Introduction:

Developing meaningful and constructive sustainability indicators is a challenge for even the most progressive organizations.  One major challenge our clients continually face is how does one step back and examine the business processes used to drive and support performance targets into an organization to measure progress while also demystifying the process to staff.  This Delphi Blog Spot will take the conversation to the next level by further exploring the challenges, best practices and sustainability program elements that can promote indicator integration.

Balancing and Choosing the Right Indicators:

If indicators are not chosen carefully and as systematically as possible, they will be ineffective and potentially result in misleading conclusions and actions.  Measuring too many things together, or over aggregation could result in an unclear indicator and therefore improper analysis.  Alternatively, too many indicators can lead to data management issues and the unnecessary use of resources to manage the indicator.  Finding the right mix can be timely and costly but is crucial to the success of any progressive sustainability program.

Here is some guidance on the key ‘ingredients’ for successful indicators and what they should represent internally in order to move measurement to action.

Challenges in Indicator Integration:

Once an organization has developed relevant indicators, the challenge then becomes integrating them into already existing business processes in order to ensure that planning and decision making reflects and promotes the sustainability program.  Unfortunately, when SD programs are developed to promote the competitive advantage of the entire organization, conflicts occur with long standing business processes that are not equipped to reflect the complexities of sustainability initiatives; for example, many companies deal with capital allocation issues when requesting funds for sustainability projects that do not fit into the traditional timeline for other capital projects—even if they have a performance indicator related to that item. In this case companies need to change the parameters for capital expenditures in order to fit within a sustainability timeline.  In another example, energy efficiency projects for some businesses do not always meet hurdle rates in ROI models and therefore do not attain approval. In this case, unique indicators measuring the success of these projects should be created and the appropriate ROI tolerances set.  Finally, integrating financial targets with sustainability objectives continue to cause stresses for many companies.  This is where cross-functional teams within the organization should be developed in order to help with this integration. 

Best Practice Examples:

GDP Style Aggregation - Ontario Power Generation’s environmental practices are assessed annually using an Environmental Performance Index (EPI). The EPI was first introduced in 2001, and it is based upon weighted scores calculated relative to voluntary performance benchmarks for spills, regulatory compliance, energy efficiency, radiation emissions and waste management. The scoring system ranges from zero to 150, with higher scores reflecting better performance

Operational Efficiency: Suncor takes a five-year timeframe in setting their performance goals which are ambitious and will require significant effort, resources (capital investments and people) and a focus on operational excellence.  The goals were established in 2009 and their business units will begin to address them in the 2010 planning cycle. The goals take into account improvements to existing operations as well as new technologies.

Long Term Goals - At DuPont, their goals are set out to 2015.  They have gone beyond simple footprint goals to the entire value chain.  They find improving efficiencies has led to meeting their goals, and that a pre-condition in the market to doing business is demonstrating progress on SD goals and targets.  Their indicators include energy efficiency, water use and air emissions. 

Four Business Processes that Help Drive SD Indicator Integration:

1. Stakeholder Engagement – A robust stakeholder engagement process can help identify business areas that require performance improvements, requiring the development of indicators and targets.  The stakeholder engagement process can also be used as a performance indicator itself, specifically for organizations with operations that are consumer-facing or having impacts at the community level.
2. Management Systems – Tracking progress on performance indicators is critical to ensuring that the intended outcome of a program is meeting its targets effectively.
3. Financial Reporting and Public Disclosures – Executives are becoming more interested in sustainability issues especially due to the new and emerging rules regarding the disclosure of environmental risks in financial reporting.  Given these developments, having a progressive reporting and disclosure framework can ensure that performance indicators are kept on the agenda—even during difficult economic times.
4. Regulatory Compliance – The longer-term aspects of commitments given current or pending regulations can help organizations focus their indicator development into specific areas of the business that will be impacted by legislation.

Interested in learning more about sustainability indicators?  Then you should contact The Delphi Group’s premier Corporate Sustainability Unit at 613-562-2005 and ask for Ted or Steven for more information.