In a world where consumers and stakeholders alike are demanding more environmentally and socially responsible actions from businesses, measuring sustainability isn’t just a box to tick but rather a powerful key that companies can use to unlock long-term value, drive innovation, and gain competitive advantage.
Data gathered by McKinsey reveals that procurement leaders who take bold action towards sustainability can make a decisive difference, driving faster growth, increasing savings and reducing waste.
But how do we translate this abstract concept into tangible numbers?
The answer lies within sustainability metrics.
Measuring sustainability allows companies to track their performance against environmental, social, and governance (ESG) objectives, identify opportunities for improvement, and communicate their progress to stakeholders. It’s about gaining insights and driving action.
In this article, we will delve into some of the key sustainability metrics you should consider and why these indicators are critical in shaping sustainable business practices. Here are the topics we will cover:
- The GRI standard
- Environmental Sustainability Metrics
- Governmental Sustainability Metrics
- Social Sustainability Metrics
- Future Metrics for Green Procurement
The GRI standard
Before we start exploring the different sustainability metrics, we must take a moment to mention The GRI (Global Reporting Initiative) Standard.
The GRI is an independent, international organization that developed one of the world’s most widely used sustainability reporting standards. It is a set of standardized metrics that provides a framework for businesses to report on their environmental, social, and corporate governance performance.
Despite the absence of a globally accepted system for sustainability tracking and reporting, the GRI Standard has achieved widespread adoption. Remarkably, it is utilized by 73% of the world’s 250 largest companies and extends across more than 100 countries.
At its core, the GRI Standard encourages transparency and accountability. Companies that rely on the GRI have a practical tool to measure sustainability in a comprehensive and standardized way. This not only helps businesses identify areas for improvement and track progress over time but also allows stakeholders – from investors to customers – to make informed decisions based on a company’s ESG performance.
All in all, the GRI can work like a compass guiding you through your sustainability journey, facilitating better decision-making, and driving sustainable action.
Environmental Sustainability Metrics
Environmental sustainability metrics provide a detailed overview of an organization’s ecological footprint, tracking impacts that directly influence our planet.
One of the most important and widely tracked environmental sustainability KPIs is Carbon Emissions. These metrics help measure a company’s contribution to greenhouse gas emissions, which are major drivers of global warming and climate change. Tracking and managing carbon emissions is key for any sustainability-focused business, and it’s often the first step in establishing a robust climate strategy.
On top of Carbon Emissions, here are more environmental sustainability metrics you could track:
- Energy Consumption. This involves monitoring how much energy your company uses in its operations, which can range from the electricity used in offices to the fuel consumed by company vehicles.
- Water Usage. With water scarcity being a pressing global issue, monitoring water usage can help you identify opportunities for conservation and more efficient use. Additionally, it is essential to manage wastewater discharge to protect your local water sources and ecosystems.
- Waste Reduction. This involves tracking how much waste your company produces and how effectively you manage it. The goal should be to minimize waste generation and divert waste from landfills through recycling or composting efforts. You can read more on how to minimize waste by leveraging a circular supply chain here: What is a circular supply chain?
- Plastic Reduction. As the issue of plastic pollution gains prominence, you tip the scale by promoting alternatives, and ensuring your plastic waste is appropriately managed.
- Noise Pollution, often an overlooked aspect, is particularly important for certain industries like construction or manufacturing. Unmitigated noise pollution can have adverse effects on local communities and wildlife, so it’s essential to manage and mitigate such impacts.
Governmental Sustainability Metrics
When we think of sustainability metrics, we often focus on the environmental aspect only. However, it’s equally important to consider the governmental sustainability metrics, which encompass a wide range of standards and guidelines that businesses should adhere to, often enforced by governmental bodies or international organizations.
For instance, the United Nations has established several frameworks and guidelines to guide businesses towards sustainable practices, like the UN Global Compact and the Sustainable Development Goals (SDGs). These standards provide a universal language for corporate sustainability, including principles on human rights, labour, environment, and anti-corruption.
