There's a pretty good chance that your sustainability planning lacks measurable ROI.
A recent study by the Aberdeen Group focussed on businesses trying to get more sustainable. It looked at the challenges, tools, and strategies business leaders across North America faced.
Of all the challenges perceived by sustainability leaders, can you guess what took the top spot?
The biggest obstacle reported was “Measuring the Return on Investment (ROI) for sustainability initiatives”. Nearly half of those who participated in the Aberdeen Group study made this claim. So can all these environmental leaders be wrong? Yes.
Let’s be clear: sustainability’s ROI can be difficult to measure depending on how you are approaching it. But a sustainability plan that is dedicated to concrete actions will produce concrete (and measurable) results.
Setting actionable goals will prompt measurable ROIs.
The key ingredient missing from many businesses attempts at measuring the ROI from their sustainability initiatives is a focus on the financial bottom line.
For some people, sustainability is too benevolent or utopian to measure in something as base as dollars and cents. But the reality is that as your business becomes more sustainable, it will see stronger profitability.
Why? Because you’ll be using less resources, and spending less on them.
And yes, the planet will benefit too.
Sustainability Plans in Action, Clear ROIs
Consider this: a furniture company wants to be “green” and get more sustainable.
As most people in the environmental management services business will tell you, the best way of doing this is simple: use less paints and coatings in a spray booth with higher efficiencies to reduce the facility’s air emissions and the overall spending on coatings over the year.
By doing something as straightforward as giving proper training to the painting crew or investing in a more efficient spray applicator, that furniture company will see a measurable impact on the amount of VOCs they need to report and the amount of paint needed per product.
That difference can be directly translated to a decrease in production cost and a decrease in VOCs.
A similar route being taken in the name of sustainability is for offices to reduce their paper or water usages.
Collecting rainwater for flushing toilets or switching entirely to electronic document management. These too have a direct cost associated with them, as both paper and water cost your business money.
Seeing your profitability go up because you needed less water is one of the best ways to measure ROI and prove that your sustainability plan to reduce your impact on local water bodies was successful.
For most CEOs, hearing that X gallons of water was saved doesn't mean that much.
But tell them how much money was saved in the process and they'll quickly get behind sustainability.
Where sustainability’s ROI gets difficult to measure is when you approach it from a PR and branding perspective. Marketing efforts are difficult in and of themselves to accurately measure, so throwing in “green messaging” to the mix won’t make measuring your success any easier.
However, recent reports have shown that consumers are more likely to purchase green products that are backed up by real environmental data (no greenwashing!), so it is possible to attribute your ROI from sustainability initiatives to increased sales if you’re advertising them right. To measure this, you’ll need to analyze long-term marketing trends and past performances.
Sustainability Types Matter
Perhaps the key to measuring the ROI of sustainability is to separate concrete sustainability from advanced sustainability.
It’s entirely possible to measure the ROI from concrete sustainability actions. Concrete sustainability is about those real-world actions that have a clear outcome, like reducing air emissions, utility usage, and hazardous waste generation. No one can claim that they are on the road to sustainability if they dump tonnes of toxic waste into nearby lakes and streams.
Advanced sustainability is focused on less tangible key performance indicators like biodiversity, habitat protection, and human rights.
These are all essential to a total sustainability plan, and are all notoriously difficult to measure.
Is there really a standard way to measure work place satisfaction and equality? Can a statistician accurately measure a consumer’s happiness in being able to use a product they know is helping to protect an endangered species?
Perhaps the problem is not that we cannot easily measure these advanced sustainability efforts, it’s that we allow the complexity of these KPIs to make us second guess corporate sustainability planning.
All around the world, organizations are working to develop a standard system for measuring sustainability. But it's still worth pursuing these less tangible sustainability plans.
So before you get hung up on the challenges of measuring sustainability’s ROI, focus on those efforts you can measure.
They’ll have a more communicable and tangible impact on the environment, save you more money, earn you great PR, and motivate you to get more advanced when you’re ready.
May 28, 2012