Environmental Metrics: A New Way to Drive Enterprise Value
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Environmental Metrics: A New Way to Drive Enterprise Value
Ian Cohen, Product Marketing Manager, Cority
Rick Mock, Principal, E2ManageTech
August 2, 2017
Agenda
• The Rise of Non-Financial Metrics
• Overview: Environmental Metrics
• Overview: Operational Metrics
• Overview: Management Metrics
• Overview: Condition Metrics
• Metric Design & Construction
• Systems
• Case studies
• Summary
Cority Software Inc.2
The Rise of Non-Financial Metrics
For decades, investors were only concerned with financial metrics and performance.
Interest in non-financial metrics and performance relative to industry peers has grown considerably since the late 1990s or early 2000s.
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The Rise of Non-Financial Metrics
Environmental is one of three pillars of sustainable development
Primary consumers of this data• Investors
• Sustainability ratings and rankings organizations
• Stakeholders
Cority Software Inc.5 Source Link: http://www.robecosam.com/images/Alpha_from_Sustainability_06_2014.pdf
The Rise of Non-Financial Metrics
• There are hundreds of sustainability organizations
• Mission, vision and value vary by organization
• Goals:• Drive transparency
• Help companies measure performance
• Drive change the corporate and community level
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The Rise of Non-Financial Metrics
Task Force on Climate Related Financial Disclosures, created by G20 nations
Offers a voluntary framework to help businesses disclose the financial impact of climate-related risks
Supported by 100 companies worth a combined $11T
Cority Software Inc.7 Source Link: https://innovation-forum.co.uk/analysis.php?s=investors-demand-better-social-impact-data
Poll Question #1
Does management at your company consider non-financial metrics when making decisions or when they are doing short and long-term planning?
All of the time
Most of the time
Some of the time
Rarely/Never
I don’t know
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Overview: Environmental MetricsEnvironmental metrics are generally divided into 3 categories
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Decision-Useful Information
Condition
Management
Operational
Overview: Operational MetricsDesigned to measure performance, which can then be used to determine the potential environmental burden of a company’s business lines
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• The amount, type, and composition of materials used by a business
Material Usage
• The quantities, types, compositions, and destinations of all non-product related output
Waste Generation
• The quantities, types, and toxicity of pollutants released into different environmental media (air, water, land)
Pollutants
• The quantities, types, and compositions of any resource type (energy, freshwater, etc.)
Resource Consumption
Overview: Management Metrics
Designed to support the decision-making process. Leading
• Number of employees trained versus the number that need training
• Number of levels of management with specific environmental responsibilities
• Number of employees whose job descriptions include environmental responsibilities
Lagging
• Environmental liabilities that may have a material impact on the financial status of the organization
• Number of resolved and unresolved corrective actions
• Number of or costs attributable to fines and penalties
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Supports decision making on the expenditure of:
Time
Money
Labor
Overview: Condition Metrics
• Environmental condition metrics seek to provide information on: • Health of the environment
• How it is changing
• Potential effects on operations
• Condition metrics should link specific industrial activities to environmental impacts
• There is a lack of robust condition metrics
• Largely derived from regulations or guidelinesdesigned to protect the human health and the environment
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Poll Question #2
In your experience, which type of metric is the most useful to management for decision making purposes?
Operational metrics
Management metrics
Conditional metrics
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Metric Design & Construction
• Ensure that the metrics being developed are SMART
• Design metrics that are quantifiableand add value
• Understand the end goals for measuring and tracking environmental data and performance
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• Measures should be well defined and clear to anyone with basic knowledge of the goals
Specific
• Measures should be quantifiable and/or qualifiable with a defined method of gathering the data and presenting them
Measurable
• Stakeholders should agree on the goal(s) of the metrics
Agreed Upon
• The metrics should be measurable while taking into consideration the availability of resources, knowledge and time
Realistic
• There should be enough time to achieve the goal of the metrics
Time-based/Time-bound
Poll Question #3
We have a software system in place to help us easily capture environmental metrics to help us with short and long-term planning.
Agree
Somewhat agree
Somewhat disagree
Disagree
I don’t know/too new
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System Implementation Considerations
Process and data readiness
How much of the iceberg?
Organizational change management
Prepare to Evolve
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Case Study >$25B Oil and Gas Company
>300 sites globally
10% YOY reduction in hazardous waste
Successes Single repository of monthly haz waste usage
Aid in achieving stated goal
Introduction to an Enterprise EMIS
Challenges Global categorization
Normalizing diverse operations
Timely input
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Takeaways and Lessons Learned
Progress not perfection
Proper metric program can facilitate cultural change
Strong leadership/management support essential
Establish strong governance
Don’t underestimate people and process
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Summary
Value of metrics Provides executives with more information for short and long-
term planning
Informs stakeholders, such as investors, customers, and NGO’s
A solid data management system is the foundation for delivering value to the company
Metrics need to be SMART
What gets measured gets managed
Cority Software Inc.20
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