Tips for Effective Sustainability Management
In today’s business world, almost every company is placing greater emphasis on corporate sustainability. In fact, a 2020 study on sustainable supply chain by Coyote Logistics found that 81% of companies are more focused on sustainability today than they were just three years ago.
The idea that organizations should generally do good by taking steps to protect the planet and its natural resources became popular less than four decades ago. The term “sustainable development,” which evolved into a more general umbrella of sustainability, was first coined in the 1987 report Our Common Future, published by the World Commission for Environment and Development (WCED). The WCED proposed that sustainable development meant progress that would meet the needs of current generations without compromising the ability of future generations to meet their needs. This definition was picked up by the United Nations Brundtland Commission that same year, and the thought eventually gave rise in 1994 to the adoption of the triple bottom line—an idea that, in addition to the standard measure of profit, companies should also prioritize caring for people and the planet.
This triple bottom line is indeed moving the needle in business growth. Accenture research on responsible leadership shows that companies with high ratings for environmental, social and governance (ESG) performance—of which sustainability is a crucial component—saw average operating margins nearly four times higher than those of lower ESG performers. Shareholders received almost three times higher annual total returns than poor ESG performers.
While headlines make for provocative public relations moves and external pressures firmly push for sustainability commitments, the real work for companies in establishing and living by sustainability agendas requires dedication, deliberate execution and systematic management.
Whether you are at the beginning of your company’s sustainability journey or you are in a more mature company that has already defined a sustainability path, employing these tips for sustainability management will help improve your current and future initiatives:
An impactful sustainability plan and a correlated management system starts with assessing where the organization is and where it wants to be. Leadership should start with these critical questions:
- What business activities carry the biggest risk of having an adverse impact on sustainability factors?
- How do we change our business strategy to incorporate new and evolving sustainability initiatives?
- What would improved sustainability outcomes look like?
- What data do we need to collect to support our sustainability efforts?
- Is the necessary data already being collected, and where is it?
- How do we best track progress against our stated goals?
By addressing these questions together, rather than placing sustainability programs in silos, companies can gain greater clarity on what tools and training are needed to move the organization, its supply chain, and its employees’ contributions forward.
Aim for Ambitious But Start with Compliance
Many companies voluntarily disclose and report on environmental efforts as one way to provide performance indicators to stakeholders. For example, 76% of the world’s largest companies disclose carbon reduction targets, and 80% of these global companies report on sustainability, indicating that sustainability reporting is becoming corporate table stakes.
Voluntary reporting may be trendy, but more critical is the fact that the regulatory landscape is getting increasingly complicated. In the short time from 2016 to 2020, ESG regulatory reporting requirements increased more than 60%. So, while getting to net zero may be part of the organizational goals, improving current compliance and reporting methods is likely the best next step.
The different standards across countries and regions can be dizzying and support a strong argument for a globally recognized and adopted approach that enables comparable, consistent and comprehensive reporting. While pressure for this mounts from both investors and the companies providing disclosures, today’s organizations cannot stand still, waiting for this unified day to come. Reporting must continue, so organizations must understand their country and regional compliance requirements.
Establishing a single platform or digital space for all of a company’s applicable data, rather than keeping it in departmental silos, can help teams meet compliance needs. Many reporting requirements involve pieces of the same information, but in different formats or over different timetables, so centralizing data is imperative.
Capitalize on Current Employee Knowledge
Significant overlap exists between data traditionally collected for EHS purposes and data contributing to sustainability reporting. In a 2021 industry survey, most EHS professionals indicated that EHS data was the most likely to support ESG and sustainability reporting needs compared to data from other departments.
Once teams have identified compliance and reporting requirements, defining who has current data, exploring how it is being documented, and identifying how it can be more accessible and digestible will be necessary.
Make It Auditable
If you are managing disclosures for water, air and emissions through siloed processes, you increase the likelihood that there will be inconsistencies between reports. This can be a significant red flag for regulators, investors, consumers and potential employees, who are increasingly seeking more transparency in the methods behind reporting.
In a recent McKinsey survey, 97% of investors indicated that they believe sustainability disclosures should undergo auditing. 67% said that sustainability audits should be as rigorous as financial audits.
Auditable methods are often supported by cloud-based management systems. When designing a program, teams should consider several approaches and critical elements to auditability:
- Auditing support: Consider hiring external third-party resources that can verify and confirm your processes are accurate
- Stakeholder engagement and collaborative features: Explore platforms that allow version histories and contributor identification to limit untraceable changes
- Flexibility to grow: Establish methods that allow additional users over time and that avoid data limits
- Quantitative and qualitative data support: Sustainability indicators often blend numeric values and qualitative information. Look for solutions that enable you to create and add the relevant indicators for your unique organization including quantitative and qualitative data in one system
- Reporting outputs: Explore the required reports in your region and look for programs that notify teams of significant reporting changes
- Automatic conversions: Avoid programs that require manual conversion for data input to mitigate against human error
- Enter once, report to many: Seek out approaches that enable data to be entered once and used for multiple reporting needs
Be Proactive: Evaluate, Measure, Forecast and Adjust
Regulatory requirements primarily evaluate past performance. Once compliance needs are met, and teams understand current sustainability performance, successful sustainability management will move to a more proactive approach. If a holistic strategy has been central to developing sustainability initiatives and agendas, then teams can collaborate, evaluate initiatives, identify risks and forecast future success.
A big part of being proactive requires organizations to seek out ways to educate and empower their employees. This can take the form of ongoing training and professional development but can also be as simple as sharing communications regularly with employees about how they can individually take action.
Remember, Start From Where You Are
In a Harvard Business Review article, Kenneth P. Pucker criticized the voracious global appetite for measuring sustainability initiatives noting, “It turns out that reporting is not a proxy for progress. Measurement is often nonstandard, incomplete, imprecise and misleading.” Reporting must evolve with companies as they grow and should not be the only end goal. This work must be seen as a continuum. Therefore, leadership and stakeholders must review their data and frequently seek to find new areas where improvements can be made.
You do not set out on a journey across the ocean by making a single straight line and hoping the ship stays the course. You measure with your sextant—or more advanced tools—daily and make adjustments regularly to ensure that you are on target and will actually arrive at your desired destination. Sometimes measurements reveal miscalculations and require resources to reposition the ship; sometimes, they need only minor adjustments. But the key here is that none of the positioning can be done without a clear destination in mind, an established system from which to draw accurate data, regular reviews of the data against the goal, and the autonomy and resources for the crew to adjust as needed.
Reprinted with permission from Risk Management Magazine. Copyright Risk and Insurance Management Society, Inc. All rights reserved.
Written by Amanda Smith, 2022