Law Prof. Galit Sarfaty finds problems in the widespread use of indicators to track corporate social performance
Should corporations put a numerical value on human rights?
It’s a question that UBC Law Professor Galit Sarfaty is exploring through her research and in her recently published article, Regulating through Numbers: A Case Study of Corporate Sustainability Reporting (Virginia Journal of International Law, Summer 2013).
Sarfaty’s study, which was also selected as a finalist for the Harvard Business Review-McKinsey Prize for Management Innovation, looks at the widespread use of quantitative indicators in international law and the limitations of using statistical tools in regulatory governance.
“Whenever you use indicators to measure human rights or other public values, there may be a distortion of their intrinsic meaning.”
Companies use indicators to measure their environmental and social performance because they translate complex concepts into numbers that are easy to understand and compare.
While metrics serve a variety of purposes, Sarfaty asserts that their effectiveness as regulatory tools is questionable.
Questionable methodology
“Whenever you use indicators to measure human rights or other public values, there may be a distortion of their intrinsic meaning,” she says. “It raises the question of what gets lost when trying to measure human rights by just converting them into numbers.”
Sarfaty took a close look at the Global Reporting Initiative (GRI), a private organization that has produced the leading standard for sustainability reporting. The GRI is used by more than three-quarters of the Global Fortune 250 companies. Its guidelines include 79 indicators for corporations to report on their social, environmental, and economic performance.
Sarfaty points to one example of a GRI indicator that looks at the total hours of employee training on policies and procedures around human rights. “Is this really going to represent what a company is doing in terms of its human rights impact?”
Sarfaty also feels that quantitative methods give considerable power to technical experts, such as accountants, who may not have a grounding in environmental or human rights issues.
“In the case of the GRI where the verification of data often involves law-related issues such as the application of international human rights and environmental standards, accountants arguably lack the professional competence to conduct a proper evaluation.” she says.
Field visits and interviews are more accurate
The use of indicators may produce a box-ticking approach to compliance, Sarfaty argues, which entails superficial changes without any substantive effects on behaviour. The process of disclosing information can become an end in itself.
The UBC Law professor believes that measuring human rights performance should involve field visits and interviews to provide a more accurate reflection of what the company is doing.
“You can gain a better understanding of the effects a mining company has had on a local community by interviewing members of that community. How has their livelihood been impacted? Have they been displaced as a result of the activities of the company? These types of effects are not going to be represented by numbers.”
The premise behind the GRI is the notion that “what is measured gets done.” But in reality, says Sarfaty, “what is easy to measure may be the only thing that gets done.”
Professor Galit A. Sarfaty is an Assistant Professor at the UBC Faculty of Law. Her research focuses on international economic law, human rights law, and regulatory governance.