SIST ISO 37005:2024

SLOVENSKI STANDARD
01-september-2024
Upravljanje organizacij – Razvoj kazalnikov za učinkovito upravljanje
Governance of organizations - Developing Indicators for effective governance
Titre manque
Ta slovenski standard je istoveten z: ISO 37005:2024
ICS:
03.100.02 Upravljanje in etika Governance and ethics
2003-01.Slovenski inštitut za standardizacijo. Razmnoževanje celote ali delov tega standarda ni dovoljeno.

International
Standard
ISO 37005
First edition
Governance of organizations —
2024-07
Developing indicators for effective
governance
Gouvernance des organismes — Élaboration d'indicateurs d'une
gouvernance efficace
Reference number
© ISO 2024
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Published in Switzerland
ii
Contents Page
Foreword .iv
Introduction .v
1 Scope . 1
2 Normative references . 1
3 Terms and definitions . 1
4 Understanding indicators . 3
4.1 General .3
4.2 Structure of indicators .4
4.3 Impact of indicators on decision making .4
4.4 Stages in the development and use of indicators .5
5 A taxonomy of types of indicators . 5
5.1 Means to ends – inputs to impacts . .5
5.2 Subjective or objective indicators .6
6 Using the taxonomy . 6
6.1 General .6
6.2 Choosing an indicator .7
6.3 What type of indicators .7
6.3.1 General .7
6.3.2 Indicators of impact .9
6.4 Characteristics of an indicator .9
6.4.1 General .9
6.4.2 Assurable .10
6.4.3 Timely .10
6.4.4 Comparisons .10
6.5 Risks arising from indicator selection and use .10
6.5.1 General .10
6.5.2 Unintended consequences .10
6.5.3 Lack of accountability .11
6.5.4 Non-alignment of purpose and sustainability .11
6.5.5 Selecting indicators to measure against purpose or to measure effectiveness .11
6.5.6 Indicators of the method used to achieve the organization’s purpose . 12
6.5.7 Too much information . 12
7 Selection of indicators by governing bodies using ISO 37000:2021 .12
7.1 General . 12
7.2 Aspects related to decision making . . 13
7.3 Aspects related to strategy, partnership and collaborations . 15
7.4 Aspects related to organizational strategy and relevant indicators . 15
7.5 Selecting indicators . 15
8 Using indicators . 16
8.1 Choosing one option over others .16
8.2 Decisions following an assessment of performance .16
9 Implementation . .16
Bibliography .18

iii
Foreword
ISO (the International Organization for Standardization) is a worldwide federation of national standards
bodies (ISO member bodies). The work of preparing International Standards is normally carried out through
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The procedures used to develop this document and those intended for its further maintenance are described
in the ISO/IEC Directives, Part 1. In particular, the different approval criteria needed for the different types
of ISO document should be noted. This document was drafted in accordance with the editorial rules of the
ISO/IEC Directives, Part 2 (see www.iso.org/directives).
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This document was prepared by Technical Committee ISO/TC 309, Governance of organizations.
Any feedback or questions on this document should be directed to the user’s national standards body. A
complete listing of these bodies can be found atwww.iso.org/members.html.

