Chapter 4 Manage and Measure 4.1. Managing and measuring sustainability In order to be effective and progressive, sustainability needs to be measured. They say “what gets measured gets managed.” Firms need to identify the indicators of sustainability, measure those and assemble the data for a report. This all is only the starting point for an understanding how to manage the business sustainability. More challenging is to condense the data, rolling indicator scores up into subcategory and category scores (environmental, social, and economic) and into a summative score on the sustainability of a business. In the end this collection of key performance indicators should guide company‟s business decisions. It is important to note that the concept of corporate sustainability is not easily defined or measured (Herriott, 2016) 4.1.1. Global Sustainability indexes In following subchapters I will give a brief introduction from some of the most known Indexes which measure companies‟ sustainability performance on national level. The Dow Jones Sustainability Index The Dow Jones Sustainability Index was established in 1998 as a result of the meeting kept by John Prestbo, Reto Ringger and Alois Flatz. Only in six months, The Dow Jones Sustainability Index, aroused a great interest among the businesses; companies wanted to know where they are in or not, but also how they were ranked according to Dow Jones Index. Companies are not selected according to their environmental or social performance but DJSI is rather an instrument tracking the long-term financial performance of the leading sustainability-driven companies worldwide. After the launch of the DJSI some companies began immediately to undertake a reassessment of their sustainability programs based on selecting the components of the index. All companies selected into the index receive information that shows how those companies are scored in each part of the assessment and
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Chapter 4
Manage and Measure
4.1. Managing and measuring sustainability
In order to be effective and progressive, sustainability needs to be measured. They say “what
gets measured gets managed.” Firms need to identify the indicators of sustainability, measure
those and assemble the data for a report. This all is only the starting point for an understanding
how to manage the business sustainability. More challenging is to condense the data, rolling
indicator scores up into subcategory and category scores (environmental, social, and economic)
and into a summative score on the sustainability of a business. In the end this collection of key
performance indicators should guide company‟s business decisions. It is important to note that
the concept of corporate sustainability is not easily defined or measured (Herriott, 2016)
4.1.1. Global Sustainability indexes
In following subchapters I will give a brief introduction from some of the most known Indexes
which measure companies‟ sustainability performance on national level.
The Dow Jones Sustainability Index
The Dow Jones Sustainability Index was established in 1998 as a result of the meeting kept
by John Prestbo, Reto Ringger and Alois Flatz. Only in six months, The Dow Jones
Sustainability Index, aroused a great interest among the businesses; companies wanted to
know where they are in or not, but also how they were ranked according to Dow Jones Index.
Companies are not selected according to their environmental or social performance but DJSI
is rather an instrument tracking the long-term financial performance of the leading
sustainability-driven companies worldwide. After the launch of the DJSI some companies
began immediately to undertake a reassessment of their sustainability programs based on
selecting the components of the index. All companies selected into the index receive
information that shows how those companies are scored in each part of the assessment and
how they succeed compare to others in the same industry. The index itself is rather like a
stimulus to the sustainability movement. (Sadler, p. 69, 2002)
FTSE4Good Global 100 Index
FTSE4Good Index was launched in 2001 and it has been designed in order to measure the
performance of corporations that meet globally recognized corporate responsibility standards,
and to facilitate investment of those corporations. Corporations are included in the Series on
the basis of their sustainability record. Thus, the Series can be used in four main ways:
1) as a basis for responsible investment, financial instruments, and fund products;
2) as a research tool to identify environmentally and socially responsible companies;
3) as a reference tool to provide companies with a transparent and evolving global CR
standard to aspire and surpass; and
4) as a benchmark index to track the performance of responsible investment portfolios
(Madu & Kuel, p. 57, 2012)
• Global 100
The Global 100 is a list of “The Global Most Sustainable Corporations in the World.”
The list is announced annually at the World Economic Forum in Davos. The list is
created by Corporate Knights Inc. in partnership with Innovest Strategic Value Advisors
Inc. Global 100 index favor corporates with exceptional capacity to address their sector-
specific environmental, social and governance (ESG) risks and opportunities. Creators of
the index believe that firms able to identify and effectively manage ESG risks will lead to
superior performance in the long run. (Kolb & Schwartz, p. 219, 2010)
4.1.2. Sustainability reporting
The simplest way to measure sustainability is the Global Reporting Initiative‟s (GRI) framework.
