While measurement, disclosure and other forms of engagement were the dominant themes yesterday, day two of New Metrics ’17 saw brands, NGOs and solution providers digging deeper to reveal practical applications and concrete findings from where the rubber meets the road in the world of sustainability metrics.
The design and implementation of a Sustainable Product Optimization Tool
By Anna Shugoll
This tool is designed to measure a product’s impact across its entire lifecycle, beginning with raw material extraction and ending with product use and end of life disposal. Mugnier, one of the core data analysts for the project, shared with us his four design “obsessions,” or key features he felt the scorecard needed to be successful. SPOT needed to be simple, consistent, trustable and user friendly. In sum, the tool needed to provide an easy method to synthesize data and generate a single aggregate score that could be evaluated for a vast spread of products.
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L’Oréal, working with EY and Quantis, began designing this tool in 2013. Now, four years later, the cosmetics giant has successfully rolled out SPOT across all of its products globally — spanning 53 brands and 150 product categories. The potential success of this global product sustainability scorecard could be a game-changer for conscientious brands worldwide; the company plans on using this tool to meet some ambitious sustainability goals by 2020:
- Each brand must have a sustainability strategy
- The company must reduce its footprint by 60 percent (including carbon, waste and water)
- All employees must have access to health care, social protection and training
- 100 percent of suppliers will participate in L’Oréal’s sustainability program
- Provide 100,000 underprivileged community members with access to work
How SAP Helps Customers Provide Decent Work via Supplier Transparency
By Nishita Lali
Sullivan asks businesses to look beyond profit and ask themselves, “What is your purpose?” But SAP’s customers are now looking for ways to integrate profit and purpose by selling sustainable products. Communicating with CFOs about sustainability in their own language drives this goal further.
Another aspect of business integration that Sullivan discussed is no longer keeping CSR efforts apart from business efforts. SAP’s Africa Code Week was an initiative through which half a million children learned coding, which is useful for their own personal growth as well as SAP’s, since they will always need coders. Such initiatives can help address each SDG while boosting company performance through connecting philanthropic activities with core business.
SAP especially focuses on Goal 8 by helping businesses achieve supple chain transparency. Sullivan explained the company’s four levels of focus:
- Level 1: Supply chain visibility
- Level 2: Incident reporting and sharing
- Level 3: Site visit reports and audits
- Level 4: Labor evaluation
But how does one incorporate the data collected? Sharing the information through procurement systems is the way SAP ensures that the data isn’t piled up in the corner. Sullivan ended with the thought that risk management in supply chains has always focused on past problems and avoiding them. SAP wishes to create a proactive way of assessing risks through open source news and real-time scheduling in the world. All of this combined, he said, can improve people’s lives.
AT&T’s unconventional connectivity initiatives bringing it closer to net-positive goal
By Orly Arbit
The three case studies that Schulz described were vastly different in their scope and sector, but the common thread was that AT&T’s connective technology enabled innovative and sustainable solutions. A rice farmer in Arkansas benefitted from Internet of Things technology that improved water and resource efficiency and transformed the rice-growing process. A new, durable and environmentally friendly shipping pallet became a more marketable product after integrating AT&T sensor technology. A smart power meter platform used AT&T’s connectivity to demonstrate the energy and money saved from revamping a building’s lighting. Schulz acknowledged that AT&T is only at the beginning of its net positive journey, but he is confident that continued collaborations will be advantageous for the company, customers and environment.
Context-based sustainability in action: Results from the first full application of the MultiCapital Scorecard
By Meg Kramer
As is true with good cheese, Cabot Creamery Cooperative’s MultiCapital Scorecard (MCS) has ripened over time. Director of Sustainability Jed Davis first presented Cabot’s MCS at New Metrics ‘15, as an initial attempt to track its impacts in a context-based manner. Since then, the Scorecard has served as a framework for Cabot’s sustainability efforts, allowing a better and more thoughtful approach to reporting performance. While the overall score provides a snapshot at a specific point in time, the progression performance score helps stakeholders understand Cabot’s progress toward a higher level of sustainability. The ability to look at performance over time is important to help prioritize efforts, highlight gaps and determine how to how to address those gaps. A notable part of the scorecard’s evolution is the inclusion of specific economic information that provides financial context for sustainability efforts.
