New Metrics
#NewMetrics18:
The ROI of Sustainability Strategy — and 6 Ways to Get There

Last week at Sustainable Brands’ New Metrics ’18 conference in Philadelphia, PA, over 300 delegates from brands, NGOs, strategists and practitioners across sectors gathered to share their latest tools and findings regarding measuring the risks and impacts of previously unmeasured forms of value, the newest credible tools and solutions for assessing the ROI of Sustainable Business. The densely packed program dug deep into topics ranging from Finance & Investment to Operational Metrics and Stakeholder Engagement — and several sessions provided pertinent insights from practitioners on the evolution of Strategy.

Goals … of the Pivot, Science- and Ethics-Based Varieties

It's easier to compare and benchmark company performance

Gowdy began by introducing the group to Pivot Goals, a research project he is leading that collects sustainability goals reported by the world’s largest companies. These goals are measured across 29 focus areas — 17 related to the environment, while the other 12 related to social and governance factors. The tool saves researchers, academics and sustainability analysts a ‘ton of time’ as it compiles the public information available in company reports and presents it in a consistent framework.

Bill Baue, from Reporting 3.0, told the group about the recent launch of the World Benchmarking Alliance — an initiative by Aviva, the Index Initiative and the UN Foundation to ‘develop free, publicly available benchmarks that compare and rank companies’ performance on the SDGs.’

Based on data collected by Pivot Goals, almost 95 percent of Fortune 500 companies have articulated their sustainability contribution in some way, and almost all of them have established goals of some kind. However, less than a quarter of them base their goals in science or ethics.

In his book, The Big Pivot, Andrew Winston argues that most organizations today define sustainability goals through a bottoms-up analysis and end up identifying improvement targets arbitrarily. Sometimes, they add a stretch goal to that as well.

But how does a company know if it is doing a good enough job to help achieve sustainability targets? This is where science- and ethics-based goals come in.

Science-based goals are based on the planet’s capability to support life and industrial activity. These primarily relate to the environmental goals for the most part, but the concept can be extended to include other goals, as well. The organizations that are developing science-based goals has recently doubled.

Baue asked: What’s stopping people from adopting them?

Reporting 3.0’s Ralph Thurm suggested that the market doesn’t incentivize companies to act as fast followers. There is an early mover disadvantage in the market that has a strong systemic basis. For example, the market artificially keeps non-sustainable products cheaper by not accounting for their costs to the environment or society.

Gowdy, on the other hand, sees this as a failure of communication teams. He contends that the language being used in sustainability is more than 25 years old and that marketing/communications team have failed to make sustainability inspiring enough.

Organizations need to consider new perspectives

Gowdy gave organizations a question to ponder: “If the sustainability targets you have right now were the absolute floor, meaning that they were the minimum expected standards, what would you do differently?”

He used this as a segue to comment on the future and emphasise the importance of context-based goals.

Current accounting practices are insufficient and even offer an early-mover disadvantage, according to Thurm. The group had discussed the limitations of benchmarking already.

The future is context- over science-based goals

Mark McElroy, from the Centre for Sustainable Organizations, then explained context-based sustainability. In a nutshell, context-based goals take the science-based thresholds available and apply them to an organization’s local context, thus improving the relevance of the goal and making it more practical.

McElroy suggested that it is important to show the effect of using better methodologies, and pointed to Reputation Dividend’s work to translate the effect of sustainability initiatives on corporate reputation.

The roundtable marked a great kick-off to the week, where subsequent sessions explored many of these themes in greater depth.

---

Do sustainable brands grow faster? Ask Seventh Generation

by Mia Overall

With mind-numbing energy, Joey Bergstein, CEO of Seventh Generation, took the stage Monday evening to explain the secret formula behind his company’s success.

The first part, he argued, is that people really do care about what’s behind the products they buy every day. He told a great story about a cab driver who overheard a Seventh Gen executive rattle off the company’s values — including labeling ingredients for the sake of transparency, workforce equity, and that business can be a force for good. The cab driver apparently stopped the executive before getting out of the car to say, “You have to tell me what company you are talking about because I am totally sold.”

There is plenty of evidence that values-driven companies perform better. Recent B Lab research has shown that B Corp employees are 46 percent more engaged, B Corps grew 34 percent faster than the category average, and have a Millennial consumer base that is 2.5 times more loyal.

Seventh Gen parent company Unilever’s Sustainable Living brands, which outperform other brands by a hefty margin, drive these numbers home. The 26 Sustainable Living brands have grown 46 percent faster than other brands and constitute 70 percent of the company’s overall growth.

