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Measuring wellbeing, like happiness, is complicated.

But in the spirit of Alex Steffan’s “dark grey paint,” the people who say it can’t be done should get out of the way of people who are doing it.

The Australian government stepped up and announced the first nationwide benchmarking Sustainability report on May 9. The report canvasses trends in environment, society, economy and collective wellbeing.

What I like about it is that the authors don’t shy away from measuring the hard stuff. They shine light on ideas that usually go unreported in balance sheets and State of the Union addresses. Ideas like wellbeing and the health of natural ecosystems often slip through the cracks of conveniently concrete numbers and census choices.

And can I tell you how much I love that Australia has a Sustainability Minister? His whole job is to make sure the country thrives today while planning for future generations to have the same chance.

Via Theaustralian.com.au:

Sustainability Council’s First Report Out

Sustainability Minister Tony Burke said the 264-page tome offered a comprehensive set of indicators that could give “a sense of how we were doing, generation to generation”.

The government-funded report does not make specific recommendations but examines trends in Australia’s environment, society, economy and collective wellbeing.

Mr Burke said he hoped the biannual report would come to be treated much like job growth or GDP figures.

“One of the things we were determined to make sure of was that we would eventually get to the point where people would follow sustainability indicators as closely as they would follow economic indicators,” he told the launch.

When you start to find ways to measure more things that matter, the result is a richer, more nuanced picture of what you have in front of you. From there, you can make it better.

 

Do investors care about CSR issues? 

Thanks to Capital Link for hosting their first annual CSR Forum called “CSR & IR – Maximizing Shareholder Value” yesterday in NYC at the astonishingly gilded Metropolitan Club.

I attended to hear first-hand from the investor community about how they make decisions, and whether CSR issues carry weight.

The answer, writ large? No.

What I heard is that Sustainability, CSR, resilience, whatever you want to call it, is still, still, not front and center.

It’s something that’s on the list, but not at the core of the decision-making process.

Maximizing shareholder value. That’s the core.

As one panelist put it, “When my CEO talks to investors, ESG factors aren’t part of the conversation.”

There’s a U.S. bias, too. Another shared that, “When my CEO talketo U.S. investors, I move the SRI slides to the back of the deck.”

The status quo. It’s powerful.

The highlight of the day for me was hearing Bennett Freeman from Calvert Investments finally mention Climate Change.

He, along with representatives from the Socially Responsible Investment world, were a welcome counterpoint to the traditional investor community perspective.

The status quo. It’s powerful.

For a flavor of the day, read what I and others tweeted live:

Tweet Story: March 13, 2013 Capital Link CSR Forum

I believe in the Big Green Tent.

Meaning, I think that the world’s largest corporations have a role to play in creating a more sustainable world.

That includes chemical companies.

Speaking practically,  giant chemical companies employ a lot of scientists. Smart, educated people. The ones we need to invent solutions to raging global problems.

Clorox is a Big Chem Company. Yes.

Clorox also published their first integrated report this year, putting their financial and environmental results on the same balance sheet.  Did not know that.

Clorox Recognized for Innovative Corporate Social Responsibility Reporting

Another thing I did not know: Clorox owns the Burts Bees brand. A personal favorite of mine.

So, a little research gave me a better, more informed picture of what Clorox is about and what they are doing.

Moving on, agri-giant Monsanto has joined a global business council that is working to achieve ambitious sustainability goals by the year 2050.

Monsanto Company joins World Business Council for Sustainable Development (WBCSD)

I personally don’t like all of the products these companies produce. Or the way they market them to consumers.

For example, the Clorox Wipes twitter feed is a paean to joyful germ eradication. I’m all for killing flu viruses and food-borne pathogens. Trust me. But overcleanliness is not a virtue.

And Monsanto’s self-branding as a Sustainable Agriculture Company gives me pause. Considering this. And this. 

That said, with the problems we face as a planet, any and all solutions are welcome.

Numbers are neutral.

It’s how we interpret and apply them that gets us into trouble.

When metrics go bad, they can cause good projects to go off the rails. Lose sight of their original goals. Worst case, bad metrics inform bad decision making that leads to human fatalities and environmental catastrophes.

As research for the Greenbiz.com sustainability metrics series I’m writing with Matt Polsky, I keep an eye out for people who think deeply about what, why, and how we measure our impact on the earth. In business particularly.

Well, I’ve got a blog for you.

Management specialist Jonathan Low’s blog: The Low-Down.

I appreciate  how Low marries the science of intangible human behavior with the tangibles of business performance. He talks about how technology, business and public policy interact in ways that get beneath surface appearances.

This post on how measurements can go awry caught my eye:

Measures That Mislead: False Efficiencies and the False Hopes They Beget

In this post, Low touches on the balance between private and public sector responsibility for getting a nation’s business done. Who’s best at what jobs, and why? How is success measured? Who benefits, and in what ways? Interesting stuff.

Low included a  New York Times economics article I’d missed by Eduardo Porter on this issue. Porter’s article examines BP’s 2010 Deepwater Horizon disaster as a case study of privatization gone wrong.

