the scientific basis for using metrics such as these. I think metrics such as these can be used in an organisation’s direct impact on employees, and indirect impact through customers and supply chains.
- If the Taskforce is considering integrating metrics from this initiative with others, such as TCFD (Task Force on Climate-related Financial Disclosures) and TNFD (Taskforce on Nature-related Financial Disclosures), I propose using Maslow’s hierarchy of needs as a framework. Social metrics could correspond to Maslow’s social, esteem, and self-actualization levels, while TCFD and TNFD metrics align with the security level. My book, “Happiness by Numbers,” [2] offers an in-depth explanation of this proposal and its scientific foundation.
Overall, I suggest that the aim should be a cohesive, well-rounded approach that aligns all metrics towards the ultimate goal of maximising global wellbeing.
We hope readers agree with our response and if you are looking to integrate social and environmental improvements into a single holistic strategy, please be in touch.