Sustainability policies require transparent performance indicators that adequately reflect stakeholder interests, says Melanie Eddis
Nowadays, televised football bombards you with statistics – not just the score, but also how many fouls, corners or penalties there have been. Yet this is just a fraction of what the manager sees. He needs much more detailed indicators to define training programmes or select the next team. In the same way, business performance indicators must satisfy the needs of a diverse audience, both internal and external, and help to track an organization’s performance at both ‘group’ and ‘operational’ levels. Developed in consultation with external parties, they can also be used for benchmarking. Effective indicators allow:
transparency (to external parties interested in the company’s motives and objectives)
progress tracking (to facilitate internal management and measure performance against defined objectives)
outcome focus (to reflect real benefits to the community, staff, environment etc).
The new international standard (ISO 14031) makes a distinction between environmental condition indicators (such as regional air quality) and environmental performance indicators that address aspects over which a company has direct control (both operations and management). The latter generally reflect internal measures and are relatively straightforward to obtain, whereas the benefits to the community or external environment are harder to establish and influenced by many factors beyond the company’s control. It’s important to distinguish these indicators, and to understand the relationships between them.
Much information can be obtained by ‘tagging’ measures collected for routine business operations against categories defined for the new indicators. However, information systems exist to measure and record numerous indicators and a link with improvement targets is vital. This means people committing to do something, and people can only handle a few linked, balanced objectives (under ‘initiative overload’, many ignore the targets and nothing happens). The critical success factor is judicious choice of objectives, on the basis of a proper stakeholder dialogue, and then adoption of a small number of key measures that reflect effort put in (input/output measures) and the resulting achievements (outcome measures).
For most companies, integrating the management information needs of social/environmental activities with financial reporting is still a long way off. Early identification of key performance indicators is a good start to measuring real performance and allows transparent and robust evidence of progress towards sustainability.