MEASURING WHAT MATTERS: THE POWER OF KPIS TO ADVANCE SUSTAINABILITY
“If everything is important, then nothing is.”
This quote from Patrick Lencioni illuminates the heart of the problem with today’s sustainability reporting practices. Too many seasoned organizations are still struggling to focus their reporting on the impacts that matter most. And companies that have not yet started reporting are discouraged from doing so, when they consider the panoply of topics and disclosures they may need to report on.
When it comes to the disclosure of non-financial information, it’s understandable that many businesses come begrudgingly to table. Companies are being asked to investigate, evaluate and report on a vast array to topics under the rubric of sustainability. With the serious issues facing our world and the very urgent challenge of the UN’s Sustainable Development Goals, this reticence hinders progress.
But when sustainability reporting is focused on a few, truly relevant issues, it creates vital data that can help companies contribute to sustainable development and, in some cases, be more profitable in the process. Whether a business is beginning to report because of stakeholder pressure, a new regulation or simply to be a better steward of the planet, establishing Key Performance Indicators (KPIs) is the way to set goals and track progress over time.
Lessons learned at Intel
More than twenty years ago, I moved from the policy arena and went to work for the tech giant Intel. It was an amazing opportunity for me, but the role was challenging beyond description. I suddenly needed to measure, understand and communicate about environmental impacts at 27 factories all over the globe. And not only did I have to wrap my head around how to manage such a broad, complicated and diffuse network, I also had to boil all of this down into useful information for Intel’s senior leaders. At the time, Intel was being led by Gordon Moore (founder, noted environmentalist, philanthropist and the author of “Moore’s Law”) and Craig Barrett – both of whom had a keen and personal interest in these results.
As I began to take in the enormity of the job, the thing that kept me awake at night was trying figure out what I needed to measure in order to track progress. I needed to demonstrate that, no matter where the facility was located, Intel was upholding the highest standards of environmental stewardship.
In the end, after many months of discussions and meetings we developed a concise set of less than 10 KPIs focused on air quality, water, waste and incidents in the factories.
While it was difficult to whittle the potential KPIs down to this short list, we knew that this was the only way we could engage with Intel’s senior leaders. We knew that brevity was the key to actually using the data to make decisions.
“I didn’t have time to write you a short letter, so I wrote you a long one instead.”
This quote, from Cicero, Pascal, and Twain, speaks to the difficulty of applying rigor to truly focus on the most important issues. But without this rigor, the process of collecting and reporting data leads to very little value.
The good news is, it’s not necessary to track every possible indicator in order to help a business become more sustainable and contribute to the long term health of our planet and the resiliency of our global economy. Our list of KPIs at Intel allowed us to track progress of the company’s vast manufacturing network each quarter. Over time, we improved our performance on these indicators. We ramped up our quality control processes and pulled in our scheduling, so that the data was presented within a few weeks after each quarter closed. But the real breakthrough came when we started to forecast. Suddenly, we had a crystal ball that could tell us about where we were going, not just where we had been.
This changed everything. For example, we could see that no matter how hard we worked to mitigate pollution, the company’s outstanding growth rate would swamp our efforts. That’s when we had an epiphany. The only way we could stem the growth of waste and pollution was to get involved in the design of the manufacturing process. And that’s what we did. Our “design for the environment program” reduced absolute emissions, while the company was growing at double digit annual rates.
This story reflects the true potential of smart KPIs. When corporate managers really dig in, to determine the critical data points, report them to decision makers frequently, and start to forecast, it can transform mere data into powerful fodder for better decision making. These decisions can save our planet.
Applying the lesson across the board
Earlier this year, I left the corporate world for the non-profit world. I’m now the Chief Executive of GRI, developer of the world’s most widely adopted sustainability reporting standards. We work to help businesses, governments and other organizations use the sustainability reporting process to create transparency that can transform decision making for the better. Over the past two decades, GRI has built a global network of organizations that are committed to the notion that transparency has the power to fundamentally change the way we do business, advance sustainable development and create economic growth.
One of the key attributes making the GRI Sustainability Reporting Standards the most widely used in the world, is the scope of sustainability impacts they cover. Any organization, in any sector of the economy, anywhere in the world can use GRI Standards to understand their impacts and communicate with all of their stakeholders. But this breadth of topics can be intimidating for companies that are just beginning their sustainability journey.
It’s important that both newcomers and seasoned reporters understand the importance of focusing on a few KPIs. At GRI we don’t expect companies to disclose information on everything. The first step in the process is engaging with your most important stakeholders to create a short list of critical sustainability issues (and KPIs) to track. This “materiality” analysis will help separate the wheat from the chaff, so you can measure and then manage the most important data that indicate the status of the larger system.
Steering a company towards a more sustainable future is a bit like driving a car. As you move forward, it’s important to pay attention to what’s going on behind you by glancing in the rear-view mirror. But if you want to drive forward, and avoid hitting obstacles, your focus has to be on the road ahead.
As my experience with Intel demonstrated, in the early phase of sustainability reporting, companies start by collecting data from the past. But over time, the business will develop leading indicators and set ambitious goals to move from reactive to proactive. That’s when the company will be positioned to make positive contributions to our shared vision of sustainable development.
Our ultimate goal is a sustainable, just and prosperous world. By focusing on measuring what matters and forecasting their impacts, companies will discover new ways to lighten their footprint while padding their bottom line. Standard setters, reporters, data users – all of us, must redouble our efforts to get more out of the investment in sustainability reporting. Because, it is only when data becomes information that real change can happen.