Practical Considerations in Measuring Sustainability Performance

By By Bill BlackburnBill BlackburnJuly 3 , 2006July 3 , 2006

Greening of Industry ConferenceGreening of Industry ConferenceAchieving Integration of Sustainability into Work, Thought and Action--- Achieving Integration of Sustainability into Work, Thought and Action---

Types, Tools and TechniquesTypes, Tools and TechniquesCardiff, WalesCardiff, Wales

William Blackburn Consulting, Ltd.William Blackburn Consulting, Ltd. Web: Web: www.WBlackburnConsulting.comwww.WBlackburnConsulting.com Email: Email: WRB@WBlackburnConsulting.comWRB@WBlackburnConsulting.com Phone: Phone: 847.530.4014847.530.4014© Copyright 2006: William R. Blackburn© Copyright 2006: William R. Blackburn

Based on new book from the Based on new book from the Environmental Law Institute Environmental Law Institute (late summer):(late summer):

The Sustainability Handbook—The Sustainability Handbook— The Complete Management Guide to Achieving The Complete Management Guide to Achieving

Social, Economic and Environmental ResponsibilitySocial, Economic and Environmental Responsibility

(Reserve book at (Reserve book at www.WBlackburnConsulting.comwww.WBlackburnConsulting.com))

The Drivers.The Drivers. The Efficient EnablersThe Efficient Enablers The PathwayThe Pathway The EvaluatorsThe Evaluators

A champion/leaderA champion/leader

Approach for selling Approach for selling management on management on sustainabilitysustainability

Accountability Accountability mechanismsmechanisms

Organizational Organizational structurestructure

Deployment and Deployment and integrationintegration

Vision and policyVision and policy

Operating system Operating system standardsstandards

Strategic planning for Strategic planning for aligned prioritiesaligned priorities

Indicators and goalsIndicators and goals

Measuring and Measuring and reporting progressreporting progress

Stakeholder Stakeholder engagement and engagement and feedbackfeedback

Practical Considerations in Measuring Practical Considerations in Measuring Sustainability PerformanceSustainability Performance

Goal and indicator conceptsGoal and indicator concepts

Types of goals; setting goalsTypes of goals; setting goals

Types of indicators; selecting indicatorsTypes of indicators; selecting indicators

Use of complementary goals and Use of complementary goals and indicatorsindicators

What is the difference among What is the difference among indicators, metrics, and goals?indicators, metrics, and goals?

Other Types of GoalsOther Types of Goals

Multi-year goalsMulti-year goals

- Collective directional goals- Collective directional goals

- Zero goals- Zero goals

Implied goalsImplied goals

What factors should be What factors should be considered in setting considered in setting sustainability goals?sustainability goals?

Considerations in Setting Considerations in Setting Sustainability GoalsSustainability Goals

Part of strategic planning, furthering the Part of strategic planning, furthering the desired objectivedesired objective

Not too many, not too fewNot too many, not too few

SMART: simple, measurable, achievable,SMART: simple, measurable, achievable, relevant, time-basedrelevant, time-based

Clear and elevating Clear and elevating

Considerations in Setting Considerations in Setting Sustainability Goals—cont’dSustainability Goals—cont’d

Stakeholder supportStakeholder support

Resistant to gamesmanship, illusory Resistant to gamesmanship, illusory resultsresults

Clear accountability mechanisms, Clear accountability mechanisms, administrative roles (guidance, reporting, administrative roles (guidance, reporting, etc.)etc.)

How do you set reasonable How do you set reasonable values for metric goals ?values for metric goals ?

Setting Values of Metric GoalsSetting Values of Metric Goals

Historical rate of improvementHistorical rate of improvement

Internal or external benchmarkingInternal or external benchmarking

Impact of planned projectsImpact of planned projects

Roll-up estimates from business unitsRoll-up estimates from business units

Expert estimateExpert estimate

Other Types of Sustainability IndicatorsOther Types of Sustainability Indicators

ISO 14031ISO 14031• Condition indicators Condition indicators • Performance indicators Performance indicators - Operational (primary desired outcome)- Operational (primary desired outcome) - Management (supportive elements such - Management (supportive elements such

as cost, personnel, training, audits, as cost, personnel, training, audits, maintenance, etc.) maintenance, etc.)

Leading vs. lagging indicatorsLeading vs. lagging indicators

Absolute vs. ratio metrics Absolute vs. ratio metrics [intensities (lbs./unit), efficiencies (units/lb.), etc. ][intensities (lbs./unit), efficiencies (units/lb.), etc. ]

IndexesIndexes

Calculating a Performance Index ScoreCalculating a Performance Index Score

ProgressProgressMeasuresMeasures

Performance LevelPerformance Level CalculationsCalculations

11 22 33 44 55 66 77 88 99 1010 ActualActualValueValue

Level x Wt.= ScoreLevel x Wt.= Score

Recordable Recordable Injury RateInjury Rate >>1.201.20 1.101.10 1.001.00 .90.90 .80.80 .70.70 .60.60 .50.50 .40.40 .30.30 .55.55 77 3030 210210

WastewaterWastewaterExceedancesExceedances >>99 88 77 66 55 44 33 22 11 00 00 1010 2525 250250

% Staff % Staff TrainedTrainedon Diversityon Diversity

<<5555 6060 6565 7070 7575 8080 8585 9090 9595 100100 8383 66 2020 120120

Budget Budget Performance Performance (% Favorable)(% Favorable)

<<-4-4 -2-2 00 22 44 66 88 1010 1212 >>1414 -1-1 22 2525 5050

Source: Eastman KodakSource: Eastman KodakBase-Base-lineline

GoalGoalStretchStretch

GoalGoalTotal=Total= 100100

630 630 ofof

10001000

What factors should be considered What factors should be considered in selecting sustainability indicators in selecting sustainability indicators

(other than goals)? (other than goals)?

