Guide to setting a sustainability performance target

 

Targets help to communicate corporate goals and objectives. They provide clarity that shape the design of your actions with the specific goal of improved performance.

 

Sustainability performance targets are an important part of an organisation’s sustainability strategy. A sustainability strategy includes a vision statement that should express where an organisation wants to be in the future in relation to their sustainability performance. Supporting the headline vision statement must be specific and measurable goals aimed at achieving the sustainability strategy. These goals require measureable targets so there is transparency about whether the organisation is achieving their strategy. 

 

Sustainability strategy

First let’s explore what it means to set a sustainability strategy.

 

Sustainability strategies don’t have to be complicated. In its simplest form, a sustainability strategy includes a headline or vision statement that aims to summarise in as few words as possible what the organisation’s sustainability strategy is all about.

 

Examples include IKEA who chose ‘People and Planet positive’, Marks and Spencer use ‘Plan A: Doing the right thing’, and Unilver adopted ‘Sustainable living’ as their heading for sustainability strategy.

 

It is important that vision statements are not too ambiguous. Vision statements should be catchy and inspirational, but they require a good deal of context and definition.

 

Defining your strategy 

The challenge is to adequately define the detail underpinning the vision and to communicate the strategy in such a way that everyone within the organisation acts in a manner that aims to achieve the strategic vision.

 

An essential element of sustainability strategy therefore is defining targets, objectives and goals in both qualitative and quantitative terms. This process must involve;

  • Clarity of ‘why’ this is a strategy at all (i.e. why are we doing this!)
  • Defining what the ultimate success of the program looks like
  • Understanding the starting point (baseline data and positioning)
  • What are the benefits to the program and when will they be realised
  • How much do we want to achieve, and by when?
  • How much is the program going to cost, and who is going to do it?

 

Accountancy or Artistry

Strategy can be based on analytics, i.e an accountants approach, or painted in the clouds, i.e the artists approach.

 

Analytic strategy takes a ‘bottom-up’ approach. This is a process combining detailed analysis of current performance data, market intelligence and internal discussion to set a strategy that management can be pretty confident of achieving.

 

  • Advantages of a well-executed bottom-up approach include:
  • Targets are aligned to availability of budgets and resources
  • Projects to achieve targeted performance already broadly identified
  • Targets are realistic and achievable
  • Individual responsibilities are clearly identified for implementation of improvement in pre-identified aspects of the operations.

 

In contrast, ‘top-down’ strategy is derived from a vision, an aspirational view of where the company would like to be. Advantages of a well-executed Top-down approach include:

 

  • Obvious support of Senior Management to achieve targets and headline goals
  • Clear approval for new projects that will deliver on targets
  • Clear corporate direction for internal and external communications
  • ‘Aspirational’ targets act as a stretch to performance and may lead to heightened efforts to achieve greater levels of improvement
  • Responsibility is collective, driving a ‘one-ness’ across the culture and empowering everyone to play a role

 

The best strategies combine elements from both the top down, and bottom up approaches.  Logically there must be connection between the bottom and top in order for them to join somewhere in the middle. It’s the middle where the work gets done to achieve success.

 

For example, IKEA recently launched their new sustainability strategy, “People & Planet Positive”. It aims to “inspire millions of customers to live a more sustainable life at home, making IKEA energy and resource independent as well as creating a better life for people and communities”. IKEA’s goal is that by 2020, and thereon after their corporate existence will lead to a net positive impact to both the population and the planet. This is more than just a vision. Sitting under the “people and planet positive” tagline is a strategic plan that is number based, with clear individual targets coupled with clear actions and activities.  

 

Practical aspects of target setting

The first steps any business should take are in capturing the current sustainability footprint of operations. This includes carbon and environmental data, social investment and workforce data. This data will provide the ‘baseline’ data from which targeted reductions may be calculated.

 

It is also advisable to consider how the baseline data fits into a trend or pattern for your business. It is a true representation of your business activity?

 

How is your business growing or otherwise changing, and will that impact on your emissions?

