There are many great articles and books that discuss the intricacies of sustainability measurement and all the methodologies and science behind them. This article is not one of those, but rather aimed at sharing some practical experience to measure sustainability in an organisation without too much technical jargon.
The world needs action now and to act we need to be able to know what to do and the impact we are having. To truly understand the impact an organisation is having there is a need to not only measure performance, but to go further than this and understand the value this brings to people and the planet.
There are different levels of sustainability measurement, and while they are interconnected there is a benefit to looking at them as different aspects as well as potential steps on a journey of maturity. When the measurements are in place it is important to ensure they are used for holistic decision making and are integrated within the organisation’s performance framework.
The impact organisations have is about both the performance of the business (e.g. how much CO2 it emits, what sales it has) and the value this brings (e.g. people who are positively or negatively impacted by the organisation and how much their lives are changed). Utilising the Theory of Change, an organisation can measure the inputs and outputs of their actions, but the true value comes from measuring the outcomes which the organisation is working towards. Performance is easier to measure and is the standard indicator of most organisations to benchmark and measure their success. The value part is harder to measure, however brings more long-term value to stakeholders, including shareholders. Both performance and value are important to measure as short-term and long-term impact drive different behaviours.
Different levels of sustainability measurement
There are three levels of sustainability measurement, and they have different uses. While they can be seen as a ladder of maturity, they can also be done in any order. The levels are:
- Models based on actuals and estimates
- Actionable decision-making measurements
- Customer facing measurements
1. Models based on actuals and estimates
To build credibility and trust in an organisation and to be able to see the performance of long-term goals, models are required that can be delivered on an annual, or more frequent basis. These will soon need to be auditable with the coming Corporate Sustainability Reporting Directive (CSRD) legislation in Europe and the International Sustainability Standards Board (ISSB) global requirements close behind. While of course it is better to be able to have actuals for all data it is not always possible, and a certain level of estimation is needed.
- CO2 emission factors may not be 100% accurate and market-based emissions (from contracts) may be used to calculate CO2 from energy consumption.
- It may not be possible to know how far every customer has travelled to a location or on what means of transport, so a representative survey can be extrapolated to calculate the CO2 of customer travel.
These estimates are good enough to be able to disclose a company’s emissions but are not necessarily actionable for the business to make decisions on a shorter-term basis. Long-term trends can be followed, and long-term actions can be planned to improve performance.
2. Actionable decision-making measurements
While estimation is accepted for annual models and reports, when making decisions a higher level of accuracy and frequency are usually needed. Imagine the example where customers distance and method of travel is estimated from an annual survey, then the only way to reduce CO2 from emissions in this model is to reduce the number of visitors, not a behaviour that most customer facing organisations would want. Therefore, to make measurements actionable and to see the impact of activities, a higher degree of accuracy and less estimation is required. Location analytics tools are progressing towards being able to see consumer journey pathways to and from specific locations and can help when trying to determine your customers carbon footprint.
If you want to understand more about how to fully integrate sustainability into the decision-making process and empower employees to see their performance and the impact of their actions, click here.
While accuracy is very important, the desired big change or impact that is required needs to be understood. For example, if a company wants to ensure that all a charitable donation is spent then measuring the spend is enough, however if the company wants to measure the impact of the donations, then measuring what the donations are spent on drives more of the required behaviour.
It is also important to “get going” with measurements and not wait for perfection. It can be difficult to measure the exact outcomes of charitable donations and developing an outcome model can take time. However categorising different activities into certain levels of outcome can take much less time and then the number of people with each outcome or the amount of money spent on each outcome can give a good enough idea of success for the employees to work on maximising the outcome of the donation.
Other ways to measure in a more actionable way can be to:
- Decide what products or services a company is selling fulfil certain sustainability criteria. Eg. circularity, better materials, or supporting a sustainable lifestyle, and then measure the percentage of the sales that come from the products or services, or the number of customers who have purchased these.
- Measure the climate footprint (CO2) of the parts of the value chain that are under the direct control of the company. These are easier to quantify, and take direct action on to improve, than the scope 3 emissions from the rest of the value chain, so starting with actionable measurements things you control ensures results in the shorter term and enables a behaviour change when scope 3 measurements are ready.
- Put an internal value on the CO2 footprint of products and services to be able to steer sales towards lower CO2 products or services
- Agree the different levels of impact generated in community engagement work and classify the engagement activities into these levels, then measure the number of activities or the number of people impacted at each level
The key to actionable sustainability measurement is being able to show stakeholders, in enough granularity, the impact their actions are having, whether it be at a department or team level.
Goals should be measured on a regular basis; weekly, monthly, or quarterly depending on how quickly they can be affected. This also allows for benchmarking and competition across the organisation.
Ideally the measurements should be shared with forecasts predicting what will happen with performance if certain actions are taken. Predicting what the highest impact actions are and sharing what others have done is a great way of creating engagement and allowing employees to focus on implementation and not detailed analysis, however it is important to share the performance, when possible, even if it takes longer to fully implement more advanced solutions.
3. Customer facing measurements
Whether you’re a B2B or B2C business, consumers want to be able to make informed decisions about what they are purchasing. While the sustainability impact of a product does not necessarily mean that a customer will buy it, purchasers are becoming more conscious all the time. In some areas consumers are willing to pay more for sustainable products, but the expectation is changing and the companies that provide sustainable products and services at an affordable cost will win out eventually. Sharing the sustainability stories and measurements with customers becomes more important as this movement takes place.
Unfortunately, there is not one standard way of calculating this currently, but the EU are bringing in a “Digital Product Passport” that will cover the circularity of products and are also testing Product Environmental Footprints (PEF). With these, the comparisons will start to become more aligned. As well as measurements it is also important to share the sustainability stories of products and services with customers as well as making sure the products are the most attractive for other reasons and not just because they are “sustainable”. Informed choices for customers should be simple and understandable, while not forcing customers, free choice means that they will take their business elsewhere if they do not like the offering of your company. Therefore, applying a simple measurement of products that is both understandable and credible works best.
Building a framework for holistic decision making
With all these measurements it is best to fit them into a framework of performance for the organisation. Sustainability measurements should not sit outside the rest of the performance framework of a company. Where a lot of organisations have profit reporting and potentially sales then the sustainability or Environmental, Social & Governance (ESG) measurements can be integrated using several simple models. I have personal experience using the 4Ps (People, Planet, Profit, Perception/Purpose) and the 4 Betters (Better Homes, Better Lives, Better Planet, Better Company), but there are also more models such as the triple bottom line 8. The key is to ensure that these are not just added to a Profit and Loss account, but that they are actually used to make holistic business decisions.
With all measurements of sustainability, it is important to “get going” with something and build from there. Ensuring a sustainability mindset when measuring the success of an organisation is more important at the outset than the exact methodology, but of course the methodologies need to be credible and trustworthy to employees, customers, and society.
Measuring performance tells us how successful we are in reaching the targets we have set for ourselves, and while the annual models are good for checking the long-term direction, the real power comes in enabling employees to see their individual impact and allowing customers to make informed choices based on the sustainability credentials of products and services.
Developing the organisations measurements and ensuring that the sustainability measurements can fit together in a simple framework allows for holistic decision making. Looking beyond the performance to the value generated by an organisation also allows for longer term decision making and gives an organisation something to aim for that creates real value to people and the planet.