The global cry to address today’s environmental crisis has bestowed new responsibility on businesses to lower their environmental impact. 75% of sustainability professionals polled by the Business for Social Responsibility believe that integrating sustainability objectives and practices into a business enhances its ability to address environmental degradation. To do this, companies have begun measuring sustainability performance which allows them to make continuous assessments, evaluate where they lie on the sustainability agenda, and make data-driven decisions and policies.
Measuring sustainability as an internal business process requires proper selection of key sustainability metrics and a means of making effective process improvements. These measures provide real-time data, a much needed quantitative basis for organizations to strategize and mitigate environmental, social and economic risks.
This data can be collected internally as a measurement integral to an organization’s daily activities or outside using third-party ratings and indices. In this article, we’ll focus primarily on internal sustainability measures and how businesses can implement them.
The Benefits of Measuring Sustainability
Measuring sustainability performance internally aligns a company’s economic goals with better social contribution and reduced environmental harm. The benefits that come from doing include:
- Progress tracking: Sustainability measures are kept up to date, indicating where sustainable progress has been made and where more effort is needed.
- Identifies a company’s impacts: Perspective is given regarding the impacts a business has on the environment. These impacts are presented against triple-bottom-line measures (Environmental, Social, Governance, the three ESG criteria). Such information is a growing requirement for business investors, with one-third of investors planning to increase their exposure to sustainable organizations.
- Creates resilience: For instance, during the COVID-19 pandemic, sustainable companies experienced less negative shock returns than their unsustainable competitors. Measuring sustainability as an internal business process gives focus to address business risk items.
- Stakeholder engagement: Traditional performance measurements relate to a shareholder point of view. This has evolved over the last 20 years into a multidimensional performance measurement system that accounts for different fields and stakeholder interests. Measuring sustainability internally allows you to engage with a diverse set of stakeholders, those interested in the economic, social, and/or environmental aspects of a business.
What Does Sustainability Look Like as an Internal Process?
Unfortunately, there isn’t a straightforward answer detailing exactly what sustainability looks like within the internal workings of businesses. Businesses are complex entities that vary in size, scope, needs and industry specifics. Similarly, sustainability involves many interrelated factors and encompasses many facets bringing breadth and depth to the kind of data that needs to be utilized. In addition, implementing sustainability requires different audiences to be considered.
Internally, sustainability needs to address everybody from the board, right down to the ground floor. Externally, your audience varies from investors and sustainability experts to the common eco-conscious consumer. Therefore, sustainability performance will mean different things depending on the audience and businesses must choose the appropriate way to utilize and present this information.
As such, there are multiple ways to approach measuring sustainability. Let’s take a look at the top internal sustainability measures and how these methods translate into business value.
Sustainability Measure #1: Point Value Scorecards
Point value scorecards are entirely initiative based. Organizations can track different aspects of sustainability throughout their operations and generate numerical scores using a point system. As seen with Green Business Bureau’s EcoPlanner, initiatives can be categorized by business areas such as office space, bathroom and break room, and transportation. Using a point value scorecard provides an easy way to tackle initiatives one-by-one and evaluate and compare different business areas.
What does a sustainable business look like according to the point value scorecard measure?
Numerical scores communicate how well an organization’s activities align with given environmental and social initiatives. For instance, the Green Business Bureau’s certification program attributes three tiers of sustainability performance depending on how many points a member business achieves; Aware, Gold and Platinum. Under this view, Platinum level members elevate their reputation as sustainability leaders and exemplify their commitment through a real-time EcoScore that can be accessed publicly.
Sustainability Measure #2: Internal Audits
Sustainability auditing and reporting evaluate the sustainability performance of a company using various performance indicators. Popular global reporting processes include:
These global reporting standards examine a business’s actual operating methods and compare these to pre-established best practices, which organizations can transcribe into their own internal auditing system. Common sustainability reporting guidelines, such as Global Reporting Initiative (GRI), can be used in combination to ensure the accuracy of internal sustainability reporting.
62% of executives stated the biggest challenge is integrating sustainability throughout the organization. Through observation, inquiry, and survey, an internal audit can help here.
What does a sustainable business look like using an internal audit sustainability measure?
A sustainable business is one that meets the requirements set out in the internal audit. The types of standards and the focus of the audit will specify the sustainability areas an organization scores highly in versus how the organization needs to improve.
Sustainability Measure #3: Benchmark Setting
Sustainability benchmarks systematically evaluate business performance relative to a sustainability standard, company, NGO, or other stakeholders.
Benchmarks provide a reference point to assess trends, measure progress and baseline global data in a range of sustainability parameters. Benchmarking in sustainability covers a large variety of entities, the most common being:
- Sustainability standards, certifications, or similar initiatives or programs. E.g. International Standard Organization.
- Policies, commitments, and performance of companies in the supply chain.
It’s important for businesses to identify which standards of sustainability tools are appropriate for their needs. Once identified, benchmarks act as market signals, indicating what sustainable business behavior should be.
What does a sustainable business look like using benchmarks as a sustainability measure?
Benchmarks have material implications for trade and investment flows, allowing brands, consumers, companies, and finance actors to define what is acceptable and what is necessary. Meeting benchmarks standards drives the uptake of responsible and sustainable practices, filtering out unsustainable operations.
Sustainability Measure #4: Sustainability Metrics and Data
Sustainability metrics and data resonate as a core component of business sustainability performance. Carbon footprint calculations have become a popular metric among organizations and individuals alike. Carbon footprint data, however, is only one sustainability metric among several that can give vastly different information about an organization’s internal workings.