Davis stressed the importance of using a performance lens such as the MCS that allows quantification of topics most material to a company and its key stakeholders. Davis’s advice was to take one metric, go after it rigorously, then measure your progress.
Davis’s final words were strong motivation: “Let me know when you succeed and I’ll send you some cheese.”
Engaging CFOs and CEOs to highlight systemic risk and create long-term value
By Nishita Lali
Andrew Winston, our host for this session, opened the floor by sharing his frustrations with being asked, “Why should we care?” by multiple leaders.
Geoff Kendall, CEO of the Future-Fit Foundation, tackles this problem head on. He helps companies understand that “businesses can only thrive if society flourishes and society can only flourish if we are operating within the carrying capacity of our planet.” The Foundation’s Business Benchmark defines the ‘extra financial breakeven points’ because, Kendall stated, we are not sending the right signal to companies. He gave the example of the Embedding Project, which spoke to many CEOs about inventing sustainability in their firms, operating within a limit and whether the idea resonated with them. There were three main findings about the CEOs’ thoughts:
- The idea of a threshold helped them set defensible limits to their contributions
- It allowed them to foresee possible disruptions and manage them effectively
- And lastly, it enhanced their social acceptance because their ambitions were authentic
Kendall also stressed the fact that there is a language barrier between people in sustainability and CEOs. The solution is a systemic approach to sustainability.
The panel then introduced Bob Willard, author of The New Sustainability Advantage, who talked about the three layers of mindsets in business:
- Do the right thing
- Capture opportunities
- Mitigate risks
He further elaborated that most people focusing on the first tend to get annoyed at the idea of justifying their need to ‘do the right thing.’ Others who look at the other two are trained to make money without getting blindsided by risks.
But recently, Willard said, there has been a ‘mind meld’ between all three layers. Companies are now realizing that if they improve, they will generate a reputation which brings them opportunities and avoids risks. Willard pointed out that we need to provide CFOs and CFAs with more information to make it holistic by bringing all three layers together.
While the move towards sustainability is great, Brendan LeBlanc from EY requested we not ‘punish by rewards.’ Companies winning awards with little effort may feel good in the short term, but has negative impacts such as a lack of more initiative. What we should do, he said, is help CEOs realize the need for sustainability through learnings instead of through explanations. One key point from LeBlanc was that sustainability workers need to ‘trim away the noise’ and get to the point in order to engage CFOs.
Speaking of sustainability workers, SASB’s Katie Schmitz Eulitt then discussed talking to CEOs effectively. She told us that investors are smartening up and understand that their lens so far, has been too narrow. They are now making decisions without questioning the CEOs because of the data and ratings available. Which is why SASB talks to businesses about their effects on the world and the ways that it comes back to them in the end.
JetBlue was the first public company to publish a SASB report. The airline’s Senior Analyst for Corporate Sustainability, Watson Millison, told us that for JetBlue, reporting was a key pillar of sustainability and that they were influenced by environmental activities happening around them. They also knew that investors need something more than just a CSR report. SASB, Watson said, was a good fit for them because it spoke a language their investors could understand.
The one common opinion across the panel was the need to translate our sustainability reports to a language that the finance team can understand and hence, support.
Evolutions in carbon neutrality: Quantifying SDG impacts, incentivizing clean development and driving low-carbon supply chains
By Nishita Lali
Carbon offsets, as Theisen explained, are a mechanism businesses use to measure and reduce their carbon footprint. This allows them to set boundaries for their actions and also helps investors to back initiatives for carbon reduction.
People often think that the companies focusing on offsetting aren’t working towards reductions, but Theisen said that this is a myth. EcoAct has found that 88 percent of the companies offsetting are spending 10 times the amount others do, to reduce their carbon footprint.
One of the many projects that EcoAct worked on was with Kenya Climate Pal for clean-burning cookstoves, which support livelihoods, preserve biodiversity and help mitigate climate change. This product benefited hundreds of thousands of people through health improvements, saving money and time, thus fostering economic growth.
