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Originally published October 16, 2008
In the upheaval and uncertainty of today’s business landscape, organizations see the value of focusing on what lasts. Companies know that paying attention to what sustains them, and the environment around them, matters. In particular, organizations are starting to grasp the importance of how their social and environmental activities affect profitability, public perceptions, subsequent stock performance, and even their ability to attract top talent.
Increasingly, it makes sense to incorporate sustainability initiatives into the fabric of an organization, such as controlling emissions, reducing waste, and lowering energy consumption. Companies are recognizing the value of these initiatives and looking for ways to become more sustainable. According to a recent analyst report, green innovation and investments have never been more active. In 2007 alone, $148 billion of new fund investment entered the sustainable energy sector.
A large majority of Fortune 1000 CEOs believe sustainability contributes to a company’s profit and that sustainability programs can deliver cost savings. On the consumer side, customer behavior is increasingly influenced by customer perceptions of whether a company is mindful of their impact on the environment and on society. In fact, many consumers say they would avoid doing business with a company that engages in practices seen as negative to the environment and the larger community.
The bottom line is that there are long-term economic and brand benefits when companies implement sustainability initiatives. But implementing these programs is one thing. Measuring their success and implementing effective governance strategies for sustainability using meaningful and actionable data is even more important. However, while implementing environmental and social activities is new, the tools available for capturing the data surrounding sustainability initiatives are even newer. Producing information on these programs in ways that make sense is difficult since the reporting processes are still immature.
So the question becomes: How can companies capture the data and understand the long-term value of sustainability initiatives? What is the financial impact internally on a company? How can results be measured? How can data be extracted from these initiatives so a company’s sustainability goals and efforts can be communicated to the public?
Fortunately, for organizations interested in developing sustainability initiatives, standards and solutions exist. The Global Reporting Initiative (GRI) provides principles and indicators that organizations can use to measure and report their economic, environmental, and social performance. Its guidelines cover broad areas such as outlining the overall content of reports, management approaches, and how to create reporting that is accurate and timely.
The GRI serves as a great resource for companies that want to understand the process of implementing sustainability efforts. However, while the GRI currently provides the most common standards for sustainability reporting, organizations still need to determine how they are going to establish a governance program that manages the process and that aligns daily decision making on all levels with sustainability skills.
For sustainability efforts to succeed, organizations need to capture relevant information and make it part of a larger performance management process. Doing this requires two key steps: understanding sustainability efforts as drivers for the business, and effectively implementing systems for sustainability reporting.
Core reporting content areas under the GRI standards include environmental, social, economic, philanthropic, management and other areas. Organizations should consider the following factors when implementing tools and methodologies to capture the data for these reporting areas:
Keep the focus on business imperatives. Correctly implemented, sustainability programs can help a business perform more efficiently and cost-effectively in addition to providing environmental and societal benefits. Sustainability initiatives should always incorporate core business drivers such as revenue generation, cost reduction and protections against business risks in order to align to the broader business goals of the company.
Recognize the business value in individual sustainability “levers.” Sustainability programs can deliver business value in any number of ways, depending on the company and industry involved. Common sustainability levers include emissions reductions with more efficient use of fuel; materials safety; waste reduction; land sustainability; water use optimization; and social activities that can build long-term support in the surrounding community.
Apply sustainability levers to core business areas. The aforementioned sustainability levers should be linked to key business areas and activities such as physical assets, operational execution, products and services, and stakeholder activities.
An organization’s move toward sustainability should be guided by rigorous strategic analysis, effective program management, performance measurement, and executive-level support and leadership in addition to specific expertise in the levers and core business areas.
Once an organization understands the intrinsic economic and brand value of sustainability programs, it can include these initiatives in a performance management system. There are two approaches to this:
When developing a system for monitoring sustainability metrics, companies should keep a few key principles in mind. Companies need to:
As environmental and societal topics emerge as pressing issues in corporate boardrooms, organizations will need to understand sustainability issues and how to govern the process and report on the data surrounding them. Sustainability initiatives matter. Understanding the basic standards and how to capture information on them is critical to helping companies shape new strategies that will influence both profitability and corporate citizenship.
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