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Universal Commons 2019 Update

Updated: Jun 11, 2019

The Universal Commons team kicked off 2019 with a highly productive workshop hosted by Founders Alan and Carol Schwartz amidst the stunning native flora and fauna of Point Addis in Victoria, Australia that helped galvanise the road ahead for the project.

The Universal Commons team was joined by a number of experts in business, economics, philanthropy, and communications. Together we made significant progress in a range of areas, including the goals of the Universal Commons Measurement Challenge, the design and function of the voluntary market for Social and Natural Capital, and the importance of developing standards of measurement in partnership with other global reporting bodies.

Mission statement

Being situated in the midst of that wondrous but fragile landscape, seeing the windswept hills covered in rusty soil under constant threat of erosion, surrounded by native acacias and eucalypts under pressure from invasive species, seeing the turbulent waters of the Bass Strait, already impacted by spills from an offshore oil and gas well, all served as a potent reminder of the Universal Commons Project’s core mission: to provide a new way for all of humanity to respect and invest in the preservation and enhancement of the earth’s bounty of social and natural assets.

The key problem the Universal Commons aims to solve is that our current economic system, as productive as it is, fails to account for the value of our social and natural assets, which we call Social and Natural Capital (S&N Capital). It excludes things like the literacy and the health of our communities, the cleanliness of the air and water, or the ecosystem services that support life because they’re considered unaccounted externalities that reside in the commons.

So if we want to value these things properly, and actually pay for what we use, then we need to find a way to internalise S&N Capital into our economic system. To do that, we need to be able to measure it effectively. This is why we’re running the Universal Commons Measurement Challenge. Better measurement will unlock the value of Social and Natural Capital and bring it alongside Financial Capital, enabling the power of the market to direct investment where it’s needed most. The end result will be a productive, market-based economy geared to preserve and enhance what we truly value.

Kick-starting the voluntary market

One of the most important discussions at the workshop was how the market in improvements in Social and Natural Capital might get started. The key question we tackled: why would any business or organisation incur a cost to invest in improvements in S&N Capital when, because S&N Capital is treated as an externality, they’re currently not obliged to do so?

First, we restated our commitment that our marketplace for improvements in S&N Capital, the Universal Commons Exchange (UCX), will remain entirely voluntary, so we will not compel anyone to use it. Yet we need enough businesses and organisations to choose to interact with the UCX to produce a strong market, with sufficient buyers and sellers of improvements in S&N Capital.

Our response is that investment by philanthropists will be an important first step kick-starting the market. Philanthropists are already investing in preserving and improving S&N Capital, but they don’t usually receive any financial return for their investment. Instead, they receive a statement indicating the impact their investment has made, albeit often reported using weak metrics.

We expect the Universal Commons Exchange will be seen as a highly attractive new approach for philanthropists to invest in preserving and improving S&N Capital, particularly given the rigour of the metrics we’ll be offering. This investment by philanthropists will effectively create the supply in the form of units representing the improvements that have been made.

But for a market to be strong, there needs to be buyers to create demand for those units. Which brings us to another question: why would a business pay for the right to deplete or degrade S&N Capital when they can currently do so in most instances without any obligation to pay for it? And if they don’t pay, where will the demand for improvements in S&N Capital come from?

Our response to this question is there already are many enlightened business and corporations who do care about their impact on people and the planet. Over 1,750 businesses have committed to integrated reporting. And there are over 2,500 certified B Corporations, businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. If these businesses want to reduce or offset their impact, or contribute to improving the condition of S&N Capital, they can easily buy units through the UCX to do so, confident their funds are flowing to organisations that have actually produced improvements.

Initially, units might be sold at a very low rate, making them attractive. For example, a philanthropist might invest a million dollars to improve air quality, and would receive units from the UCX representing the improvement made. The philanthropist can then sell these units to another organisation, such as a corporation that currently degrades air quality through its operations. That corporation might only offer $10,000 for the units, which might look like a significant write-down for the philanthropist, but in actuality the philanthropist is receiving $10,000 in income where previously he or she would have received nothing but a glossy impact report. That income can then then go towards other projects the philanthropist wishes to pursue.

Already this means air quality is no longer an externality, although it is being traded below cost. This represents an opportunity for another responsible corporation to bid up the price of air quality units, perhaps offering $20,000 for them. Then another service provider might come along with an innovative new method to improve air quality, and produce the same overall improvement for only $100,000. Market forces will then steer investment towards them, encouraging competition, and an improvement in the efficiencies and services provided to improve S&N Capital.

Over time, we expect demand for air quality and other S&N Capital units will rise as businesses, philanthropists and the public recognise that the market is funnelling investment to organisations actually making measurable improvements to S&N Capital. Positive social pressure might encourage more corporations to pay a greater amount for the S&N Capital they use, increasing demand further. Eventually, we anticipate the UCX will reach a threshold where supply and demand are balanced, creating a strong market.

Measurement and standards

Another focus at the workshop was the development of the Universal Commons Measurement Challenge, run by Nesta. This challenge prize aims to bring together the world’s best minds in measurement and impact to produce high quality and low cost metrics for various dimensions of S&N Capital such as air quality. Nesta has already made great progress on the Challenge design, and will soon be convening a workshop with experts to refine the prize criteria.

One feature of the Measurement Challenge highlighted during the workshop is that we’re not just looking for new scientific metrics - although they are of central importance - we’re also looking for new standards. The metric system, for example, is not just a system of scientific specifications for measurement of length, mass, etc, it represents a global consensus about how we measure. Likewise, the output of the Measurement Challenge needs to foster consensus around how we measure various aspects of S&N Capital.

There are already some well established sustainability reporting standards that mesh well with the objectives of the Universal Commons. The Measurement Challenge will seek to buttress those standards with high quality measurement. One example is the Global Reporting Initiative (GRI), which “helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social well-being. This enables real action to create social, environmental and economic benefits for everyone. The GRI Sustainability Reporting Standards are developed with true multi-stakeholder contributions and rooted in the public interest.”

This reinforced the need for the Universal Commons to collaborate with international standards groups, such as the GRI, to combine efforts to improve the quality of reporting with improved metrics. The Universal Commons will also give those organisations that have signed up to groups such as the GRI a set of high quality metrics to track their impact, which will make it easier for them to engage with the UCX.

These are just some of the highlights that emerged from the 2019 Universal Commons workshop. We are also hard at work designing the technical specifications of the UCX, building partnerships with other related organisations, and developing our strategy for bringing the Universal Commons to life. We expect 2019 to be a pivotal year for the Universal Commons Project. Stay tuned and subscribe to our newsletter so you don’t miss any important developments.


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