Building Better Sustainability Metrics
January 28, 2010
In June, Cisco received a number of pats on the back from environmental groups. Why? The company publicly declared an absolute reduction target for their greenhouse gas footprint. This is no small feat for a growing company with ever-increasing energy demands. For this reason, intensity reduction targets (i.e. GHG per unit of output) are more appealing for most growth companies. But environmental stakeholders dismiss these out of hand. Partially because they can depict improvements even while absolute emissions continue to grow. And partially because there is an expectation that companies should continually enhance energy efficiency — without accolade – simply because it saves money.
So who is right? I find it useful to contextualize the debate by examining the pedigree of sustainability metrics and their relative benefits.
Indeed, sustainability metrics have evolved by leaps and bounds over the past few decades. The earliest were merely absolute metrics of whatever was easiest to measure. Things that were difficult to measure were either ignored or given an arbitrary value. The next development was the conversion of absolute measures into relative measures, such as ratios, which screen out statistical ‘noise’ such as differences in size or output, and focus on relationships. The third generation compared less conventional risk measurements (e.g. environmental risk) with conventional economic risk. This was when the financial benefits of sustainability performance began to show.
Lately, practitioners have combined all of the above, together with newly minted Life Cycle Assessment data, leading to information overload — ever notice how the average CSR report has grown fatter over time?
So now the challenge is shifting from metric availability to metric suitability.
First, in streamlining metrics, practicality should reign supreme. New indicators, like all