Geoff Kendall, co-founder and CEO of the Future-Fit Foundation, set the stage by calling into question most of the existing sustainability performance metrics, which he believes are sending business leaders and investors the wrong signals; “if someone with the illustrious name of Dow Jones can tell the CEO and investors of an oil company that it is 85 percent sustainable, something is wrong.” Kendall explained why existing approaches to performance metrics are limited: 1) some metrics measure progress relative to a baseline year but this does not tell us where a company should be; 2) other metrics evaluate companies relative to best practice or peers but that encourages companies to think incrementally; “as in the oil company example, if you measure the best company in a broken system, that is not enough;” and 3) other metrics measure progress toward short-term goals that the company sets, but in most cases companies will only set public goals that they are certain that they will accomplish.
Jeff Gowdy, Adjunct Professor at Vanderbilt University, complemented these overarching observations by sharing several trends from the Pivot Goals, a database of environmental, social, and governance (ESG) targets that are set by the Fortune Global 500 companies. While the database includes a small subset of companies, Gowdy believes that these data are nevertheless noteworthy given the significant impact that large companies have on their environment, “40 percent of the impact in the world’s CO2 emissions is for example attributed to Fortune 500 companies.”
Of the Fortune Global 200 companies, 83 percent have an ESG target, up from 75 percent last year, and yet the majority of companies still approach targets in terms of what one can do, as opposed to ‘how much we each need to do’
- 25 percent of goals do not have a year due, which still represents a significant percentage. Should open goals be considered science-based goals?
- Social metrics are harder to measure than environmental metrics, and companies start with what they can measure
- Water is the most progressive goal and would qualify as a science-based goal
- 71 percent of goals are goals within a company’s walls
- The vast majority of goals are not grounded on where companies need to be, except for a few such as Unilever
Kendall and Bob Willard, co-founders of the Future-Fit Foundation, propose the Future-Fit Business Benchmark as an alternative approach to measuring performance, one that envisions what a sustainable company looks like and that measures progress toward that through minimum thresholds of environmental and social performance. The benchmark, which is available online for free, seeks to re-define how we approach sustainability metrics, linking performance metrics to a desired future state as opposed to a past or current state, and builds on the knowledge of more than 10 existing methodologies, such as the B Corp certification and the GRI.
Participants suggested that the benchmark should allow the user to set priorities among the great array of KPIs; that one may need to engage different audiences from a different starting point — the Board may respond better to talking about system conditions, while the sustainability manager may better connect on principles. Several participants also posed the question of whether KPIs should reflect minimum thresholds (e.g. having zero impact on the environment or providing a living wage), as opposed to aspirational targets that inspire and engage people on envisioning the possibilities of the future; should we envision the sustainable company of the future as a company that has a neutral impact on its stakeholders, or as a company that goes beyond minimum standards and generates positive value?
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Published Jun 2, 2015 8am EDT / 5am PDT / 1pm BST / 2pm CEST