There is no such thing as a “New economy” there is just understanding the old one

Faced with information overload, we have no al...

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There seem to be a grown consensus among certain parts of the sustainability debate that CSR is a new way of perceiving economics. The debaters claim that the way we have been thinking about finance is somehow to be discarded or rejected as not good enough or are just tainted by the financial crisis and therefor should be discarded like waste. One of the proponents of the so-called new Economy claims that:

“The Old Economy fails us because it concentrates power in unaccountable corporations and financial markets that value money more than life.” David Korten in CSRwire Talkback.

By this statement and others like it, experts claim that the market somehow have feelings and “it” will do evil if it is not caged up or tamed in some way (just to remain in the animal analogy).

David continues listing a series of what he claims are failures of the old economy (which are to a large extend true), but then he comes up with solutions, which at least to me are closer to fairytale than reality. For instance take the problem of financial indicators, which have seen an exponential increase in the last few decades, just look at the IFRS manual and you will find out how comprehensive this work actually is. The problem becomes information overload, I know that some would argue that you cant get enough information but lets face it we need to have some kind of filter or system of selection which creates real corporate transparency and not just massive availability of more or less accurate information.

This problem is a real issue for people who are interested in understanding and dissecting (yes, I understand the irony of the animal comparison) corporate disclosed information. It is the role of these people to convey information into communication that “real” people can understand and take decision upon.

But according to Korten and others the solution seem to be more systems; “Optimize sustainable human well-being by evaluating economic performance against indicators of human- and natural-systems health. The Bhutan experiment with a happiness index is an excellent start.”

Having interviewed a MBA student from Bhutan that came to my university to study economics and management there is no doubt that the people of the country are proud of there unique way of measuring GDP. But they do not believe that this is a new way of measuring economic performance. Rather they see this is a supplement and a way for the nation to stand together and protect their unique heritage and culture.

So what should we do?

Well as individuals interested in corporate performance we all need different types of information, at different times and with different degrees of accuracy. So what we need is rather to focus on the receiver rather than the sender of information.

If I’m a critical NGO I would like to have information on ethical performance, which I have a possibility to objectively evaluate while the accounting firm might need the same degree of accuracy but just in another area. For the business student or analyst it might be more useful to have information, which can be easily compared with other companies in the same field of business or in business in general. And from time to time the roles might be reversed and information that one normally would think was interesting to a shareholder might be really important to a more distant stakeholder.

Instead of inventing one reporting systems after another as the new economists suggests, we should make systems that are inline with the multitude of different stakeholders which the corporation encounter.

So the solution, at least to me, is that we need systems of systems instead of information overload on already strained financial reporting frameworks. These systems should access the corporate reporting framework from its most basic suppliers to their accounting books gathering and channeling information to the people who wants and needs it.

This approach would mean that corporations would produce customized quarterly and annual reports, which in essence is orchestrated by the receiver. This would also make it possible to know more about what the receiver is actually interested in when investigating the company. One could say that this approach would mean the entry of social media to the corporate financial and non-financial reporting platform. Giving the power back to the stakeholder who wants to exercise it like David Korten and a lot of others would like to see.


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