Essential Points to Consider on Measuring Sustainability Performance
“Strive not to be a Success; but rather to be of value” — Albert Einstein
With global awareness on environment and social issues on the rise today, more companies are jumping on to the sustainability bandwagon. From doing the “right thing” to doing “something”, companies today want to be seen as doing their bit to the society and environment. But how do you really measure the value of a company’s sustainability initiatives? Efforts to measure and compare sustainability performances across companies have been undertaken by several organizations. Some organizations have also undertaken exercises in rating companies for their sustainability performances, using in certain cases, a fairly complex set of metrics. With sustainability reporting becoming more common, here are some of the challenges I faced as I undertook the exercise of evaluating the sustainability performance of the top 100 companies in India.
Challenge No. 1: Quantitative vs Qualitative?
The good part about companies working on sustainability and CSR initiatives is that they have a free hand to decide the area and extent of intervention. The downside of this is that a lot of these interventions are not measurable. How do you measure the impact of donating 100 computers to a nearby school? Or the happiness quotient of the community due to increased lung space? Because of the subjective nature of these interventions, some rating companies prefer to rank the sustainability performance through surveys and personal opinions. Much of it then depends on how well a company has been able to project its performance through its annual reports, sustainability reports and other social media.
Challenge No. 2: Reporting Formats
While reporting on their sustainability performance, companies are faced with using the formats outlined by Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), or of the many exchanges across the world, such as the DJSI. Companies in India have been more likely to follow the GRI format or follow their own style of reporting. Most commonly, their sustainability performance is reported as part of their annual report, and follows a reporting format rather than a measurement format. Using this widely diverse publicly available sustainability reporting data to measure, and more importantly, compare sustainability performance across companies becomes an exercise in subjectivity.
Challenge no. 3: How Good is Good?
Which brings us to the question of “How good is good”? Is it better to build hospitals in rural areas or donate computers to schools? Is it better to achieve 100% sustainability within your organization and ensure employee satisfaction, or uplift the community around your facility and contribute to economic growth. Or is it better to contribute to saving the Great Lakes or provide clean drinking water in Tanzania? While there may be several opportunities to make a difference through CSR activities, measuring, quantifying and comparing performance data is a tricky task. Organizations that currently rate sustainability performances have devised methodologies ranging from simple to very complex, some of them quantifying the data while others using subjective analysis.
Attaining the “Value” Nirvana
It is becoming increasingly clear that standardized indicators or “metrics” are the need of the day, not just to be able to measure the sustainability performance of an organization, but also to streamline measurement and reporting within an organization. In the Indian context where sustainability reporting is just catching up, the GRI reporting requirements or the DJSI performance indicators are too sophisticated and involved. This begs the question on whether different sets of metrics would be required for developed and developing economies. There are questions to be answered, decisions to be made, goals to be attained. Because, as in Robert Frost’s poem, we need to know how many miles we need to travel before we can sleep.