Why Conduct a Sustainability Assessment?
Within many sectors of the economy, there has been an increasing need for companies to address sustainability principles throughout their value chain. The impetus for addressing sustainability has generally been a heightened awareness of the issue on the part of key stakeholders – such as investors, large scale customers, employers, and non-governmental organizations – with a corresponding request for taking action. Often, an additional factor is a pure business interest in operational efficiency and cost reduction.
To take meaningful action, an organization needs to start by defining what sustainability means with respect to its mission, products and services. This initial step is then followed by a baseline assessment of how well the organization is performing in relation to defined sustainability parameters and which initiatives it might pursue to better integrate sustainability parameters into the core systems and procedures of the enterprise.
Defining what sustainability means for your organization is not an easy task as classical definitions of sustainability are rather broad. For a manufacturing entity, the term Sustainability tends to mean an operational approach that emphasizes long-term viability in terms of environmental, economic and social dimensions, and that does not negatively impact the opportunities of future generations. The challenge for most organizations is translating that definition into a framework for distinctive, meaningful work flows.
Defining the Framework for a Sustainability Assessment
One practical framework for conducting a sustainability assessment involves the following six key steps:
- Conduct a benchmark analysis within the relevant industry sector
- Identify best sustainability practices among the selected peer group
- Evaluate current organizational performance relative to the best practices
- Characterize the relative importance of sustainability elements to your organization
- Rank and prioritize sustainability options
- Develop short-term, mid-term, and long-term sustainability targets
This framework enables an organization to systematically evaluate its own sustainability performance, identify potential sustainability action items (particularly those that are most relevant for its business sector), and determine options for communicating with key stakeholders regarding its sustainability initiatives. The six-step framework is flexible in that it can be readily blended into existing operational planning or management systems activity - such as the planning phase within a formal environmental management system (i.e., ISO 14001).
Conducting the Sustainability Assessment
Under the first and second steps, your organization begins by conducting a gap analysis using critical sustainability elements listed below to identify best practices from other entities within a carefully selected peer group. Critical sustainability elements would include the following:
- Sustainability policy and management system
- Climate change strategy and commitments
- Energy efficiency
- Investment in renewable energy technologies
- Water conservation
- Waste minimization/pollution prevention
- Vehicle fleet management
- Land development/conservation
- Green procurement practices
- Education/outreach on sustainability issues
- Employee travel
- Transparency/reporting on sustainability issues
The target peer group should allow your organization to identify both moderate action and advanced performance in the area of sustainability. Thus, it is most prudent to select not only immediate peer companies in your business sector, but also known leading performers in related business sectors. Typically, the analysis is most meaningful if you select at least 6 to 8 companies against which to compare.
Under the third component of this process, your organization characterizes its current performance relevant to best practices identified for each of the 12 sustainability elements listed above. The intent of this characterization is to identify whether you currently meet or exceed best practices, versus whether more progress is needed to achieve best practice status. The underlying presumption is that early sustainability action by your organization would need to address the elements where more progress is needed.
An organization may find it helpful to examine its own performance relative to best practices within a direct peer group as well as best practices among advanced organizations. This approach provides insight for the organization determining whether it desires to be just slightly ahead of its peer group versus an industry sector leader in sustainability practices. See Table 2 for an example evaluation of certain sustainability criteria.
The fourth component involves characterizing the relative importance to your organization of each of the 12 sustainability elements listed above. The step can be accomplished via an evaluation of existing environmental planning documents and further discussions with a sample of company representatives (management, employees, and stakeholders). The goal here is to classify each sustainability element as high, medium, and low importance from the perspective of your organization. As with the previous step, the underlying presumption is that early sustainability action by your organization should emphasize the elements classified as high or medium.
In the fifth component of this process, the organization evaluates potential sustainability actions for each element based on five criteria. These criteria include the following:
- Implementation ease
- How difficult and potentially costly is implementing the action?
- Will there be internal/external opposition?
- Magnitude of impact
- What are the potential sustainability improvements from the action (e.g.,GHG emissions reduction percentage, quantity of energy/water use reduction)?
- Regulatory exposure
- Will taking this action reduce any potential future regulatory obligations?
- Stakeholder perception
- Do key stakeholders value or support this action?
Using existing environmental management plans along with information derived from the benchmark assessment of peer group entities, the organization can then develop 4 to 6 specific actions for each sustainability element. Based on the criteria listed above, a score can be assigned (e.g., 1 to 5) and all sustainability actions can be ranked.
The sixth component generally involves conducting a workshop with key decision makers to formulate the corporate sustainability goals. During the workshop, the group should review rankings developed in Step 5 along with the best practice assessment (Step 3) and relative importance assessment (Step 4). The group can then organize sustainability actions into three categories based on ranking, improvement needed and importance to the organization:
- Category A – Near-term action items (0 to 2 years)
- Category B – Mid-term action items (2 to 5 years)
- Category C – Long-term action items (> 5 years)
The ultimate product of this final component is generally some type of strategic sustainability plan. Based on key themes determined at the workshop along with the sustainability planning process outcomes, the organization should have a sufficient foundation for preparing a strategic plan for enhancing sustainability practices. The plan should clarify the process for the formulation of specific sustainability goals and outline the process for aligning organizational practices with these goals.
Important Considerations in Conducting Your Sustainability Assessment
During the initial stage of your sustainability assessment, important considerations include identifying the appropriate target group for conducting your benchmarking analysis and developing a common understanding across your organization regarding the level of sustainability performance you seek. In other words, does your organization wish to simply match the performance of peer enterprises or does it aim to be a leading performer? Those judgments will guide the later stages of your sustainability assessment where you identify and rank potential actions.
As your organization moves through the sustainability assessment, another important consideration is data management. Trinity has observed that there is great value to considering implementation of a technology-based environmental management information system (EMIS) for sustainability data management. Sustainability initiatives thrive best when organizations are able to examine performance through enterprise-wide metrics tracking, trend analysis, and metrics prioritization. Given the volume of data that must be examined, analyzed, and summarized to accomplish sustainability goals, efficient use of information technology provides great value to most companies.
Finally, the organization needs to consider how it will communicate sustainability initiatives and performance to stakeholders. Clearly, the primary options are via a formal sustainability report or sustainability summary on the corporate web site. In either case, there are some good practices to follow in communicating sustainability information. For example, in a recent CERES presentation on the topic of transparency regarding environmental performance, a Chief Executive Officer of a Fortune 100 company outlined the parameters representing best practices in sustainability reporting. These parameters serve as sound guiding principles for any organization considering the development of a sustainability reporting initiative.
The key parameters include:
- Standards Test – Is the report adhering to a universally accepted protocol – such as the Global Reporting Initiative?
- Consistency Test – Is there consistency across the documents where sustainable development information is presented – such as annual reports, SEC 10-K reports, environmental reports, company speeches?
- Employee Test – Do employees get it and espouse the message?
- Elephant Test – Are you covering what everyone in the press is talking about?
- Comparability Test – How does your report or information compare to those of companies within your sectors?
- Target Test – Is there frank discussion regarding overall performance and, where applicable, failure to meet targets?
- User Test – Can the user get the message in 10 minutes – ideally determined via outside peer review (stakeholder) input?
By addressing the important considerations noted above, your organization will be able to derive optimal value in conducting your sustainability assessment.