Measuring Sustainable Business Performance

admin — Thu, 28 May 2009 18:49:34 +0000

We are in a “perfect storm” of trends that are driving a new view of what consitutes “good” business performance. Our internet connected, “Hot Flat and Crowded” world puts all of us in each others’ backyards. A global company can pollute an indigenous tribal area today, and it’s all over the web tomorrow. The traditional view of business performance is simple = return to shareholders. The new view acknowledges the importance of a much wider variety of players in the system, what we’ve come to label as “stakeholders”. These can include employees, suppliers, customers, communities impacted by business operations, other species, and natural systems, in addition to the investors. A number of the entrepreneurs and others I’ve interviewed on my radio show have described a remarkably similar pattern that gives legs to the term “triple bottom line”.

First, we have to see the entire supply, manufacturing, distribution, consumption, and disposal chain as a whole system comprising multiple stakeholders with diverse interests
Second, we need to understand what constitutes “value” for each of those stakeholders, and how we measure that.
Third, we design products and business processes to maximize positive outcomes for all the stakeholders along the way, both in real time and in consideration of the future.
Fourth, we rethink what we mean by “branding” – today’s astute consumers want to consume information as part of the product – the product”story” becomes a key component of the packaging.

In a recent conversation I had with Bill Shutkin, Sustainable Development Chair at University of Colorado’s Leeds School of Business, he characterized both approaches as “Friedmanesque”. For you economists out there, the first is based on the view of Milton Friedman, the second on the very different views of Thomas Friedman. Many major corporations have begun annual reporting on wider stakeholder outcomes, using frameworks such as the Global Reporting Initiative. This has grown out of the “Corporate Social Responsibility” movement as well as environmental reporting. Increasingly, we are seeing initiatives like the Climate Prosperity Project, funded by the Rockefeller Brothers Fund, that takes the ideas being popularized by T. Friedman and puts them into action in major cities – the idea that there can be no genuine economic development or prosperity without addressing both the challenges AND the business opportunities of energy efficiency, new technologies and more “natural” products. How would you translate all this into practice, to keep your organization focused on the measures that matter?

Clarify your vision by identifying all the stakeholders you impact, the players from whom you need resources, money, services, etc
You are in a state of “exchange” will all of these stakeholders – what do you provide them and what do they provide you?
Design metrics that define what success looks like in relation to each of these stakeholders
Combine these into a scorecard and build a system for regular reporting and feedback
Learn, adapt, and refocus continuously

Resilient Strategies » Climate Prosperity

Measuring Sustainable Business Performance