Companies still struggling to quantify the impacts of sustainability
46% of companies state they're not accurately measuring the impacts of their sustainability activities
As highlighted across our events in 2016, many CEOs and business leaders understand the benefits that being a responsible and sustainable company brings.
And this sentiment is echoed throughout our Responsible Business Trends report (74% of our near 2,500 respondents stated their CEOs see the value of sustainability). However, one of the stand-out challenges from the report is proving the value and return of sustainability with empirical justification and metrics.
Nelson Switzer, chief sustainability officer at Nestlé Waters North America, summed it up in his feedback on the report “I was somewhat troubled with one trend in particular – while so many respondents see the role of the sustainability team to maintain and track KPIs, many reported an inability to measure performance and the value that sustainability is delivering.”
Driving business value
In the report, we wanted to gauge whether our corporate respondents are seeing a return from their sustainability activities. Initially we asked whether sustainability was driving revenue for their business to which 54% (52% in 2016) stated “yes” and a further 25% (25% in 2016) said they weren’t sure.
Encouragingly this continues the shift highlighted last year of more companies being able to attribute revenues to their sustainability activities. What’s slightly discouraging is that a quarter of global businesses still can’t attribute revenues to their sustainability activities.
When focussing on regional differences 56% of our North American respondents can attribute revenues to sustainability activities, compared to 54% of Asia/Pacific and 53% of European respondents.
When focussing on the “Don’t know” camp, both European and Asia/ Pacific score highest with 26% and the North American respondents were 2% behind, with 24% indicating they weren’t sure whether sustainability was delivering revenues to the business.
Meanwhile, it’s the energy and extractives industries that were more likely to link sustainability with revenues (58% indicating yes), then it was our apparel & manufacturing respondents (55% indicating yes) and finally financial & professional services (50% indicating yes).
When refocussing the question on linking sustainability to delivering savings to the business, our respondents offer a nuanced picture. 65% of all corporate respondents agreed that this was the case in their organisation, a fall of 5% on 2016’s report. A further 19% stated “Don’t know” which is an increase of 3% on last year’s findings.
So, although two-thirds of our respondents can attribute savings to their sustainability activities, which is a positive sign, the fact that there’s a fall in those stating “Yes” and an increase in those stating “No” and “Don’t know” indicates a slight step backwards in proving the value of sustainability to the business.
Echoing our findings in the 2016 report, corporate professionals from Asia/Pacific gave the most positive responses, with 73% of those expressing a definitive opinion saying sustainability is delivering savings for the business – however this represented a 14% decrease on 2016’s responses.
As for the main industry groupings, apparel FMCG & manufacturing professionals gave the most positive responses with 68% indicating “Yes” (87% in 2016), while those from energy & extractives gave the least positive with 65% indicating “Yes” (77% in 2016). So, it is clear to see that a large majority of companies are linking direct savings back to their sustainability activities, which can only help ensure it’s a mainstream consideration for the business.
However, the fact that a smaller number of businesses can attribute savings to sustainability activities is a worrying finding – as with linking back to profits, companies need to ensure they have the correct metrics in place to justify the resources and expenditure on sustainability initiatives.
Measuring your impact
To get a true understanding of the savings and revenues that sustainability brings, a company must have robust systems and accurate metrics to quantify the impacts of any sustainability-related initiatives or activities.
However, as with the previous two reports, less than half of our respondents feel they have accurate measurement practices in place. 46% of our corporate respondents (42% in 2016 and 39% in 2015) told us that they feel confident that they are accurately measuring the impact of their sustainability activity.
A further 45% (44% in 2016 and 39% in 2015) stated their company is measuring the ROI of their sustainability activities. So, whilst there’s been improvements over the past two years, it’s concerning that the number of companies who are failing to measure and quantify the impacts of their sustainability work continues to outnumber those that are succeeding.
When focussing on our three regional groups, both Asia/ Pacific and North America were within one percentile of our global average with regards to confidence in accurately measuring the impact of sustainability activity.
Our European respondents, as like last year, were a lot more negative, with only 29% stating confidence in their measurement of sustainability initiatives. These findings would suggest that businesses are yet to establish robust metrics and processes that prove the true business benefits and impacts of sustainability activities.
This echoes our findings in the research for our Responsible Business Summit Europe, where several sessions are looking to highlight how businesses can improve the quality of sustainability.
Interestingly, a development we've seen in our 11th Annual Sustainability, Reporting and Communications Summit, is that financial departments are becoming increasingly involved in the dictating of sustainability metrics and analysis of their impacts on the business. In next year’s survey, we’ll look to get a better gauge on who’s setting the sustainability metrics and whether that in turn impacts the confidence in measurement and the reporting of ROI from sustainability activities.
In his feedback, Nelson goes on to suggest ways in which companies can address the issue of measurement “I recommend two items be addressed right away for those struggling with this challenge. First, identify the key goals of your organisation – not your sustainability goal, but what it is the company is trying to achieve, be it growth, market share, margin, reputation and so on, and second, identify the sustainability actions that can contribute to that strategy. If your KPIs are aligned, demonstrating the contribution your team makes to the success of the organization will be much more apparent – and provide you a mechanism for course correction, as needed.