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We Need to Accelerate the Development of Sustainability Metrics

Posted: 10/14/2013 10:45 am

If we are to make the transition to a renewable resource based economy, we need to do a better job of measuring the sustainability of our organizations, cities and nations. In an excellent article published in 2002 entitled "Using Sustainability Metrics to Guide Decision Making," Jeanette Schwarz, Beth Beloff and Earl Beaver proposed a framework for developing measures of sustainability within organizations. In that piece, the authors identified what they called the "five basic indicators of sustainability":

  • Material intensity
  • Energy intensity
  • Water consumption
  • Toxic emissions
  • Pollutant emissions

Their very accessible article provides details that define and further explain these measures. Since that time a wide variety of organizations have begun to develop and implement an even wider variety of sustainability measures. The retailing giant Walmart requires its vendors to measure and report their performance on sustainability indicators before Walmart will purchase their products. Many companies are measuring and reporting their sustainability performance in annual reports to their shareholders. These are all important steps in bringing sustainability into routine management decision-making. As Peter Drucker once famously observed, "if you can't measure it you can't manage it." Without measurement, you can't tell if your management actions are making the situation better or worse.

While the development of these organizational level indicators is critical and must be continued, it is time to begin the process of settling on organizational sustainability indicators that everyone can use. We need a generally accepted set of definitions and indicators for measuring sustainability. We also need independent auditors to verify that these numbers are real. Numbers without verification are ultimately useless.

Just as we have generally accepted accounting practices and clear definitions of financial indicators, we need to extend that process into these more tangible and physical measures of organizational performance: sustainability metrics. These measures should ultimately be part of overall private sector organizational performance measures, as important as market share, return on equity and profit and loss. In the public and nonprofit sectors, the organization's overall performance measures would be different, but of equal importance: Sustainability metrics would be reported along with data on crime reduction, graduation rates, medical treatment outcomes, emergency response time and other indicators of public sector performance. They should also be added to or included within normal organizational process and output measures such as labor productivity/efficiency, value of goods and services delivered, employment, labor turnover and so on. Ultimately these physical dimensions of sustainability must be defined as a key, but routinized element, of organizational management. In the near future, any organization that is not run to maximize sustainability performance would be considered a poorly managed organization, comparable to a private firm that could not turn a profit or a police department with a rising crime rate. Before long, all effective managers will need to be sustainability managers.

In order to contribute to the process of sustainability metric development, I recently initiated a new research program on Sustainability Policy and Management at Columbia University's Earth Institute. This research program has initiated a long-term project on sustainability metrics. Our metrics research recently began with an effort to take inventory. We have started to develop a database on all the sustainability metrics we can find. We will attempt to describe these indicators and understand them. Next we hope to analyze the indicators for commonalities in order to identify the world's most utilized sustainability indicators. This analysis would then form the basis for a conversation about generally accepted sustainability metrics.

Another part of this discussion will focus on the development of local, state and national sustainability indicators. One example of a national sustainability metric was the Labor Department's effort to measure and report on green jobs. This very important project was suspended last spring due to the budget sequestration in a very short-sighted and even petulant decision by the Obama Administration to respond to the budget cuts. This effort should be restored immediately, and other aggregate measures of sustainability at the macro level need to be developed and implemented.

Measurement may sound like an arcane, technical and unimportant subject, but it is actually critical to action. Its importance to management decision making in a data driven environment cannot be understated. Anything pursued in a serious way in a modern organization is measured. The absence of measurement encourages the most talented people in the organization to gravitate away from unmeasured and therefore unimportant activity.

A sign of the growing importance of sustainability management is the impressive number of efforts to develop and utilize sustainability metrics. Some of this is related to the huge influence of Walmart on its supply chain. By definition, Walmart is in the business of retailing the consumer items having the broadest appeal in the American (and increasingly global) marketplace. By requiring sustainability metrics from their suppliers, those producing goods sold by Walmart must require their suppliers to provide metrics as well. This is having a massive impact on the movement to incorporate sustainability into routine organizational management. However, it is not clear that the measures under development are appropriate, reliable or valid. Moreover, the collection and reporting of these metrics is voluntary, self-completed, inadequately audited and there is no penalty for deceptive, incomplete or incompetent reporting.

The effort to develop an effective system of sustainability metrics is still in its infancy. Academics, business leaders and government officials must work together to develop and refine acceptable indicators. A standardized system of data collection, verification and audit needs to be put into place. In addition to organizational level indicators, we need to do some hard thinking about developing some multiple indicator scales that might chart local, state and national progress toward a sustainable economy. An easy-to-understand measure like the Gross Domestic Product (GDP) or the unemployment rate would help guide public policies encouraging sustainability management. One possible approach would be to do a better job of including environmental benefits and costs in the GDP measure itself. A revival of the Labor Department's effort to track green jobs should also be a high priority.

While the American national government seems too busy self-destructing to take on a new and constructive task, it would be quite helpful if a national effort were undertaken to develop and build consensus around a set of sustainability metrics. One of the problems of the current drive to develop sustainability metrics is the absence of an authoritative and potentially objective moderator of the discussion. Corporations and environmental interest groups are key stakeholders in any metrics discussion, but they each have their own axe to grind and cannot be allowed to have the final word. Government has a key role to play.

The good news is that we are ready to have these discussions and develop a way to measure organizational sustainability efforts along with our nation's progress in making the transition to a sustainable economy. It will take a number of years to complete this work, but the sooner we get started the sooner we will be able to make the transition to a renewable resource based, sustainable economy.

 

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