 

1. What you might target

There is a wide choice of sustainability performance targets you may want to choose from. The most common however include:

 

  • GHG emission (absolute) reductions – meaning a reduction in electricity consumption, selecting greener, cleaner sources of electricity, fewer vehicle miles and improved vehicle efficiency
  • Carbon intensity – relates carbon usage to business performance. Calculated (or normalized) as the firm’s carbon usage for the year divided by a financial metric (e.g. sales) for the same time period
  • Carbon dependency – the change in a company’s use of carbon (intensity) over a given time period, expressed as a percentage
  • Scope 3 emission reductions – including reduction in business travel, flights and reductions in waste generated and office consumables (i.e. paper)
  • Resource efficiency – including water, raw materials and consumables
  • Health and Safety – zero harm, reductions in absenteeism, near-misses
  • Workforce – gender diversity, equality and employee satisfaction
  • Social Investment – charitable or community giving, pro-bono work, donated time

 

2. Materiality

Materiality is becoming increasingly important in assessing sustainability impacts.

 

Something is material if it is considered sufficiently significant, that if it weren’t reported on, then it would have the potential to mislead an investor or other interested stakeholder.

 

Materiality is a judgment-based assessment. For example, take the same company operating two sites, both using the same volumes of water each year, but one operating in a region of high water stress, the other is a region of no water stress. Water consumption will not have a material impact for the no-water stress location, but may be very material in the high-stress area. Materiality should be considered in terms of environmental and economic terms.

 

3. Consider your industry and market

Its quite common for organisations in the public and private sector to set up relational targets, that is to say, have a look around at peers and emulate them. In the public sector the tone is set by international bodies such as the UNFCCC and in particular the Kyoto Protocol and the work of the IPCC. In the private sector “benchmarking” is used to sense check the market and competitors and then set targets that match or slightly exceed those of peers. Further refinement occurs to take into account materiality and individual circumstances such as economics, technological feasibility, and stakeholder values.

 

4. Be Realistic

It’s a sometimes overlooked aspect of targeting reductions, but if your company is experiencing 10% year on year growth, then to achieve a 10% year on year reduction in emissions will certainly be challenging, expensive and probably impractical.

 

5. Be timely

Another gravity check is to understand that setting targets and addressing sustainability performance across one or two, four or five metrics does not define a company as sustainable. Sustainability incorporates many hundreds of inter-related elements. Moreover considering sustainability over different timeframes is also important in shaping a business’s sustainability credentials. The following table illustrates how timeframes may be applied to different dimensions of target setting:

 

Timeframe

Term

Basis by which targets are established

Typically applicable to…

Transitional

1-10 years

Achievable, activity based quantitative targets and strategic initiatives.

SME’s early in their sustainability journey

Institutional

Up to 15-20 years

Multiple stakeholder consensus given present-day circumstances. Goals and objectives, both quantitative and qualitative. Aspirations targets.

Established businesses already engaged in sustainability practices

Generational

Mid-term, up to 50years

Scientifically-based “green” scenarios, if available robust, credible projections of historical trend into future.

Multi-national organisations, NGO’s and Government organisations

Visionary

Up tp 100 years

Theoretically ideal mission statements, a vision for a secure, safe future. Qualitative statements.

Governments, UN and other global multi-stakeholder agencies

 

6. And finally…. Be brave

There is no time like the present to begin (or advance) your sustainability evolution; turning historic and present performance into improved future performance. Turning data into information as the basis for analysis and improved decision making.

 

If “You can’t manage what you don’t measure”, it is equally difficult to achieve your goals if you don’t know what they are, where they are, or how far away they.

 

However you combine a top-down or bottom-up approach for establishing targets, it is common practice to review and revise performance against those targets on a regular basis and re-adjust, either up or down, according to your rate of progress, ambition, cost, or any changes in circumstances.

 

Impact Sustainability’s performance management system has new functionality to store your performance targets. Watch a short demonstration on this functionality on the video below.