Sustainability metrics for businesses can be categorized as environmental, social and economic:
- Environmental metrics: Generate hard data of an organization’s environmental inputs, outputs, and overall impact. Typically relates to air and water quality, levels of greenhouse gas emissions, and biodiversity and the condition of ecological systems.
E.g. Carbon footprint measures the total greenhouse gas emissions (GHG) caused directly and indirectly by an organization. You can measure the carbon footprint of your business using the business carbon footprint calculator here.
- Social metrics: Indicate social performance to reflect a company’s attitude towards and treatment of its employees, customers, partners and society at large. E.g. Benefits as a % of payroll expenses, annual charity contributions
- Economic metrics: Include specific economic indicators that track the creation of wealth or value and report its distribution and reinvestment for future growth. E.g. Research and development expenditures as a % of sales.
What does a sustainable business look like using sustainability metrics?
Sustainability metrics mean little when presented in isolation. However, using these metrics alongside benchmarking, auditing, and point value scorecards helps create a framework for evaluating sustainability performance and leading evidence-based policymaking.
It must be noted that some aspects of sustainability are difficult to quantify due to the interrelated complexities of the real world and a lack of global standards.
Using Hard Numbers to Launch Green Initiatives and Track Progress
The implementation of the Six Sigma methodology for making process improvements relies on the DMAIC methodology, which is an acronym for:
- Define what business processes need to be improved.
- Measure current process performance.
- Analyze data to determine how the process needs to be improved.
- Improve your process continuously.
- Control your processes to maintain optimized performance.
These step-by-step phases of DMAIC can help organizations implement a plan for measuring sustainability and continuous improvement.
According to Thomas Pyzdek’s book, The Six Sigma Handbook, DMAIC standardizes the problem-solving routine while also emphasizing the importance of data collection and analysis.
Combined with quantitative sustainability measures, DMAIC provides a formal and structured means of how to use hard data to launch green initiatives.
STEP 1: Document your processes
For DMAIC to work, you’ll need to first document your business processes which can be alleviated by using process documentation software such as a Business Process Management (BPM) platform.
Process documentation gives a visible representation of your business operations. This means you can both focus on individual components and stand back for big picture thinking and acknowledge how different processes interconnect.
Documenting your business processes may seem like a daunting task to get started. To help, consider using these steps:
- Identify and name the process, starting with the core business processes first.
- Define the process scope, i.e. Which steps are included in the process and which are not?
- Explain the process boundaries, i.e. Where does the process begin and end? What causes the process to start? How do you know when the process is done?
- Identify the process inputs, that is, the resources necessary to carry out each process step.
- Brainstorm the process steps by gathering team information from process start to finish.
- Organize the steps sequentially to create a process flow.
- Describe who is involved and responsible for each process task.
- Make note of exceptions to the normal process flow.
- Add control points and measurements. This includes identifying process risks or sustainability measures to monitor the process.
STEP 2: Define the processes to be improved
Ask the following questions to determine which processes to prioritize:
- Which processes are used most frequently?
- Which processes have the highest output?
- Which processes are critical to a business function?
- Which processes could provide the highest sustainability return (which will be quantified by sustainability measures) if improved on?
- Which processes are expected to be most degrading to the organization’s overall sustainability performance?
Studies indicate that processes selected for improvement efforts based on objective information are more successful than those based on subjective information. Therefore, identify the processes to be improved by:
- Clarifying the process scope and goal
- Identifying the process-related sustainability metrics
- Define the data collection method
STEP 3: Measure current process performance
Comparisons between before and after will quantify the effectiveness of process changes made.
Literature indicates that establishing reliable and applicable sustainability measures will help monitor key process characteristics and performance towards the process goals detailed in the defined stage.
Use these sustainability measures along with quantitative analysis, e.g. obtain feedback from employees working at the front-line as well as the customers receiving your end products and services.
STEP 4: Analyze how to optimize business processes to increase sustainability
As stated, quantitative measures can be used to reduce the gap between current performance and desired goals. Use the gap analysis technique to examine and describe this gap in performance.
The analysis stage is all about identifying process waste and opportunities for performance improvement. To do this, ask the following questions:
- How long does it take to complete each task in the process?
- Are any steps irrelevant?
- Will any steps benefit from green tech investments?
- Can the efficiency of any steps be improved?
- Can parts of the process be automated?
STEP 5: Improve your processes continuously
Act on the collected data, information, and insight so you can make beneficial adjustments to your business processes and move closer to your sustainability goals.
All adapted processes need to be moved to the testing phase. Have inter and intra-departmental employees run these processes and provide feedback on whether the changes made were beneficial or not.
STEP 6: Control your processes for ongoing sustainable performance
For true process control, you’ll need to regularly review the business processes with the question of sustainability in mind. Depending on your level of seniority, this may involve sending your processes to the appropriate authority for review and approval.
Communicate process changes to the relevant department. Answer any questions put forward and explain what changes have been made, why these changes have been made, and what sustainability improvements are to be expected. You need to ensure all employees perform the improvement processes in a uniform manner. Set up a mechanism for ongoing monitoring and institutionalizing the improvement actions taken.
To operate more sustainably, organizations have to adopt sustainability as a core business component. Sustainability measures can quantify internal sustainability performance and be used in combination with process improvement frameworks like DMAIC.
About the Author
Jane Courtnell is a Content Writer for Process Street. With a Biology degree from Imperial College London and further studies at Imperial College’s Business School, Jane has an enthusiasm for science communication and how biology can be used to solve business issues, such as employee wellbeing, culture, and business sustainability.