A New Era of Sustainability Metrics?
According to the World Bank, we expect global economic growth of 3.3% to 2015; 3.0% from the US and 7.9% from China, a region that uses three times more natural resources than the rest of the world to create each unit of GDP.Â But the environmental impacts of business â€“ air pollution, biodiversity loss, ecosystem degradation and water scarcity â€“ are threatening the ability of our finite stock of natural capital to deliver Sustainable Growth.
The challenge for sustainable business is to identify growth models that result in reduced environmental impact.Â So how do we identify these business models? And how do we measure our progress along the journey? Are our current sustainability metrics up to the job?
At my company, we believeÂ a new era of sustainability metricsÂ is needed. Sustainability metrics that can be assessed alongside financial metrics. Sustainability metrics that everyone in an organization, from board members and financial managers to supply chain managers and product decision makers, can understand – and act on.
So this year, in addition to the traditional sustainability metrics we regularly contribute to The State of Green Business report, we present a new series of sustainability metrics, The Natural Capital Leaders Index, to illustrate how companies can measure their progress in decoupling growth from environmental impact. As the results demonstrate, meeting this challenge is far from easy â€“ we identified just 34 companies within our research universe (representing 93% of global markets by market capitalization) that have successfully â€˜decoupledâ€™ over the last 5 years.
Weâ€™ve adapted our methodology along the way â€“ most significantly by developing an additional performance metric to help companies understand how efficiently they are using natural capital to generate revenue.
This is the start of a journey towards exploring the right indicators to effectively align business strategies with sustainable development imperatives. Our objective has been to demonstrate the power of financially orientated sustainability metrics. We trust in the innovation of the companies we work with to adapt these metrics to address specific sustainability goals and objectives.
Sustainability issues are already creating winners and losers. Challenges such as commodity price volatility, natural resource shortages, pollution impacts, regulatory costs and extreme weather patterns are already leading to profit reductions, reputational damage and supply chain hiccups. Our challenge is to develop new sustainability metrics that support sustainability winners.
Richard Mattison is Chief Executive of Trucost Plc. Richard has advised various UN bodies and governments on environmental reporting and ecosystem services and has led ground-breaking projects including developing the worldâ€™s first Environmental Profit and Loss account for PUMA, valuing the environmental externalities of the worldâ€™s 3,000 largest companies for the UN Principles for Responsible Investment, and producing the UK Governmentâ€™s Environmental Reporting Guidelines for Business.
Richard is also a Member of the World Economic Forum Global Agenda Council on Biodiversity & Natural Capital, member of the Oxford University Smith School Stranded Asset Programme consultative panel, advisor to The Economics of Ecosystems and Biodiversity (TEEB) coalition, and a regular public speaker on environmental matters. This article was republished with permission from Trucost.
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