iv
Introduction
The purpose of indicators is to enable measurement that helps an organization to establish, implement,
maintain, and improve an effective governance framework and the conditions and practices enabling the
organization to fulfil its purpose. By following the guidance in this document organizations can realize the
governance principles as set out in ISO 37000.
This document provides a means to assess how an organization’s governance framework contributes most
effectively to the fulfilment of the organization's purpose. It covers:
— a taxonomy for the classification of different types of indicators;
— the context in which they are used, including the purpose of the organization and its appetite for risk
given impacts on all stakeholders;
— the risk appetite and tolerance of the organization and stakeholders;
— the limitations of indicators;
— choosing or developing meaningful indicators.
The role of an organization’s governing body is to establish, implement and maintain the organizational
governance framework, conditions and practices so that the organization can fulfil its purpose. In
performing this role the governing body has to make decisions and choose between available options,
as many times there will not be one solution. The indicators used will be part of the process to generate
those options and part of the mechanism to guide the choice between options. Governing bodies should
measure performance against objectives, which requires indicators. ISO 37000 helps to create cross-sector
international consensus on the role and results of organizational governance. However, the organizational
outcomes of organizational governance depend on the decisions made by governing bodies, the information
used to support those decisions as well as their execution. These decisions mean making choices between
the intended performance of alternative options for the same organizational purpose. A mechanism is
required to compare these options, in order to choose the optimal one for the specific context.
There is always the possibility that the choice made between options does not represent the "best"
choice or that the execution is not effective. Effective governance therefore requires an understanding of
appropriate indicators in the context of that possibility and the risk appetite of the governing body. Effective
consideration of indicators linked to organizational purpose, stakeholder issues, materiality and risk
appetite/tolerance reduces the extent to which a governing body can make decisions without the full range
of material information. It also enhances a dynamic monitoring approach.
Indicators are used and understood in various ways. Ultimately the governing body is seeking to achieve the
organizational purpose in the way intended. If this is done well then over time the governing body would
expect its organizational purpose and financial results to become aligned with sustainable development
and well-being as it considers the principles in ISO 37000, including social responsibility and viability and
performance over time. The pursuit of a purpose with consequences that detracts from ISO 37000 principles
would neither be responsible nor viable.
Unless otherwise indicated, all "principles" in this document refer to the principles in ISO 37000.

v
International Standard ISO 37005:2024(en)
Governance of organizations — Developing indicators for
effective governance
1 Scope
This document provides guidance to governing bodies on how to approach the development and use of
indicators in their governing activities.
This document is primarily written for use by governing bodies, it is also written to be of relevance to a
range of other stakeholders inside and outside of the organization to help them improve the quality of the
information on which they assess and make decisions regarding the organization’s governance.
It is applicable to all organizations regardless of type, size, location, structure or purpose. This document
does not cover indicators of effective governance.
2 Normative references
The following documents are referred to in the text in such a way that some or all of their content constitutes
requirements of this document. For dated references, only the edition cited applies. For undated references,
the latest edition of the referenced document (including any amendments) applies.
ISO 37000:2021, Governance of organizations — Guidance
3 Terms and definitions
For the purposes of this document, the terms and definitions given in ISO 37000 and the following apply.
ISO and IEC maintain terminology databases for use in standardization at the following addresses:
— ISO Online browsing platform: available at https:// www .iso .org/ obp
— IEC Electropedia: available at https:// www .electropedia .org/
3.1
indicator
measurable representation of the condition or status of governing body decisions, organizational actions or
activities (3.4), and stakeholder expectations
Note 1 to entry: Indicators can be measured, calculated, and described.
3.2
input indicator
indicator (3.1) of all types of resources on which the organization depends, irrespective of how they have
been sourced
Note 1 to entry: Examples of these resources include air, biodiversity, unpaid labour etc, including resources used
across the supply chain.
3.3
output indicator
indicator (3.1) for measuring activities (3.4)
Note 1 to entry: Can be qualitative or quantitative.

3.4
activity
way in which resources are used
3.5
objective
result to be achieved
Note 1 to entry: An objective can be strategic, tactical or operational.
Note 2 to entry: An objective can be, for example, organization-wide or specific to a project, product or process (3.6).
Note 3 to entry: Result in this document can refer to output (3.7), organizational outcome (3.8), or impact (3.9)
[SOURCE: ISO 37301:2021, 3.6 modified – Note 2 to entry has been modified, Note 3 to entry has been
replaced and Note 4 to entry has been deleted]
3.6
process
set of interrelated or interacting activities (3.4) that uses or transforms inputs to deliver an intended result
Note 1 to entry: Result in this document can refer to output (3.7), organizational outcomes (3.8), or impact (3.9)
[SOURCE: ISO 9000:2015, 3.4.1 modified – Note 1 to entry has been modified, Notes 2 to 6 to entry have been
deleted]
3.7
output
result of a process (3.6)
Note 1 to entry: This result can be intended or unintended
[SOURCE: ISO 9000:2015, 3.7.15, modified – Note 1 to entry has been modified]
3.8
organizational outcome
something, including aspects of well-being (3.14), that has the potential to change following a governing
body’s decisions
3.9
impact
positive or negative change in an organizational outcome (3.8) because of a governing body´s decision,
execution and the consequences of those decisions
Note 1 to entry: Taking account of other causes of any change in those outcomes.
Note 2 to entry: The change in an outcome can be positive or negative depending on its relation to a threshold.
Note 3 to entry: There may be interim points between actions and impacts where measurement can support
management towards achieving organizational purpose.
Note 4 to entry: If the change is in a well-being (3.14) outcome then this would be a well-being impact
3.10
impact valuation
measurement (3.11) of the relative importance of impacts (3.9)
3.11
measurement
process (3.6) to determine a value
Note 1 to entry: Impact valuation (3.10) is one type of measurement.
[SOURCE: ISO 37301:2021, 3.19, modified – Note 1 to entry has been added]

