So, How Do You Measure Sustainability Anyway?

Second only to execution of CSR initiatives, corporate sustainability measurement is extremely important to ensure the program is moving in a positive direction. Once a company embarks in a corporate sustainability program, it’s under the watchful eyes of its stakeholders, including employees, customers, and investors. CSR metrics are key in reporting progress to stakeholders.

In addition, measurements are important for continuous improvement, signaling when adjustments need to be made. They also support the case for ongoing sustainability and assist in future strategy development.

What to measure?

One technique is to use strategy maps, such as those described by Kaplan and Norton. Marc Epstein, author of “Making Sustainability Work,” has a similar methodology for determining what to measure. Marc says, “It’s important to understand how one variable drives another until the link to profit is clear.”

He breaks down the linkage into inputs, processes, outputs, and outcomes making sure to map the …

Second only to execution of CSR initiatives, corporate sustainability measurement is extremely important to ensure the program is moving in a positive direction. Once a company embarks in a corporate sustainability program, it’s under the watchful eyes of its stakeholders, including employees, customers, and investors. CSR metrics are key in reporting progress to stakeholders.

In addition, measurements are important for continuous improvement, signaling when adjustments need to be made. They also support the case for ongoing sustainability and assist in future strategy development.

What to measure?

One technique is to use strategy maps, such as those described by Kaplan and Norton. Marc Epstein, author of “Making Sustainability Work,” has a similar methodology for determining what to measure. Marc says, “It’s important to understand how one variable drives another until the link to profit is clear.”

He breaks down the linkage into inputs, processes, outputs, and outcomes making sure to map the variables that connect cause and effect. As an example:

Diagram from “Making Sustainability Work” by Marc J. Epstein

Inputs – Industry standards, managerial talent, regulatory environment, available capital

Processes – increase product inspections, ISO certification, employee training, improve technology

Outputs – Stakeholder reactions: improved reputation, increased purchases, reduced fines and penalties

               – Sustainability performance: reduced emissions, improved safety, fewer recalls

Outcomes – Financial performance: lower costs, increased revenues, increased profit

                  – Sustainability performance: reduced environmental impact, improved community relations, improved sustainability ratings

How to measure

Now it’s time to define metrics that represent items identified in the linkage. Epstein suggests that the inputs can be further categorized into external (geography, local standards, employment laws), internal (corporate code of conduct, number of business units, product/process life-cycle assessment), business (number of competitors, market size, number of customer channels), and human/financial resources (training cost per employee, average salary, R&D funds for environmental improvements).

Moving further up the chain, sustainability metrics related to process might include diversity of the workforce, percentage of “green” office space, number of functions with environmental responsibilities, safety training hours, paid hours for volunteer work, ISO certification, and investments in cleaner technologies and/or community projects.

The outputs that drive the financial outcomes might include percentage of recycled materials, fresh water consumption, number of community causes supported, duration of product use, rate of defective products, and local jobs created.

Finally, the prior metrics should all lead and connect to the financial metrics that support the triple bottom line (financial, environmental, and social profitability). These will always be monetary and might include cost savings from employee turnover reduction, increased sales from improved reputation, income from recycled products, and cost savings from reduced energy consumption.

Data dependency

As with any corporate performance management program, sustainability measurement has a heavy dependence on data management and end-user reporting. A sound sustainability program will have several to hundreds of metrics that need to be sourced and displayed in an easy-to-read manner for the company’s stakeholders. This is the perfect time for the BI team to get engaged and become an integral part of the CSR program.