Another important facet is Compliance with the Code of Conduct. This typically refers to internal policies that a company establishes to guide its business practices and behaviour. Compliance with this code shows a commitment to ethical conduct, transparency, and accountability.
Last but not least, you should consider creating your own Corporate Social Responsibility (CSR) Policy. A CSR policy outlines your company’s efforts to conduct its business in an ethical way, considering its social, economic, and environmental impact. For example, in procurement, this could translate into choosing suppliers that not only provide the best value but also align with the company’s sustainability goals.
Governmental sustainability metrics are all about ensuring businesses operate within the bounds of ethical, social, and environmental responsibility. All in all, these metrics help businesses establish a culture of integrity and responsibility, key ingredients for sustainable performance and long-term success.
Social Sustainability Metrics
In our exploration of sustainability metrics, the focus now shifts to an equally vital component – the “S” in ESG, which stands for Social sustainability.
This category encompasses the impacts an organization has on the social systems within which it operates, and these metrics are designed to assess a company’s relationship with people – be it employees, suppliers, customers, or the communities within which it operates.
- Human Rights. Businesses have a responsibility to respect and uphold the basic human rights outlined in the United Nations’ Universal Declaration of Human Rights. This might involve ensuring fair labour practices, eliminating any form of discrimination, or making sure operations do not infringe on local communities’ rights. Respect for human rights is not just ethically sound; it also contributes to an organization’s reputation, stakeholder relations, and overall sustainability.
- Work Opportunities. This metric focuses on how a company contributes to economic and social development through job creation. It also looks at the quality of those jobs, including whether a company provides fair wages, career development opportunities, and a safe and healthy work environment. This is especially relevant in regions where job opportunities are scarce, and businesses can play a critical role in driving economic development.
- Workers’ Welfare. This metric pertains to how a company takes care of its employees. This includes offering fair compensation and benefits, ensuring occupational health and safety, providing training and development opportunities, and fostering a positive, inclusive work culture. Worker welfare is crucial for maintaining a motivated, productive workforce and reducing staff turnover.
- Improvement of Living Conditions. This metric may extend beyond the company’s immediate operations. It looks at how a company contributes to the wider community in areas such as access to education, healthcare, or housing. Your business can make a significant impact on local living conditions through various means, such as community investments, partnerships, or corporate philanthropy.
All in all, social sustainability metrics help businesses to gauge their positive social impacts and areas where they need to improve. When you monitor these metrics, you can ensure a positive contribution to society, which in turn can strengthen your reputation, boost employee morale, and foster loyalty among your customers and stakeholders alike.
Conclusion: Future Metrics for Green Procurement
There is a diverse range of sustainability metrics to choose from, with some companies focusing on environmental factors, others on social dimensions, and still others encompassing a broad spectrum of ESG metrics examples.
The key is to select the sustainability KPIs most relevant to your operations, industry, and stakeholder expectations.
Remember, as our understanding of sustainability deepens and the global landscape continues to evolve, so must the sustainability metrics you use to gauge your progress.
So, what might be included in a future-facing sustainability KPI dashboard for procurement professionals?
Here are some examples:
- Reducing Supply Chain Waste: encouraging companies to optimize processes and adopt circular economy principles, thereby contributing to a more sustainable world.
- Recycling Rates: to determine how effectively materials are being reused, thereby conserving resources and reducing environmental impacts.
- Greenhouse Gas Emissions or Carbon Footprint, as companies worldwide strive to achieve net-zero emissions in line with global climate goals.
- Energy Consumption can help identify inefficiencies and opportunities to switch to cleaner, renewable energy sources.
- Transportation Processes in order to promote more efficient logistics and distribution methods, reducing both costs and environmental impacts.
- Impact on Ecological Systems, assessing a company’s impact on biodiversity and natural ecosystems.
Measuring sustainability is not a static process. It requires adaptability and a commitment to continuous improvement. When you learn to consistently track a broad range of sustainability metrics and KPIs, you’ll be able to gain a more holistic view of your business’ performance and its impact on the world. This will allow you to make more informed decisions, improve your operations, and contribute positively to the world.