Another critical aspect of carbon neutrality that Theisen presented was, “What are project buyers looking for?” A trend he noticed was the utilization of SDG-related metrics, which are inclusive. He pointed out that while we have a tendency to focus only on carbon when we say offsets, the new wave is to cover multiple SDGs, since the impacts are wider and interwoven. The other trend he witnessed was sustainability in the value chain. Although a lot of money is being channeled toward emission reductions, companies are now developing their own projects for the benefit of the communities around their supply chains.
Theisen closed by assuring attendees that “carbon offsets are not going away; it is transforming and getting a new look.”
Cross-sector collaboration driving progress on deforestation goals
By Meg Kramer
According to Al Iannuzzi of Johnson & Johnson, step one is to identify your company’s biggest risks. Once supply chain hotspots have been identified, look for partners such as SupplyShift and NGOs to map out and audit your supply chain, then form strategies for how to address the hotspots.
Now that pulp and paper and palm oil have established certifications and more companies are setting sustainability goals to address those areas, the new frontier will be soy and cattle. But beware that these materials may be even more difficult to track, despite the fact that cattle represents a much larger environmental impact. It's a frontier that must be crossed nonetheless because, as Iannuzzi said in closing, “10 years from now we are going to be asked, ‘Where does everything come from?’”
Small businesses and their CPAs must drive sustainable solutions
By Orly Arbit
Jessica Gehl, Sustainable Business Solutions and Risk Management consultant at PwC, emphasized that using the UN Sustainable Development Goals to begin the conversation about supply chain transparency is invaluable for creating value, attracting talent, and anticipating investors’ sustainability inquiries. Elodie Timmermans, Senior Climate Change and Sustainability Services Manager at EY, urged the audience to consider the risk mitigated when businesses hold themselves to high environmental standards. She also pointed out that shareholders are looking for increasingly detailed disclosure information, necessitating better supply chain and risk management.
Donna Westerman, VP of Global Risk Management at Verisk-Maplecroft, approached the issue based on her experience with ethical sourcing and mentoring small businesses. She reminded attendees that a focus on a triple bottom line ensures that small companies have a stake in advancing sustainability management, even when competing with large public companies. Finally, Phillip Holman, president and owner of Massachusetts-based solutions provider Fourstar Connections, provided his perspective as a sustainability-minded private business owner. He expressed his hopes that his company’s implementation of voluntary sustainability efforts will provide a competitive advantage regarding financial savings, reputational benefits and immense value creation.
To sum up the discussion, Pettirossi-Poland quoted an article titled “Accountants will save the world.” This encapsulated an underlying theme of the entire discussion. Businesses must be the driver for change, but behind each business is a CPA who creates significant value by guiding their clients through regulation compliance, auditing and risk considerations. There was consensus among the panelists that regardless of a company’s size or if it is private or publicly traded, incorporating sustainability metrics beyond the bare minimum creates a substantial competitive advantage.
A Value-to-Society Approach: Calculating a company’s entire contribution to society
By Anna Shugoll
Most sustainability reports will measure a company’s GHG emissions, but does how this output specifically affect climate change and, in turn, the wellbeing of the population? Heller stressed that a full impact evaluation should consider the societal costs of this output, including adverse health effects and property damages such as flooding. Only then can we realize the true cost of our negative externalities. On a more positive note, Heller also demonstrated how the simple act of hiring employees has wide-reaching social benefits. Jobs provide wages and benefits, reduce unemployment and generate skills. While impacts such as these are difficult to quantify, a relevant “valuation coefficient” could be the World Bank’s PPP (per capita purchasing power) as employment helps to stimulate the economy.
As Heller asserted, creating a value-to-society assessment of a brand could change the future of impact reports, and make it easier to express sustainability strategies in terms of monetary risks and opportunities that can then be relayed across all sectors of a company.
From employee engagement to employee fulfillment: Tracking employees’ complex relationship with company values
By Alex Smith
In the past few years, a shift in our expectations of businesses has been evident in the issues that they choose to take a stand on. Brands are telling new stories that often focus on more than their products alone; consider Coca-Cola’s Super Bowl ad, Tecate’s stand on violence against women, and 84 Lumber’s emotional take on immigration. Andrew Winston, author of The Big Pivot, has seen this shift manifest internally, as well. He says that CEOs feel the pressure at the level of day-to-day interactions with their own employees, many of whom are millennials openly asking for change. In this day and age, employees simply expect their CEOs to take a stand on social issues.
