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Sustainability performance a new essential


Artopex Inc. isn't green when it comes to green. The office furniture manufacturer, based in Granby, Que., just east of Montreal, has had an environmental program since 2004.

But a few years ago, it expanded its environmental efforts into a broader sustainability program that includes social responsibility, part of the company's commitment to contribute "to the wellbeing of our communities." It sponsors community events and healthcare organizations, and it redesigned some of its products to make them easier to use for people with mobility problems.

"We've been working on our sustainability program for quite some time," says Jean Barbeau, an Artopex product specialist who is leading the company's sustainability program. "We identified sustainability as one of the critical things that will drive the growth of the company. Our industry has certainly been moving in this direction for years."

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What's new for Artopex is that this year it will measure the return on investment in its sustainability program. Mr. Barbeau will produce a report that, he hopes, will provide meaningful metrics of his company's efforts on environmental and social fronts.

Artopex, which has about 400 employees, is privately owned. Nonetheless, Mr. Barbeau says the company might also start measuring and reporting on its governance in the near future.

Business management and sustainability experts say there's a growing trend today towards enhanced measurement and disclosure of companies' environmental, social and governance programs. This is being driven largely by investors who say such indicators - referred to these days as ESG - are a strong clue about a company's management quality, which directly affects its financial performance.

Financial news sources such as Thomson Reuters and Bloomberg have launched ESG data services that give financial analysts and institutional funds access to the ESG data of publicly traded companies.

"There's a greater understanding among businesses today that environmental and social issues have an impact on the bottom line," says Julie Desjardins, an advisor to the Canadian Institute of Chartered Accountants who specializes in performance measurement and reporting.

It's not just investors who see value in tracking ESG; many companies are also realizing the strategic benefits of demonstrating good environmental, social and governance practices, says Ms. Desjardins.

For example, some companies believe showing strong governance measures can make them attractive to higher calibre directors, she says.

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Companies also find some of their customers use ESG performance as a criterion for doing business.

"If you aspire to providing your product to Walmart, you'll now be required to provide a sustainability survey," says Ms. Desjardins.

Coro Strandberg, principal of Stranberg Consulting, a company in Burnaby, B.C., that helps businesses implement and track sustainability programs, recalls a B.C. company that lost out on a project because it couldn't provide data on its environmental practices.

"You need to not only look at the benefits of measuring your efforts, you also have to think about what you stand to lose by not having metrics in place," she says.

Measuring ESG can be particularly challenging for small and mid-sized businesses, says Ms. Strandberg. And because ESG efforts in smaller companies are often ad hoc in nature, when managers set out to measure things, they find there's no baseline data to work with.

In such a case, companies will need to dig up information. If they're looking to measure environmental efforts, for example, they'll need to look at old energy and water bills, and total expenditures on products such as paper and toner ink.

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They can also hire a consultant to do an audit and help them build a baseline for measurement as well as a set of metrics to use going forward.

There's currently no standardized approach to ESG reporting and different types of business will want to measure on report on different things, says Ms. Strandberg. But there are certain measures considered fundamental.

These include impact of ESG efforts on brand and reputation, operating costs, customer attraction and loyalty, employee engagement, and revenues from product differentiation.

"There isn't one size that fits all," says Ms. Strandberg. "You have to find out what metrics are important to you, your customers and your employees."

Karen Clarke Whistler, chief environmental officer at TD Bank Group, says companies need to create metrics that will encourage employee to take responsibility for the objectives set out in their sustainability programs.

Ms. Clarke Whistler says it's also important for companies to know the ESG priorities of their customers.

"If you're a small or mid-sized company then you're probably going to be selling someone else who is bigger than you," she says. "And if that company decides that their corporate responsibility program is going to emphasize on waste reduction, then you need be ready to align your company - and your metrics - with these priorities."

Special to The Globe and Mail

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