Selecting Sustainability IndicatorsSelecting Sustainability Indicators

Threshold measurement questionsThreshold measurement questions

Who?Who?

What?What?

When?When?

Where?Where?

Why?Why?

How burdensome?How burdensome?

Other Factors in Selecting Other Factors in Selecting Sustainability IndicatorsSustainability Indicators

1.1. Relevance to objectives and decision-Relevance to objectives and decision-makingmaking

2.2. Scope and location of operations coveredScope and location of operations covered

3.3. Resistance to illusory resultsResistance to illusory results

4.4. Clarity Clarity

Other Factors in Selecting Other Factors in Selecting Sustainability IndicatorsSustainability Indicators

--cont’d--cont’d

5.5. Suitability for benchmarkingSuitability for benchmarking

6.6. Obstacles to intended useObstacles to intended use

7.7. Reliability of information sourceReliability of information source

How can a various goals and How can a various goals and indicators be used together for indicators be used together for

best effect?best effect?

Complementary Goals and IndicatorsComplementary Goals and Indicators

Multiple goals to eliminate undesirable Multiple goals to eliminate undesirable results of individual goalsresults of individual goals

Metric, initiative, and descriptive indicators Metric, initiative, and descriptive indicators used togetherused together

Env. & social goals linked to financial Env. & social goals linked to financial benefitsbenefits

Baxter’s 2005 Environmental and Safety Goals and Baxter’s 2005 Environmental and Safety Goals and Associated Savings TargetsAssociated Savings Targets

ParameterReduction Target

(%)Base Year

Target 2005Savings and

Cost Avoidance($ million)

Air toxic emissions per unit of production 80 1996 1

Hazardous and regulated waste generation per unit of production 35 1996 4

Nonhazardous waste per unit of production 35 1996 15

Energy use ( and associated greenhouse gas emissions) per unit of production 30 1996 30

Packaging materials per unit 20 1995 25

Employee work-related lost-workday cases per 200,000 work hoursRate for all employee work-related injuries and illnesses per 200,000 work hours

60

50

1996) }1999}

25

TOTAL 100

Complementary Goals and IndicatorsComplementary Goals and Indicators --cont’d. --cont’d.

Indicators across supply chainIndicators across supply chain

Cause and effect indicatorsCause and effect indicators

Complementary Goals and IndicatorsComplementary Goals and Indicators --cont’d. --cont’d.

Indicators across supply chainIndicators across supply chain

Cause and effect indicatorsCause and effect indicators

Indicators by stage of processIndicators by stage of process

Complementary Goals and IndicatorsComplementary Goals and Indicators --cont’d. --cont’d.

Indicators across supply chainIndicators across supply chain

Cause and effect indicatorsCause and effect indicators

Indicators by stage of processIndicators by stage of process

Indicators by stage of program Indicators by stage of program developmentdevelopment

Other ways of measuring Other ways of measuring progress on management progress on management

systems?systems?

Evolving Measures with Program Maturity: Evolving Measures with Program Maturity: Occupational Safety ExampleOccupational Safety Example

(Source: (Source: The Measure of Success. The Measure of Success. The Conference Board 2005The Conference Board 2005))

Component LevelComponent Level((Stakeholder(s))Stakeholder(s))

Objective(s)Objective(s) Measure(s)Measure(s) Economic ValueEconomic Value Social ValueSocial Value

ComplianceCompliance(Regulators/ (Regulators/ Shareholders)Shareholders)

-Avoid fines and -Avoid fines and penaltiespenalties

-Compliance audits-Compliance audits-Actual fine/penalty -Actual fine/penalty levellevel

-Avoided cost-Avoided cost-Some increase in -Some increase in worker well- being?worker well- being?

Employ “Best H&S Employ “Best H&S Practices”Practices”(Above + employees)(Above + employees)

Above +Above +-Dramatically reduce -Dramatically reduce accidentsaccidents-Reduced absenteeism-Reduced absenteeism-Improve productivity-Improve productivity

-Accident/injury rates-Accident/injury rates-Productivity -Productivity -Employee satisfaction -Employee satisfaction surveyssurveys

-As above +-As above +-Reduced costs-Reduced costs - Absenteeism- Absenteeism - Line downtime- Line downtime-Increased over- all -Increased over- all productivity?productivity?

- Improved quality of - Improved quality of work- lifework- life- Employee morale- Employee morale

Take Programs Take Programs “Outside”“Outside”-Other companies-Other companies-Community-Community(Above + other (Above + other companies and the companies and the larger community)larger community)

All Above +All Above +-Share with other -Share with other companiescompanies- Community safety - Community safety improvesimproves

-Other companies -Other companies ratesrates-Feedback-Feedback-Community -Community performance (e.g. performance (e.g. seatbelt use)seatbelt use)-Indirect – press, ease -Indirect – press, ease of permitting etc.of permitting etc.

- Little direct benefit - Little direct benefit other than aboveother than above- Other companies/ - Other companies/ community realize community realize savingssavings-New business -New business opportunity? opportunity?

-Fewer accidents and -Fewer accidents and injuries else- whereinjuries else- where-Employee pride and -Employee pride and morale?morale?

William Blackburn Consulting, Ltd.William Blackburn Consulting, Ltd.

Web: Web: www.WBlackburnConsulting.comwww.WBlackburnConsulting.com

Email: Email: WRB@WBlackburnConsulting.comWRB@WBlackburnConsulting.com

Phone: Phone: 847.530.4014847.530.4014

Book:Book: The Sustainability Handbook—The Sustainability Handbook— The Complete Management Guide The Complete Management Guide

to Social, Economic and to Social, Economic and

Environmental Responsibility Environmental Responsibility