3.12
uncertainty
state, even partial, of deficiency of information related to understanding or knowledge
Note 1 to entry: In some cases, uncertainty can be related to the organization´s context as well as to its objectives (3.5).
Note 2 to entry: Uncertainty is the root source of risk, namely any kind of “deficiency of information” that matters in
relation to objectives (and objectives, in turn, relate to all relevant interested parties´ needs and expectations).
[SOURCE: ISO 31073:2022, 3.1.3]
3.13
materiality assessment
identification of information that would influence the decisions of a governing body in the context of the
principles in ISO 37000
3.14
well-being
positive state of being where people’s needs are met, such that they have the capacity and opportunity to
lead fulfilling lives
Note 1 to entry: Well-being is also referred to as a state of flourishing or a “good life”.
Note 2 to entry: Well-being exists at the individual, household, country and global level and can be applied to people
and nature, and to individuals and systems.
Note 3 to entry: Well-being can be achieved on varying timescales and to varying degrees.
Note 4 to entry: Sustainable development underpins the achievement of well-being at a point in time and for present
and future generations.
3.15
performance
measurable result
Note 1 to entry: Performance can relate either to quantitative or qualitative findings.
[SOURCE: ISO 37301:2021, 3.11, modified – Note 2 to entry has been deleted]
3.16
effectiveness
extent to which planned activities (3.4) are realized and planned results are achieved
Note 1 to entry: Result in this document can refer to output (3.7), organizational outcomes (3.8), or impact (3.9).
[SOURCE: ISO 37301:2021, 3.13, modified – Note 1 to entry has been added]
4 Understanding indicators
4.1 General
Governing bodies are responsible for "the fulfilment of the purpose of the organization in an ethical, effective
and responsible manner in line with stakeholder expectations" (ISO 37000:2021).
ISO 37000:2021, 4.1 sets this out as:
a) setting and committing to the organizational purpose and organizational values;
b) determining the organization’s approach to value generation;
c) directing and engaging with strategy to generate value;

d) overseeing that the organization performs and behaves according to the expectations set by the
governing body;
e) demonstrating accountability for this performance and behaviour.
Useful indicators provide a measure of performance in line with organizational purpose. Consequently,
indicators are quantitative and qualitative conditions that can be described and measured or calculated.
4.2 Structure of indicators
Indicators are descriptive and qualitative or quantitative and are used to assess performance. Based on
ISO 37000 principles, an indicator for effective governance should provide the assurance of responsibility,
in a social, environmental and economic context, and provide the basis for accountability and assurance in
accordance with governing body decisions, organizational action and stakeholder expectations by relevance.
An indicator can be structured as shown in Figure 1:
Figure 1 — Structure of an indicator
The structure of an indicator has multiple levels of description, according to the scope (see Figure 1). These
levels can be articulated as follows:
a) A quantitative element OF a qualitative element;
b) A quantitative element OF a qualitative element BY or PER a specific principle of ISO 37000 over time;
c) A quantitative element OF a qualitative element BY context (social, environmental or economic) [or]
PER accountability (governing body decisions, organizational action and stakeholder expectations by
relevance);
d) A quantitative element OF a qualitative element BY context [and/or/not] PER accountability (where the
accountability could also precede the context).
The minimum specification of an indicator includes "quantity OF a quality/attribute" and either PER or BY.
NOTE 1 BY and PER are interchangeable.
NOTE 2 Context is described in ISO 37000 as "the natural environment, social and economic system context".
EXAMPLE Cost of customer acquisition by market segment per customer channel.
The measure associated with an indicator linked to an organizational purpose provides a measure of an
underlying condition and is always associated with some degree of uncertainty. The effect of this uncertainty
is a risk. Uncertainty changes as new data become available.
4.3 Impact of indicators on decision making
Indicators allow the governing body to make comparisons to assist in making decisions including:
— comparisons of different options or actions in order to choose the one or the combination of options that
contributes most to the organizational outcomes and to the fulfilment of the organizational purpose;
— the simple binary comparison of whether the decision has been executed or not;
— comparisons between actual and expected results to assess the effectiveness of the organization
governance framework in achieving the fulfilment of the organization's purpose at the rate required.