When Public Outperforms Private in Services

BP’s bumpy ride is recorded in “The Org: The Underlying Logic of the Office,” a compelling new book by Ray Fisman, a professor at Columbia Business School, and Tim Sullivan, the editorial director of Harvard Business Review Press. “The Org” aims to explain why organizations — be they private companies or government agencies — work the way they do.

One of the authors’ chief insights is that every organization faces trade-offs — inherent conflicts between competing objectives. The challenge is to manage them. This is way more difficult than it sounds.

Those difficulties include deciding what gets measured. Because what gets measured, gets managed.

When profits count more than safety, for instance, the results can be disastrous for the public.

On the flip side, companies that strive for a balance between financial gains, social responsibility and environmental stewardship have the opportunity to do well in both the public and private spheres.

 

 

Sports apparel maker Puma is giving leather the boot.

After calculating the true, full end-to-end cost of including different materials in its products, Puma announced in June that it is phasing out leather from its products.

(I missed this news in the whole Rio+20 UN Sustainable Development conference media avalanche so I’m just catching up on it now.)

Puma is one of the few companies that has committed to publishing an environmental profit and loss statement. Its first report in November 2011 attaches monetary costs to the environmental impact of each step in its operations and supply chains.

To its credit, the company has decided that leather costs too much in environmental impact, so it won’t be used anymore.

Via ft.com:

Puma to kick leather into touch
Puma will have to stop using leather in its famous football boots and trainers because it is such an environmentally damaging product, the sportswear company’s executive chairman has said.

The measure showed the production and processing of raw materials was the biggest contributor to Puma’s environmental footprint, said Mr Zeitz, “with leather being the biggest impact driver”.

That is partly because cattle ranching soaks up water supplies and requires land to be cleared, which can affect plant and wildlife species, and also because of the chemicals and contaminants associated with leather tanneries.

But it’s important to remember that Puma isn’t really focused on “zero leather.”

Pulling leather out of the equation lets the company continue to produce goods, probably more goods, for increased revenues.

Just with a lighter carbon footprint overall.

As a society, in the pursuit of growth and enterprise, we as a society tend to go for “more.”

Reducing or ceasing consumption is not a popular topic of conversation, but it is an important one.

In the meantime, I think that efforts from companies like Puma to get to  “less” represent steps in the right direction to a more sustainable future.

Is Sustainability good for business?

Yes.

But where are the facts to back this claim up?

Here.

Sustainable Business consultancy Natural Capital Solutions has created an annotated report of studies that prove the business case for Sustainability.

Via NatCapSolutions.org:

“This document is a resource to help you understand how business leaders can profit by integrating sustainability into their strategy and value-chain while securing a competitive advantage.

This annotated list describes the ever-growing number of studies, most by conventional management consulting houses, academic institutions and similar establishment entities that prove this assertion.”

Sustainability Pays: Studies That Prove the Business Case for Sustainability

Many thanks to Natural Capital Solutions for a useful reference tool for Sustainability practitioners and students.

Integrated Reporting is putting all your cards on the table.

Integrated reporting is the practice of including all the important financial and non-financial factors, such as environmental impact and community actions,  in one report.

It provides a fuller, clearer accounting picture of a company’s overall performance and future plans for success.

Harvard professor Robert G. Eccles has written extensively on the science and practice of integrated reporting.

Read his Summer 2011 Stanford Social Innovation Review article (co-authored by Daniela Saltzman) for a comprehensive introduction to the topic.

Achieving Sustainability Through Integrated Reporting

Materiality is coming up a lot in the Sustainability conversation.

Including at last month’s Responsible Business Summit USA in New York City.  TriplePundit.com contributor Raz Godelnick just posted an article recapping some of the CSR executive conversations about reporting.

Let’s talk about this word “materiality.”

In the accounting and finance worlds, materiality means how important an amount, transaction, or discrepancy is to the business.

When you talk about materiality in financial statements, you are asking about all the things that have to go into the report that really, truly matter. Reporting on all material aspects gives you the best possible view of  what or how a business is doing.

Materiality is about measuring and accounting for all the actions that positively or negatively impact a business’ growth or success.

Even though most of us don’t produce 10-K forms and hold shareholder earnings calls, I’d hazard that anyone who has owned or operated a small business  intrinsically understands this evaluative process.

As a simple example, what’s material–most important–about investing in a dog boarding and walking business?  To properly evaluate the business, you need to know how much the business costs to run.  How much are employees paid? You’ll want to see records of how client dogs are fed, watered, and exercised on a specific schedule. You might also add other measures such as the age and experience of employees, specific training, or criminal background checks. These are the essential, or “material,” elements you measure to make a decision.

While it might not have mattered as much 10 years ago, today you might also want to know about the energy and environmental impacts related to the business. These might include gas consumption for getting to and from clients, or what chemicals are used to keep the facility clean and sanitary. How do these “green” issues positively or negatively impact the business’ success?

(In case you’re wondering, there are several “green” dog-walking and boarding businesses out there, including this one.)

