How to select the right sustainability metrics for your business
“You cannot manage what you cannot measure, and what gets measured gets done.”
There’s a reason why this mantra from Bill Hewlett, co-founder of Hewlett-Packard, is still quoted so often – and it applies as much to sustainability as it does any other essential business discipline. Given the breadth and complexity of the subject, companies often face a challenge in consolidating large amounts of economic, environmental and social information into a small number of key indicators. However, identifying the right metrics for your organisation is essential if you are to measure progress towards your goals and demonstrate the effectiveness and value of your approach.
As corporate reporting season hots up, here are our tips on how to identify the right metrics for your organisation, and how to use them most effectively:
See metrics as part of a wider performance framework
It’s important to recognise that metrics are part of a wider performance framework that underpins a strategic approach to sustainability, so there may be some work to do before you can start thinking about metrics.
Consider whether you have a clear idea of what you want to achieve – this might be a high-level vision, objective or objectives which focus on the desired outcomes. Below this will often be a number of operational or sub-objectives which will support or enable the achievement of these desired outcomes. In turn, these sub-objectives might be a mix of inputs, outputs and impacts or outcomes (but more on this later).
In a simplified example, if the ultimate goal is ‘to be a sustainable business’, sub-objectives might include decarbonising the operations of the business; developing sustainable products and services; improving the health of the workforce; and strengthening local economies. These strategic objectives are a fundamental part of the strategic plan.
Be selective – use only clearly defined measures of success
Metrics are the indicators you and your colleagues will use to monitor progress and drive performance against your stated objectives. There should therefore be clear alignment with – and metrics should flow naturally from – the high level and sub-objectives.
Remember that metrics need to send a clear message out to internal stakeholders, and in many cases external stakeholders too, of where the organisation currently is and where it wants to be (the target) against a stated objective. They should therefore be carefully selected to define a clear, long-term trajectory. In order to enable effective assessment of progress and to drive performance over the short and the long-term, it is likely that multiple indicators may be required to align with each objective.
Decarbonisation is a good example; a business may be targeting net zero absolute greenhouse gas emissions over a 20-year period with a clear understanding of where it is now, but will need to track and monitor a carbon-intensity metric in the short-term to confirm that the plans it is putting in place are effective. This is because the absolute picture may fluctuate in the short and medium-term according to other factors.
Make sure your metrics reflect the breadth and scope of sustainability
Broadly-speaking, sustainability metrics can be categorised according to three main aspects: economic, environmental and social. Looking at where your metrics sit within these is a useful exercise, as it will help to show whether you are taking a balanced approach to sustainability while also recognising their interdependencies. For example, if most of your indicators are environmental, you may need to go back and reassess your strategy and objectives.
Similarly, it is likely that your indicators will need to be a mix of inputs, outputs and impacts in order to track performance against your objectives effectively. Taking wellbeing as an example, input indicators will track your ongoing investment (e.g. financial, resource, training, campaigns etc.), output indicators might track things such as staff absences over time and financial savings (return on investment) and impact indicators will monitor what has changed in terms of the desired outcome, in this case improved employee wellbeing.
All too often, we see that impacts are not quantified, as they can be the most challenging part to measure, but where there’s a will there’s a way – and it’s vital to find it so you can effectively measure performance against your stated objective.
As a final point, it is important to identify and link proxy indicators for success that recognise interdependencies between different areas. For example, you might look to link trends in training and development, workplace productivity and customer retention and satisfaction in our wellbeing example.
Consider the relevance of metrics beyond your business
“Sustainability requires contextualization within thresholds; that’s what sustainability is all about.” Allen White, Co-Founder, Global Reporting Initiative
Sustainability is fundamentally contextual – and the key to achieving sustainability as a business is to present performance in relation to the broader concepts of limits and demands placed on the environment and society.
A context-based approach to selecting metrics and setting targets requires research, analysis and understanding to address the critical question of whether a company’s activities are sustainable. It takes real-world economic, environmental and social thresholds and limits into account as well as local, national and global ambitions, allowing a business to meaningfully understand the sustainability (or not) of its impacts and its contribution to broader societal goals.
For example, setting greenhouse gas emission reduction targets in line with climate science is one way to help ensure a business can operate successfully in a low-carbon world as well as playing its part in keeping global warming well below 2 degrees.
In short, dedicating time and effort to select the right sustainability metrics for your business and setting the organisation up to monitor and track them is well worth the investment. It will reap rewards for your business, and society, long into the future.
Please contact Alasdair Marks if you are looking for sustainability strategy and target-setting expertise and support