Organizational Governance

In Sustainability, How Much Is ‘Enough’?

If your sustainability efforts cannot withstand increasingly tough questions from executives and Board members, your company is not approaching it in the right way. This framework will help you be ready the next time someone asks, ‘how much is enough?’

Brand Provided | By Erik Foley | Published 4 months ago | About a 4 minute read

Image: Alena Darmel

Sustainability strategies are increasingly being held to a similar standard as financial reporting. This is a positive development, but one few sustainability professionals are ready for: Many of us don’t have a finance background — we might just feverishly pour over the Wall Street Journal to sharpen our business acumen before back-to-back meetings riddled with an alphabet of sustainability issues pushes it most of it out of our heads.

This was my mindset when a client recently asked for our advice on a question that often comes up with his Board: With sustainability initiatives, how do we know how much is enough? A simple enough question, devilishly hard to answer. The response in that moment could make or break one’s career and the company’s will for sustainability-driven innovation and growth. My advice, expanded for this article, is what follows.

There are three ways to define enough-ness: impact, penetration or value creation. And there are two principles to consider as the Board makes its assessment: responsibility and transparency.

Let's start with the principles.

Principles of enough-ness

Responsibility

What is "enough" depends on the impacts the company creates through the choices it makes upstream and in the product-design decisions that flow into impacts downstream. This means that a company must develop a measured understanding of the impacts it is responsible for; that measure becomes the denominator used to inform evaluations of enough-ness.

A hypothetical microchip manufacturer — XYZ Chips — is responsible for upstream impacts that result from sourcing decisions, mid-stream impacts from manufacturing decisions, and for the slice of downstream impacts connected to the energy efficiency of the chip itself. It is not responsible for the products the chip is used in or how they are used.

Transparency

"Enough" also depends on data availability and the extent of feasible transparency. In short, a company cannot be held responsible for impacts that cannot be measured; without measurement, "enough" cannot be determined.

XYZ gathers data from first-, second- and third-tier suppliers. However, it has learned that some third-tier suppliers use subcontractors to fulfill certain orders. There is little to no data on the use of subcontractors, so enough-ness cannot be determined. The company should obviously work to identify subcontractors and ensure they adhere to codes of conduct and other requirements.

Determining 'enough' at three levels

Impact: What is the potential beneficial and negative impact the company is responsible for, compared to current impact?

XYZ's analysis is based on its annual purchase of Titanium (Ti), Tantalum (Ta), and Cobalt (Co), and the training and PPE programs recommended by groups such as the Fair Cobalt Alliance. The analysis shows that 75 percent of mines providing these minerals have sufficient safety programs.

Penetration: What percentage of products, product lines, spend etc. is being included in the program compared to stated goals and industry averages and best practice?

XYZ can calculate that, for example, ethically sourced Ti, Ta and Co were used in 60 percent of its microchips in 2023. The limiting factor has been volume of ethical sources and the time it takes to set up and verify the effectiveness of safety programs.

Strategy: What is the potential beneficial contribution to business performance, compared to the current contribution?

"Enough" is not just an externally oriented judgement but an internal one. Indeed, sustainability is a strategic — not just a moral — imperative, so ‘are we doing enough?’ is in large part a business question. The extent of enough-ness therefore is measured in part by contribution to cost reduction, revenue creation, risk avoidance and long-term value creation.

If a Board member at XYZ asks ‘how much of this sustainability stuff is enough?,’ an answer tied to business strategy would be well-placed. One could answer, "We have been largely focused on aerospace and defense, and our new strategy is focused on the EV market. Our analysis suggests that we have captured 15 percent of the market of the EV producers with public goals to source efficient microchips as part of their sustainability strategy. We think we can double that and capture 30 percent."

Conclusion

As sustainability is increasingly integrated into core businesses, executive teams and Board members will ask increasingly tough questions. If sustainability cannot withstand the tough questions, your company is not approaching it in the right way. The above framework is provided so that you can be ready the next time someone asks, ‘how much is enough?’