In terms of a winning formula, Bergstein said, first comes a clear mission: Seventh Generation’s is to transform the world into a healthy, sustainable and equitable place for the next seven generations. Second, the only way to win is to create chaos. And third, you need to be strong in your convictions and be able to go after them day after day.

Living your values can mean making hard choices. As an example, Bergstein used Seventh Gen’s commitment to making sure all the ingredients in its products are bio-based and non-toxic. This value was challenged when the company had the opportunity to launch a liquid soap pod. Following evidence [from other brands] that ingesting soap pods can be toxic, Seventh Generation nixed the product and released a powder soap instead.

Another example of living your values is how employees are incentivized: Seventh Gen has pegged 20 percent of employee bonuses to meeting sustainability targets, which is equal to the percentage of the bonus linked to profitability targets.

The results in terms of sales growth have been much better than other brands, which is proof that there is a market for brands with a mission.

---

Going carbon-neutral, one ride at a time

by Alissa Stevens

Lyft’s Senior Manager of Social Impact, Lisa Boyd, took the main stage Tuesday morning to share how the business case behind this bold stance came to be, and how the leadership’s vision sets Lyft apart from its competitors.

Zimmer and Green co-founded Lyft to improve people’s lives with the world’s best transportation. They quickly disrupted the taxi and rental car industries, growing to serve nearly 50 million rides this past March. Transportation is one of the largest contributors to greenhouse gases in the U.S., and though ride-sharing only accounts for 0.5 percent of all vehicle transportation across the country, Lyft feels responsible for the profound impact the platform will have on the planet as that number grows.

As the co-founders wrote about the carbon offset announcement: “We’re in the unique and fortunate position to be a driving force in bringing forward a more sustainable future, and we don’t take that lightly.” Unlike many other companies, the push for sustainable business practices at Lyft came straight from the top.

The long-term vision for the company is redefining mobility through shared, electric, autonomous and multimodal vehicles, all of which have environmental benefits. Boyd remarked, “If we do not invest in sustainable mobility ... we will have a much higher cost burden in the future.” The offset commitment has already resulted in internal prioritization of sustainable mobility: Lyft recently acquired Motivate, the nation’s largest bike-share operator, and launched scooters in Santa Monica and Denver. In addition, it has reprioritized shared vehicles in the Lyft app, incentivizing riders with cheaper fares to ultimately have more riders per car. These initiatives are not led by the sustainability team but by the ops, policy and tech teams, showing that the sustainability focus brought by Zimmer and Green at a company level has trickled down into new cross-functional efforts.

Short-term benefits such as customer acquisition and engagement, employee recruitment and retention, and policy relationships and key decisions have added to the case that these practices are worth the investment. Immediately following the carbon offset announcement, there was a market share gain in a market that cares about the environment. In a 2018 employee engagement survey, employees remarked that they were proud to work for Lyft and would recommend the company to a friend. For a company in a brand-new sector, policy is important. Following the announcement, a Colorado policymaker made a swing vote in favor of the company that resulted in massive cost savings. And most importantly, looking at hard cost of the customer and policy savings, Lyft has already paid for its 2018 carbon offsets, which is a great sign for future years.

Short-term positive outcomes are advantageous, but Lyft must justify continuing to prioritize sustainability initiatives in the long term. Operational efficiencies, shareholder valuation and industry innovation are three key indicators of future success. Beyond internal operations, Lyft looks at its operations out in the world via its autonomous vehicle pilot in Las Vegas; it has already seen huge efficiencies and much lower costs.

On shareholder value, Boyd noted, “When you have people who are dedicated to your brand and feel really strongly about you as a company, feel like you share the same values, they want to come back to your company.” In the transportation industry, sustainable mobility is the future, and tapping into new opportunities will allow Lyft to continually drive more success.

---

The SB Brand Transformation Roadmap, Version 2.0

by Alexandra Smith

As Kevin Hagen, VP of ESG Strategy at Iron Mountain, pointed out in a breakout later Tuesday morning: “CEOs are never wild about sustainability as a journey instead of a destination; the Brand Transformation Roadmap provides you with a clear layout of the path you can take to reach your full sustainability potential, and shows you exactly what it will look like when you get there.”

The SB Roadmap is presented as a 5x5 grid, outlining progress through five stages of growth across five different aspects of sustainability. Starting with a vision for the final destination and working backwards from there, the roadmap was designed to serve as a universal guide to embarking on and successfully navigating a sustainability journey.

