Measuring Environmental and Social Responsibility

There are several approaches companies use to measure environmental and social impact. These methods have several factors in common. They all attempt to create measurable, quantifiable results that provide transparency into the actions of the company that affect the environment and society (Kubert, 2007). As noted by Andrew Savitz, achieving this is far more challenging than standard financial reporting (eClipsCo, 2008). The key reason is that all facts reported on financial reports are based on a single unit of measure, the dollar. However, there is not a standard measuring stick to measure environmental and social value. Even when attempting to trace environmental and social impacts back to dollars, assessing the total social benefits or total social costs is challenging. Therefore, there continues to be lack of consistency in measurement criteria and systems to assess the true social and environmental impact of a company’s actions.

The first model is the Identifying Priorities for Action model proposed by Searcy, McCartney, and Karapetrovic (2005). Somewhat like the Natural Step model, this approach begins by prioritizing key sustainability issues. This leads to developing a list of key indicators for measuring the current and desired states through discussions with key stakeholders, needs assessment, and framework development. The advantage of this method is that it is action-oriented, in that it starts by asking the question about what problems the company must solve in order to achieve a more sustainable outcome.

A second method is the Social Return on Investment (SROI) model reviewed by Gable (2008). This methodology focuses on converting social and environmental value into dollar terms. This benefit is compared to the cost of the effort, which can then be converted into an index that shows the value the investment gained for investors. The advantage of this method is that it creates a standard measurement (dollars) by which different initiatives can be compared either within a company or between companies. However, as Savitz articulated, converting social and environmental benefits and costs to dollars is very challenging.

The method for measuring environmental impact that I most prefer is the Corporate Sustainability Model proposed by Epstein (2008). This model provides a “comprehensive approach for examining, measuring, and managing the drivers of corporate sustainability” by aligning the “strategy, structure, management systems, and performance measures” (Epstein, 2008, p. 31). The model identifies performance measures holistically across inputs, processes, outputs, and outcomes. The reason I prefer this method is that it attempts to integrate sustainability into the fabric of the company so that it permeates operations, financial measures, internal and external stakeholders, and the end-to-end value chain.

References

eClipsCo. (2008, June 6). Sustainability is difficult to measure. [Video]. Retrieved from http://www.youtube.com/watch?v=CYasSUWdPxE&feature=youtu.be

Epstein, M. J. (2008, January). Implementing corporate sustainability: Measuring and managing social and environmental impacts. Strategic Finance. Retrieved from http://marylhurst.courseobjects.net/items/efc318df-17e7-e6f2-18d5-7f5f4b42fd95/1/epstein-measuring_social_and_environment.pdf

Gable, C. (2007, Spring). Measuring what matters: ShoreBank Enterprise Cascadia’s commitment to triple-bottom-line metrics. Environmental Quality Management. Retrieved from http://0-web.ebscohost.com.shoen.iii.com/ehost/detail?sid=08e9fa79-6e3d-4f49-8fef-ecec52876959%40sessionmgr115&vid=1&hid=113&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#db=bth&AN=24630022

Kubert, J. (2010, July 1). Why all companies should track sustainability metrics. Retrieved from http://marylhurst.courseobjects.net/items/efc318df-17e7-e6f2-18d5-7f5f4b42fd95/1/Why_All_Companies_Should_Track_Sustainab.pdf

Searcy, C., McCartney, D., & Karapetrovic, S. (2005). Identifying priorities for action in corporate sustainable development indicator programs. Business Strategy and the Environment, 17, 137-148. Retrieved July 18, 2011, from http://0-web.ebscohost.com.shoen.iii.com/ehost/detail?sid=59ebbd78-a1fc-4918-a3a2-5a8c1312f34d%40sessionmgr112&vid=1&hid=113&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#db=bth&AN=28802259

About the Author
Theresa Martin Theresa Martin has 23 years of operations management leadership at Fidelity Investments and Procter & Gamble.  As a vice president at Fidelity, Theresa led a diverse array of organizations such as manufacturing, call centers and information technology.  Her passion is renewable energy and sustainable business.  She obtained a Green MBA focused on renewable energy from Marylhurst University in Portland, Oregon. Theresa also has a BS Computer Science from the University of Illinois.

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