The GRI was first established by a group of socially responsible investors and environmentalists
as a reaction to the 1989 Exxon Valdez oil spill. Nowadays it is a set of guidelines created by
businesses, governments, advocacy groups, universities and research organizations. The mission
is to develop and disseminate globally applicable Sustainability Reporting Guidelines to give
business managers the measures to manage sustainability. The GRI consists of those same three
areas than TBL; Environmental, Economic and Social but in addition also subcategories as
Human Rights, Labor Practices and Decent Work and Product Responsibility. (Musikanski,
2012)
GRI report typically defines at first the Aspects and Boundaries for a business. The Aspects are
those issues crucial to a business‟s economic, environmental, and societal impacts and affects the
decisions of stakeholders. Impacts related to the Aspects, and the company‟s controls over those
impacts determine the boundary over the business. GRI report contains two areas: the General
Standard Disclosure and the Specific Standard Disclosure. The General Standard Disclosure
includes reporting in the following areas: Strategy and Analysis, Organizational Profile,
Identified Aspects and Boundaries, Stakeholder Engagement, Report Profile, Governance, and
Ethics and Integrity. The Specific Standard Disclosure instead concentrates on those
sustainability main areas: Economic, Environmental, and Societal as well as societal
subcategories which include Labor Practices and Decent Work, Human Rights, Society and
Product Responsibility. (Subhas, Sengupta & Rajib, p. 117; 119, 2017)
Figure 4.1: GRI Categories and Guidelines
Note: From “Becoming a Sustainable Organization”, p. 210,211, by K. Kohl, 2016, Florida, FL,
United States: Taylor & Francis Group, LLC
Figure 4.2: GRI Social Subcategories
Note: From “Becoming a Sustainable Organization”, p. 210,211, by K. Kohl, 2016, Florida, FL,
United States: Taylor & Francis Group, LLC
In next page is an example how different familiar corporations are reporting their sustainability
performance. Some corporations are following those GRI guidelines explicitly but even if the
GRI is a beneficial tool for businesses it might be that it does not cover all the areas where the
business is active.
Table 4.1: Reporting on sustainability by major corporations
Note: From “Measuring Progress Towards Sustainability”, p.119, by By Subhas K. Sikdar,
Debalina Sengupta, Rajib Mukherjee, 2017, Switzerland: Springer International Publishing
4.1.3. ISO Standards 14 000 and 26 000
The group International Organization for Standardization, or ISO, has been around since 1947. It
is an international organization focusing on sustainability by promoting international standards
associated with industrial and commercial operations. Most countries, as well as companies,
voluntarily have integrated ISO standards into their operations.
ISO standardization range from basic standards like material codes for ordering forms to quality
management standards. ISO operates also in the areas like standards for materials, parts,
shipping, and manufacturing. The important point is that a corporation must purchase access to
the standards. Some companies have criticized the costs of having the access to the standards.
ISO have developed two key standards, ISO 14 000 and ISO 26 000, that are specifically
concentrated on sustainability.
ISO 14 000
ISO 14000 focuses on environmental management. It includes all business operations
associated with the environment and it aims to limit corporations‟ impact on the
environment. On the same time it is complying with local, national, and international laws.
ISO standard assessment may be anything from energy and waste to greenhouse gas
emissions and environmental communications. By using ISO 14000 standard companies are
ensuring legal compliance of the law but also those are continuously updating and evaluating
policies and procedures for all aspect of operations. Through ISO 14000 process corporations
are setting goals for improvement as well as new policies and procedures. Progress toward
the goal will be evaluated to show if appropriate policies and procedures are in use.
(Brinkmann; p.277; 278, 2016)
ISO 26 000
ISO 26000 focuses on social responsibility and it is voluntary whereas most other standards
can be certified. This standard is relatively new as it was launched in 2010. Corporations are
encouraged to follow ISO 26000 standard but those are not certified according to the
performance. The standards focus mainly on workers, the environment, and communities
within seven main areas:
1) Organizational governance: main concern is how a corporation is governed by its
owners, board, shareholders, workers, and other stakeholders.
2) Human rights: ISO provides guidelines for human rights and those focus on areas like
civil rights, access to the political process, economic freedom, education, and other
human rights issues.
3) Labor practices: concerns on how the company manages its workers.
4) The environment: concern on the company´s impact (resource use, especially energy) on
the environment
5) Fair operating practices (FOP). These FOB standards are related to organizational ethics
within and outside of the organization.
6) Consumer Issues focus on how the corporation interacts with consumers and it consist of
issues such as contracts, marketing, and product information.
7) Community involvement and development concerns on how the corporation interacts with
other organizations on the area where they operate or do business. It includes interactions
with governments, other businesses, and any other organization. The main theme focuses
on what is the company´s positive contribution to broader society within their
community. (Brinkmann; p.277; 278, 2016)
To sum up, the GRI focuses on environmental performance standards, whereas ISO 26 000 does
not. Similarly, the FTSE4Good assessment framework focuses more heavily on environmental
performance than does either the DJSI or the Global 100. Thus, corporations must choose the
most suitable guidance and assessment protocols that best address the aspects of sustainability
where they require improved performance. (Weber & Feltmate, 2016)
The giant sportswear manufacturer, Adidas, is shimmering again what it comes to following
sustainable indexes and standards. Regarding to their annual report the company has gained a
great success among the most valued assessment frameworks:
“We are proud that our sustainability programme has continuously earned high external
recognition over the past decades. Ethical investment agencies and socially responsible
investment (SRI) analysts such as the Dow Jones Sustainability Index, the Financial Times Index
FTSE4Good and ETHIBEL have rated us positively in terms of social and environmental
responsibility. Furthermore, we have been named one of the „Global 100 Most Sustainable
Corporations in the World‟ every year since 2005 and made it to the top ten of the „Global 100
Index‟ for the third consecutive time in January 2016. The positive assessments underscore our
industry-leading role in sustainability and acknowledge our social, environmental and ethical