Saturday, July 23, 2011

How to set sustainability goals

A recent piece of research from GreenResearch TM, a research, advisory and consulting firm focusing on cleantech, alternative energy and sustainability, looks at the trends and best practices for defining, managing and communicating sustainability goals. This is an interesting subject. The quality, quantity, scope, "softness" and "hardness" of sustainability goals as presented in sustainability reports varies widely, from those which are clearly measurable (and therefore manageable) to those which are broad directional aspirational type statements which offer no clue as to how progress will be assessed.  (The researcher David Schatzky notes in the GreenResearch TM report "Aspirational goals can bring excitement to a sustainability strategy, but can engender grumbling from mid-level executives if they are held accountable for achieving them."

Mostly, I believe, the type of goals a company sets and commits to in a Sustainability Report will have to do with the company's approach to sustainability. Those companies who have a clear sustainability strategy with clear action plans will find it easier to define SMART goals. Those companies who are just doing stuff, and want to report on it, find it harder to formulate a set of quantifiable goals. There tends to be quite a clear correlation here.

Good example
The Cooperative Group has a clear strategic approach to sustainability and SMART quantified goals in each of the three core strategy areas: social responsibility, ecological sustainability and delivering value. Some goals span several years. Here is an example of the goals in the Social Responsibility area:

Example of targets from the Cooperative Group Sustainabilty Report 2010 (page 9)
The top two on this list (as it's quite hard to read on this blog) are:
  • Ensure that 10% of the profits available for distribution is made available for community investment by 2013, with £5m deployed per annum to tackle UK poverty around stores and branches.
  • Stores and branches will act as a focus for 10,000 community initiatives per annum.
You can see how these are very specific and define measurable outcomes. All the Cooperative Group's 14 key targets are similarly expressed.

Less good example:
The Mauser Group  has a list of targets in its Sustainability Report for 2010 and while the company should be commended for publishing targets, it is easy to notice the difference - the targets are not entirely quantifiable. They are just specific enough to guide the work but not specific enough to measure success. "Work on market introduction of light-weight packaging" provides an item on the action plan but hardly defines measurable outputs. Will the fact that people work on light-weight packaging be enough to meet the target? Or is the delivery of light-weight packaging the goal? And how much light-weight packaging? One item? All items?

Example of targets from Mauser Sustainability Report 2010
Another less good example
Oxy also should be commended for making commitments to targets in its Sustainability Report, however these are also quite vague. "Continue to engage with key stakeholders on Oxy’s corporate governance, HES and social responsibility efforts" doesn't really describe the kind of step-change activity or desired result. Sounds a little like a more-of-the-same soft-option target. What will people do differently? How will success be measured?

Another of Oxy's targets is "Maintain efforts to make Oxy’s workforce reflect the communities in which the company operates, through national, regional and local hiring practices and equal opportunities for women and minorities." Any time a target or goal starts with "maintain efforts", it is describing the effort, not the result. It's hard to measure efforts. Stakeholders don't buy efforts. They buy results.

Anyway, the above-mentioned research had 32 respondents (senior executives at major corporations in USA, Europe and Asia) from companies which are considered to be leaders in sustainability. The research therefore targeted to represent best practice, not all practice. Additionally, interviews were conducted with with 14 companies including Alcatel-Lucent, Barclays, Dell, Edelman, Johnson Controls, Kraft Foods, Nokia, Unilever and Telefonica  and more. Key questions addressed by the research are:
  • What is the right way for companies to establish sustainability goals?
  • How should companies manage sustainability performance to ensure they achieve their goals?
  • When and how should sustainability goals be communicated to the public, and what is the place of internal sustainability goals?
The research shows that several factors influence the establishment of sustainability goals:

Factors influencing the selection of sustainability goals from GreenResearch 2011

Interestingly, the top factor relates to environmental impact goals, arguably the easiest and most quantifiable area of sustainability practice (though I believe all other areas of sustainability performance can be quantified in clear goals). The research shows that 79% of respondents have publicly declared goals on carbon emissions, 57% on overall energy consumption, 45% on solid waste, water and renewable energy consumption and 41% on recycling.

55% of respondents indicate that goals are set annually with only 3% setting goals on a 3-5 year horizon. This may be indicative of approach or of semantics. Sustainability requires longer term thinking, so annual goals are inadequate. However, multi-year goals with annual milestones which are adjusted along the way is a good approach. Sometimes milestones may be expressed in terms of annual goals.

Another interesting aspect of goal-setting includes the degree to which executive compensation is tied to sustainability goals. The research shows that very few companies mandate that all leaders and managers should have part of their compensation package related to sustainability, and only 7% of companies indicated that some or all Board members are compensated on this basis. 

Link between compensation and sustainability from GreenResearch 2011

Finally, the research around Sustainability Goals refers to the debat about publication of goals externally versus the use of goals at an internal level only. Why would a company (which reports on sustainability externally) not publish goals externally? Some suggestions thrown up by the research:
  • Belief that this is not very relevant to external stakeholders.
  • Lack of good tracking systems or credible data for measuring performance.
  • Lack of confidence in their ability to meet their goals, sometimes because of a dependence on third parties to achieve a goal.
  • Regional factors affect goal-setting such that an overall global goal would not be realistic.
  • Competitive considerations, including a reluctance to see competitors outpacing the company by setting more ambitious goals.
  • Creating a sustainability report (with goals) would be redundant, time consuming and costly (a direct reference to Apple's statements relating to Apple's (misguided) reluctance to report on sustainability).
I agree with GreenResearch that publicly stated goals have power and making an external commitment should really be the best practice that companies aspire to both as a management tool and as a route to gaining trust and credibility with stakeholders. No-one expects perfection, it is understandable that some goals may not be achieved, but as a minimum I think we should expect transparency. If sustainability reporting is about building trust, reporting needs to address what companies WILL do not just what they HAVE done.

The conclusions shared by GreenResearch are:
  • Companies should craft sustainability goals in consultation with internal and external experts and stakeholders, combining bottom-up and top-down analysis to produce goals that are material, achievable, quantitative and time-bound. A quarter of sustainability executives at leading companies have “aspirational” sustainability goals without a clear plan to achieve them.
  • CEO support, operating executive accountability and regular progress reporting are the best practices of managing sustainability goals. Fifty percent of sustainability leaders tie part of C-level executive compensation to the achievement of sustainability goals. But over forty percent say progress on sustainability goals is reported to senior management only semi-annually or annually.
  • Public sustainability goals demonstrate commitment and help galvanize internal staff and drive results. Seventy-nine percent of sustainability leaders have public greenhouse gas emissions goals while 45 percent have public waste and water goals. Companies with immature management or measurement practices should start with internal goals but aim to go public in short order.

So, time for a review of your sustainability goals?
Learnings from GreenResearch's report might indicate it might be a worthwhile exercise.

(Disclosure: I have no relationship with GreenResearch and do not benefit from sales of the company's reports)

 elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via  on Twitter or via my business website  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

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