Indicators are required for information that is material to the comparisons that a governing body is
making to improve the organization’s effectiveness in meeting its purpose with the available resources. If
comparisons are being made which include information that is not material, or do not include information
that is material, there is a possibility that the comparison would lead to a suboptimal decision.
4.4 Stages in the development and use of indicators
Materiality assessment is a critical step before the selection and use of indicators. A materiality assessment
is designed to reduce the possibility that suboptimal decisions are being made and increase the opportunity
to generate insights that inform decisions relating to an organization´s purpose. The decisions to be made by
a governing body in providing strategic direction as part of Principle 1 of ISO 37000:2021 include considering
the risk landscape and the material impacts on the context and of the context on the organization. In addition,
the information that is material depends on that purpose and is a judgement (ISO 37000:2021, 6.8.3.2.1). It
may change over time.
Once the information that matters has been determined, suitable indicators can be selected to obtain
relevant measurements. The measures associated with the indicators require a level of accuracy for effective
monitoring and decision making.
Once indicators have been selected, measurement information can be collected. It is important that the
measures associated with the indicator be under effective governance to ensure appropriate accuracy,
completeness and repeatability - and should be verified before formalising use.
5 A taxonomy of types of indicators
5.1 Means to ends – inputs to impacts
The main taxonomy for considering indicators that can be used for the decisions in 7.1 is to categorise
indicators against:
— Input indicator/means indicators.
— Inputs.
— Activity indicators.
— Outputs.
— Impact indicator/ends indicators.
— Organizational outcomes (including well-being outcomes).
— Impacts (including impact valuations).
See also structure of a theory of change as illustrated in Figure 3.
For any purpose it defines as its overarching objective, an organization should commit resources to activities
in the expectation of progress against that purpose. The resources being committed are the inputs. These
permit the development of activities to achieve the purpose in the way intended. A measure of the activities
is the outputs. The core subjects that change, which can be both expected and unexpected (or intended
and unintended) are the organizational outcomes. Changes in those outcomes are impacts. Changes in
organizational outcomes may cause change in other organizational outcomes.
Where the intentions towards the natural environment, society and the organization’s stakeholders
are encoded in the organizational purpose, are in line with sustainable development; and the way this
organizational purpose is intended to be achieved (for example as in Principle 11), reference to ‘impacts’
should, by extension, mean changes in aspects of well-being.
If the governing body has articulated an organizational purpose that is not aligned with achieving sustainable
development, impacts may not help contribute to the well-being of current and future generations. The

decisions made to achieve the organizational purpose will affect what ultimate value is created and
destroyed but the decisions should affect people’s well-being irrespective of the quality of this purpose.
An organization that is considering sustainability in its decision-making should examine how its impacts
lead to changes in aspects of well-being. The set of organizational outcomes that relate to aspects of well-
being are termed ‘well-being outcomes’.
When a governing body needs to make comparisons between options one or more of which is a future
projection, the choice is informed by the expected impact valuation. The assessment of expected impact
valuation can be implicit or transparent, informed by the decision maker or by those experiencing the
impacts.
These expectations are implicit in, for example, Principle 10 on social responsibility requiring that decisions
are in line with broader social expectations; Principle 11 on viability and performance over time requiring
consideration of present and future generations; and Principle 6 on stakeholder engagement requiring an
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