The main-stage program of New Metrics ’15 kicked off Wednesday with a simple, yet powerful reminder: This set of conversations is all about upside potential, smarter risk management and long-term resilience. Our focus this week — New Metrics — are metrics that allow business leaders to quantify previously ignored ESG impacts, or capture entirely new forms of business value based on new opportunities along those dimensions.
The morning started with an IO Sustainability summary of more than 300 studies showing the overwhelmingly positive ROI of well-run corporate sustainability programs. Such programs have now been shown to outperform peers in the stock market by 4-6 percent, reduce share price volatility, increase sales by 20 percent, and act as insurance against brand and reputational risk, among other benefits. One important caveat, this meta-study points out, is that companies are best able to tap these benefits if they set goals carefully and strategically, focusing deeply on a set of issues that is not too big. IO’s results are well-complemented by a few other important studies by CSRHub, which found increases in the correlation between sustainability performance and brand strength, sustainability performance and reputational risk, as well as sustainability performance and good credit cost.
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highlights!The program then turned to a specific case studies diving deeper into three specific types of ROI modeling that are still rare, but increasingly sought-after: measuring the contribution of sustainability as a sales differentiator and revenue generation engine, which has already won more than half-a-billion dollars’ worth of sales for HP; tying the value of natural capital to JetBlue’s main economic measure, revenue per available seat mile, in the interest of engaging senior executives and external partners with ROI positioned in specific units they understand; and Dow Chemical’s adoption of a remarkable new metric called Nature’s Future Value (NFV), helping the chemical giant pick projects and products in the direction of its goal of generating $1 billion from improving and enhancing ecosystem services by 2025.
Dirk Voeste from BASF, another global leader in sustainable chemistry, provided an update on its Sustainable Solution Steering method, a massive project that systematically reviewed and evaluated the sustainability aspects of 60,000 product applications in the company’s portfolio. The analysis involved 2,000 experts, and resulted in more than a thousand specific action plans for improving the overall value-chain sustainability performance. As a result, more than 60 percent of BASF’s R&D pipeline currently consists of “Accelerators,” products rated in the highest category for sustainability performance.
Switching gears a bit to the topics of integrated reporting and science-based goal-setting, Cabot Creamery’s Jed Davis then provided an overview of the company’s pilot application of the MultiCapital Scorecard™ (MCS), an integrated measurement and reporting system that more than meets the requirements of the International Integrated Reporting Council’s (IIRC) Integrated Reporting standard. Cabot revealed its ambitions to limit its impacts on 12 vital capitals to levels determined by the context-based MultiCapital Scorecard approach. In the process, attendees also learned that context- or science-based questions are being integrated into the B Corp assessment, a move that promises to elevate science-based sustainability performance to much more mainstream levels of adoption in the near future.
In another leading-edge example of integrated reporting and management, paints and coatings brand AkzoNobel‘s Caterina Camerani presented its so-called 4D approach to corporate reporting, intended to consider the whole value chain and measure both positive and negative environmental, human, social and financial impacts, as well as express said impacts in monetary terms — no small feat, especially on the human and social dimensions which look at hard-to-quantify things such as the value of employee experience and training, health and safety, and impact on local communities.
“Reporting is the basis for real change,” Camerani stated in her wrap-up of the afternoon’s plenary sessions, which summed up the common theme of the previous three speakers. AzkoNobel, Cabot Creamery and BASF all use a multi-capital approach to measure, evaluate and report upon their businesses to stakeholders.
In the concluding hour of the day’s program, plenary speakers focused on one of the hardest questions sustainability leaders are facing globally: how to arrive at a thorough roadmap to true sustainability that is not only science-based, but also manages to engage and excite all important stakeholders, including top management and investors. Robin Wood, founder of the ThriveAbility Foundation, observed that for a regenerative and inclusive economy we need integrated thinking that can view the organization and its business model from a helicopter perspective in relation to the challenging yet opportunity-rich world emerging in front of us. Integrated thinkers, however, are in the minority among corporate executives in our current silo-centric world, Wood noted, sharing the alarming fact that only about 20-25 percent of top executives around the world seem to practice integrated thinking at the present moment. “You can’t rely on epiphanies, but leaders do have them,” Wood continued. “We have to apply global pressure points — global acupuncture — to activate leaders’ conscience.”
Leading on from this is the importance of Context- and Science-based goals. They are generally agreed upon as critical yet less adopted. Companies and governments are well aware of ‘external’ goals yet continue to determine their own targets. Why is this? The closing panel — led by Bill Baue and comprised of Wood, Future-Fit business guru Bob Willard, The Big Pivot author Andrew Winston, and Mark McElroy, creator of the MultiCapital Scorecard — agreed that corporations must be held to common standards and should no longer be able to pick and choose their areas of impact.
As Winston pointed out: “Goals are the required link between intention and action,” and “setting goals based on external thresholds helps move us faster.”
“We have to collectively click into a higher gear,” said Willard, the leading mastermind behind the Future-Fit Business Benchmark, the most comprehensive tool for science-based goal-setting to date. Future-Fit has been in development for three years and will formally launch in December — certainly a noteworthy milestone worth the attention of the entire global Sustainable Brands community.