Measuring sustainability. Part II: constructing a sustainability index
In Part I of this series, we explored the basics of why a company would use a sustainability index to help guide decision-making. Here, we go into further depth on the steps to create such an index.
Step 1: Determining what’s important
The first step in defining a sustainability index is to determine what factors need to be considered for inclusion in the system. What is important to your company, your customers and your stakeholders?
I recommend starting with a wide range of potential factors, from carbon emissions to water and air quality impacts, efficiency of resource use, and social and community impacts. These factors should be considered in the context of the stakeholders that will be directly and indirectly affected, such as workers within and outside of the organisation, customers and clients, and local communities.
Once you’ve gathered all of this information, your company can start to prioritise: What drives your environmental footprint? What are your industry peers doing to address sustainability? What does the scientific literature and NGO community say about your operations and your supply chains? It is important to note that positive contributions to sustainability can also be included: Does your product reduce certain health risks? Are you creating greater access to education opportunities? Are your employees actively engaged in community support efforts?
Step 2: Determining the scope
The next step of designing the index is to determine the scope and organisation of the index. What types of decisions will be evaluated using the index? Properly defining and creating a sustainability index can help individuals at organisations make consistent evaluations of the sustainability implications of product designs, material choices or supplier selection (to name a few examples). It’s also important during this phase to consider where the data will come from.
The Nike Materials Sustainability Index is being used by the Sustainable Apparel Coalition to develop the Higg Index. More at www.apparelcoaltion.org
GoodGuide’s product rating system is based on an internally-developed index. More at www.goodguide.com
Step 3: Building the index
After deciding on the relevant factors to be considered for the index, establishing the scope and gathering the data, the next step is to further prioritise the information within the index. Managers should be asking questions about how to fit all of this information together. They can do this by first reviewing the selected impacts: Can you establish categories that make sense based on the factors identified? Are there other systems within the company that could be used to group this data? What is the current decision-making framework? All of these questions can help with grouping the selected factors into the index system.
One approach that I have used in the past and often recommend to companies now is to create stakeholder input groups made up of customers, staff, communities, etc. The groups can be asked to review and discuss the factors selected in step 1, and prioritise the factors by how important they are to them. The end result, once this task has been completed across a number of different stakeholder groups, is a clear view of what value different groups place on different factors. Stakeholder prioritisation, coupled with a review of other literature and information, will help to form the initial relative weighting of each of the contributing factors. Once this information has been gathered, the scoring system can be constructed.
Step 4: Reviewing and refining
After the initial index has been fully identified and constructed, is it important to continually test and refine the factors, weightings and scoring systems to ensure that the index remains usable, useful and ultimately accurate in promoting more sustainable decisions.
A sustainability index can be a great help in guiding decisions, and should evolve over time. An index creates a common platform that will help to promote consistent sustainability decision-making across team, divisions and entire organisations. In part III, we will discuss how a sustainability index can be applied and used to help improve decision-making.
Cash worked for PRé as a Senior Sustainability Consultant from 2012 to 2017. His areas of expertise included sustainable return on investment, sustainable supply chain collaboration, and sustainability performance. For PRé, he lead the development of tailored sustainability software tools for the Sustainable Apparel Coalition, among many other projects in sustainable development and sustainability integration.