Figuring out and reducing the impact business has on the environment is an issue on the minds of many in these green-conscious times. Customers and clients want to buy responsibly. Employees are attracted to firms committed to the environment. Investors and managers look for the public recognition and lower risks that result from stronger environmental performance – not to mention the savings related to innovation and greater efficiency.
Yet measuring and valuing a company’s environmental impact is a complex undertaking, according to a recent review by the Network for Business Sustainability (NBS). The report, which synthesizes research from 180 studies, concludes that why and what companies monitor in terms of their environmental impact – and determining the best tools to do so – are important factors in ensuring sustainability.
“You need to have an understanding of your impacts in order to manage them,” says Tom Ewart, managing director of the NBS, a non-profit organization made up of researchers and business leaders focused on sustainable business models, which is based in the Richard Ivey School of Business at the University of Western Ontario. “You need to be able to measure so you can identify the areas of greatest risk and greatest opportunity.”
For many companies, measuring environmental impacts “is more art than science,” Mr. Ewart says, adding that sustainability hasn’t typically been included in the business-school curriculum.
“We don’t have that skill set,” he explains, although given changing societal expectations, “business managers need to adapt.”
The NBS report suggests that businesses should first define their goals, then decide what to measure, as well as how to measure it, and finally incorporate their findings into decision-making.
The most common tools include measuring a product’s life cycle or its total environmental footprint, valuing “services” provided by the environment, and monitoring flows of goods and services.
Simon MacMahon, the global director of advisory services at Jantzi-Sustainalytics, an investment research firm that tracks company performance in social, environmental and governance areas, says that companies should not stop at simply measuring their impacts. They need to take the resulting data and factor in their different business units, locations or factories, for instance.
Next they should find a common denominator (for example, per square foot) to create a “baseline.” From there, they can track progress and set targets for the future.
The Global Reporting Initiative has established standards and guidelines for companies to publish “sustainability reports,” much like annual reports. “That’s not to say that it isn’t challenging, especially for companies doing this for the first time,” Mr. MacMahon says.
For companies that haven’t looked deeply at sustainability before, “there’s a fairly steep learning curve,” he says, adding that companies should also consider their social impacts.
Beyond the “reputational benefit” it brings, Mr. MacMahon explains, monitoring such impacts can help companies develop new products and services, become more efficient in using resources and treat their employees and communities better.
Peter MacConnachie, a senior sustainability issues management specialist for Suncor Energy Inc., says it’s important to set environmental performance goals, much as companies establish financial goals, and to ensure that all parts of the business contribute. Suncor has tracked and reported its impacts on water and land, its emissions and energy use since 1995, and has set ambitious environmental performance goals in those four areas for 2015.
Mr. MacConnachie says that measuring can be complex – “there’s no perfect science or perfect formula” – but with a high degree of transparency, the resulting targets can bring about realistic change. “If we have a way of measuring it, we have a way of improving it.”
Many companies are addressing the issue now because they expect future regulations could force them to be on top of the issue.
Tyler Elm, vice president of business sustainability for Canadian Tire Corp., says a major concern among businesses is an expected tax on carbon loads. By measuring their carbon production, businesses can build in a “shadow price” reflecting such risks. “It adds to the business case for sustainability,” Mr. Elm explains.
For Canadian Tire, measuring and reporting their environmental impact has become a business initiative. Every quarter, the company issues a report on efforts to mitigate its environmental footprint, such as “right-size” packaging.
“The name of the game is business sustainability, not environmental sustainability,” Mr. Elm says. Canadian Tire calculates the overall energy use and greenhouse gas emissions for products, transport, and operations.
Mr. Ewart says decision makers new to sustainability who are confounded by the array of measurement options should simply consider their objectives. “You need to know why you want to measure your environmental impacts, that will inform what you measure – and the ‘how’ will flow from there.”