“Silence is no longer golden,” agreed Tony Calandro, SVP Social Impact Chair at Povaddo. In his recent survey of 1,400 Fortune 1000 employees, 57 percent agreed that corporate America needs to play a more active role in addressing societal issues.
Calandro’s survey revealed new metrics on a class of activist employees, who react differently than the typical employee when asked about social and environmental issues. Activist employees — as key drivers in the shift to a more sustainable economy — are mainly millennial, largely female, and slightly more democratic – and 74 percent of activist employees are in a management role. When asked how they would like to be engaged on social issues, 93 percent of activist employees said that they are ready to get involved (compared to 63 percent of all respondents); but less than 30 percent of activists believe that their CEO has their finger on the pulse of employee attitudes towards societal issues. Most importantly, these activist employees are on the move - half (47 percent) of all activists are likely to leave their company in the next year (compared to 28 percent of all employees).
The key to engaging these activist employees lies in creating a shift from employee engagement to employee fulfillment. While employee engagement is a top-down process, employee fulfillment is bottom-up. For example, instead of focusing on one-time assignments, engagement programs can be baked into roles and responsibilities at a company. Fulfillment can also be integrated as a job-screener, by asking targeted questions in interviews, such as “When you’re at your best, how do you uniquely lead every day?”
“We live in a time where we have to take a stand,” Winston said. Stay within the zone of the mission, culture and values of your company, and deliver a message that resonates with the stance of your employees. By delivering a clear message on social issues, companies will be more likely to attract those key activist employees who are leading the shift to a more socially conscious business model.
How to measuring and communicate a product’s ‘Total Contribution’ to society
By Meg Kramer
To tackle this daunting challenge, The Crown Estate’s Claudine Blamey, along with colleagues and partners, developed tools to measure brand impact in economic terms based on six capitals — including financial, physical and natural resources, as well as people, knowhow and networks. These tools were shared publicly for the first time at New Metrics 17.
The Crown Estate’s tools calculate adjusted Gross Value Added (aGVA) based on positive and negative flows for each of the six capitals, producing Total Contribution results that can be compared year over year. While these tools are a big step forward in the quest to measure overall contribution to society, Blamey admits there are still challenges to overcome:
- Resistance to aggregation from accountants due to perception that the data combines “apples and pears.”
- Rigor around data and methodology. Rigor needs to increase in order for metrics to be accepted and incorporated into financial reporting. As Blamey observed, “If the metrics stay in sustainability, sustainability is still a niche.”
- The need for consistency and standardization.
Blamey said it well when she noted, “If we are all doing the same thing but in a different way, that’s counterproductive.”
BASF’s Christian Heller discussed similar challenges in creating metrics to calculate value to society. He agreed that there is a need for standardization and that monetization is critically important to drive internal understanding and business context. Simply stated, “Never underestimate in business the value of currency.”
Pivoting from reputation to revenue: Sustainability as a strategic differentiator
By Anna Shugoll
Frey noted that most people involved in sustainability efforts are driven by a desire to make a difference and increase the greater good; however, the sustainability team of a given corporation may have a hard time translating these desires to a management team that is focused more narrowly on creating revenue. In the past, most sustainability metrics were based on reducing negative outputs, but how can we focus on creating positive value in society and producing revenue through an enhanced reputation?
One of the answers to this difficult question lies in the power of collaboration. When HPE began to reach out to its customers about sustainability, it found that most clients were already concerned about environmental impact, a fact that seemed to shock HPE’s sales team. Meanwhile, most of its customers did not even consider that a tech supplier could help them to achieve their sustainability goals, giving HPE a competitive advantage to offer a service alongside its products. Frey found that when his company opened a dialog about sustainability practices with its customers, customers then began emulating the approach with their clients, multiplying the scope of his business’s influence and positive reputation. As Frey summed it up: “Partnership is leadership. When we collaborate on sustainability … we increase our global impact.”