That’s what’s happening large-scale in the business world. As the Sustainability field grows from a sidebar conversation to front-and-center discussions,  Sustainability practitioners are finding new opportunities to materially contribute to business success.

One way to make this happen is through collaboration with business colleagues to mesh corporate responsibility initiatives with strategic goals. Here’s a great article about how Dell’s Sustainability team is doing exactly that.

Via MIT Sloan Management Review:

How Dell Turned Bamboo and Mushrooms Into Environmental-Friendly Packaging

Sustainability as a domain is moving in the direction of “materiality” — information that is relevant or “material” from the point of view of stakeholders and investors. And Dell, the computer and technology company, is working to make itself well-positioned to make the link between its initiatives and outcomes.

How? Against the trend of Sustainability teams moving under the CFO, Dell’s Sustainability team resides in a surprising place:

“We report into the global marketing organization,” says John Pflueger, principal environmental strategist for Dell. “That may sound weird to some people, but I actually think it’s a fantastic place for a sustainability organization to sit.”

The rest of the article is well worth a read for how the Dell team leverages its organizational positioning to positively impact packaging innovation:

At Dell, the sustainability team, working with suppliers and recyclers, has developed new compostable packaging materials made from bamboo and mushrooms. As John Pflueger, Principal Environmental Strategist, says, “It’s absolutely amazing.”

They experimented with the material, and they actually found a way to use bamboo as a raw material for manufacturing packaging. Now, I don’t think we use it on any of our big systems, but right now, 70 percent of notebooks ship in bamboo. Its structural strength makes it great for shipping our high-tech products.

These creative solutions are easy to see as “green” or environmentally friends. But more importantly, they grew out of several material concerns that have to do with bottom-line costs and supply chain security:

This followed a few high-level principles that we wanted to put into place. One, he wanted packaging material to be sourced near the point of use because he didn’t want to spend a lot of time and effort or fuel moving cardboard or some other packaging material across the world. Two, he wanted a material that was easy to replace.

How much does it cost to make and ship packing materials?

What materials will be available today and for the foreseeable future?

And only then, as a third priority, does the outwardly “environmentally friendly” aspect of the solution show up to reduce waste and carbon impact at the end of the packing material’s life cycle:

And three, he wants something that’s recyclable and compostable.

By linking Sustainability initiatives to outcomes on the executive dashboard, Dell is proving the case for how environmental stewardship materially contributes to a company’s success.

Full day, full brain.

I spent today listening to and tweeting about Sustainability progress from leaders representing FedEx, Patagonia, Intel, Lockheed Martin, Campbell Soup, Abbott, Human Rights Watch and others at Ethical Corporation’s Responsible Business Summit USA conference in New York City.

We talked about the approaches and actions organizations are taking to measure their impact on the earth: tipping points and pressures, risks and opportunities, and thinking long-term in a quarterly dividend world.

A highlight for me today was hearing Bennett Freeman of Calvert Investments say, “Integrated reporting is coming.” Not today or tomorrow, he said to me, but his team has a “solid toehold” on models to integrate corporate responsibility measures with financial reports. So now the challenge shifts to scaling up and creating an environment where integrated reporting becomes pro forma. Investors will expect corporations to provide this richer, more complete picture of their company’s performance in the regular course of business.

Cristina Amorim from Life Technologies gave a tremendous presentation on the results her team has achieved with an all-in aggressive effort to streamline her company’s environmental footprint. The biotech tools company has transformed the traditional linear “take-make-waste” paradigm into a circular lifecycle of reduce, reuse, reclaim, recycle and recreate. Go steal ideas from Life Technologies’ award-winning Sustainability initiatives.

Considering her program’s emphasis on exact measurement and quantifiable results, it caught me off guard when Christina said that Zero Waste  doesn’t mean “no waste at all.” Rather than an absolute, Zero Waste is an aspirational goal that is generally accepted by her industry peers as 90 percent diversion from the waste stream.

In this case, ninety percent represents the very best that can be done without creating new problems.

That’s a truth worth keeping in mind.

Considering the overwhelming environmental, social and economic challenges facing the world,  we can’t afford to let the perfect be the enemy of the good.

After all, doing the very best possible for all concerned is what drives Sustainable Business.

As Ray Anderson put it, “Doing well by doing good.”

In the eyes of non-profit corporate sustainability group Ceres, environmental and social sustainability issues are material “balance sheet” issues.

Think about that for a second. This mindset calls for a full accounting of everything that goes into a business’ profit and loss statement. I’m talking about the real one, with the numbers. Not just the sidebar Corporate Responsibility brochure.

Via Ceres.com:

For businesses in all sectors of the economy, sustainability is a strategy for building long-term shareholder value, managing environmental and social risks, and improving competitiveness. Environmental and social sustainability issues are material “balance sheet” issues. They pose risks and present opportunities that will drive the success of corporations.

And if this is case, the logical conclusion is to link compensation with sustainability results.

Ceres Vice President Andrea Moffett lays out the case for this in her Apr. 24 blog post: It’s Time to Link Compensation With Sustainability

Good ideas.