Presented by Hagen and SB’s Dimitar Vlahov, a ‘lite’ version of the roadmap was offered exclusively to attendees at this New Metrics session. Different groups tackled each aspect of the roadmap, assessing their own companies’ progress on that component, and comparing and contrasting it to other companies around the table. This mapping exercise generated discussion about the differences between industries in terms of advancement, and the possibility for certain sectors to provide learnings for others. The ability to apply the roadmap across all companies in the room allowed a new level of transparency into where we are heading as a community and how we can move ourselves forward.

Next steps for the Roadmap include a web-based diagnostic tool that will allow SB Corporate Members to fully assess their company on either a brand or business level.

---

The ROI of embedding social purpose in brand strategy

by Alexandra Smith

“Corporate reputation isn’t just about good will,” explained Stephen Hahn-Griffiths, Chief Reputation Officer at Reputation Institute, “it’s about good business.” When measuring which aspects consumers consider when judging brands, Hahn-Griffiths has found that workplace, governance and citizenship are the only considerations that impact corporate reputation. While considerations of the workplace have decreased in the past few years, governance and citizenship remain strong.

Brands with the lowest consumer ratings on corporate responsibility are impacted most by their low corporate responsibility standing, while brands with higher standing on workplace, governance and citizenship aspects have reputational ratings that are more robust to changes in these areas. In other words, if your company has an established CSR program, then a focus on other areas may help to improve reputation; but if you are not activating at all around corporate social responsibility, activation in this area could critically improve your reputational standing.

If brand purpose is the promise that a brand makes about their position, then brand reputation is the public assessment of whether a brand has really kept that promise. Building intelligence on brand reputation is best pursued through three steps:

• mining the narrative that takes place in the digital ecosystem about your brand,
• being part of a global community of exchange with peers and colleagues, and
• telling your story based on the insights gleaned from these two avenues.

As Hahn-Griffiths asserted, setting a brand purpose and following through on that purpose can make a critical difference to reputation, and consequently, to market success.

---

It’s the end of consumption as we know it. How will your business thrive?

by Aurora Dawn Benton

The challenge we face is not so much population growth, he said, but the projected exponential growth of GDP — a metric largely fueled by our linear, take-make-waste economy. If we continue on our current path, we should expect to need three times the current resource extraction to meet the needs of the global population by 2050 (and corresponding increases in energy, chemicals, water, and waste).

Moss shared a vision of lower consumption in retail apparel: Today 100% of store space is allocated to selling us something new. Imagine this store in 2030 — now only 30% of the space displays new items, 30% contains items that have been previously used, and 30% of the store is dedicated to repairing items. Moss stressed that this is just one of many possibilities, and that with marketing panache this futuristic store can have a more integrated experience than the simplistic 30/30/30 scenario. Still, this set the stage nicely for the audience exercise.

Continuing with the apparel industry, table groups were asked to brainstorm ideas for transforming the overall supply chain. Here are selected disruptive ideas crowdsourced in the session (working backwards from end consumer):

• Consumer role: Subtlety is key. Rather than raising the level of responsibility to the point that customers might be turned off, make it an “oh, by the way…” proposition.
• Retailers: Transform retail from transactional to experiential by creating DIY and maker spaces, repair workshops, and even using augmented reality for custom-designed clothes consumers are more likely to keep and enjoy longer.
• Finished production assembly: Ideas in this space centered on changing industry structures and models that facilitate better take-back of clothing for recycling.
• Raw materials: This group recognized the need for longer-lasting and more sustainable fibers and components. For example, companies can switch to more sustainable and durable fibers such as Himalayan nettle or new polymers that have yet to be invented.
• Logistics: The problem this group focused on solving was the problem of ensuring quality and efficiency in the take back (recycling, reusing, or repurposing) process. An attendee from Goodwill Industries at that table shared that 40% of what they receive is not in good enough condition to be reused. Others suggested blockchain might be leveraged to solve such logistical challenges.

One thing is clear: Companies will likely only pursue lower-consumption business models if there’s a corresponding value or service that does not compromise margins. Moss admitted the challenge of getting this message through to executives: “We can talk about resource efficiency, we can talk about water, we can talk about recycling. The topic that is very hard for most of us to talk about in our companies is consumption. Consumption is still a part of most of the business models of most companies, and an assumption that we will continue to grow consumption as a way of growing business.”