Measuring sustainability. Part III: how a sustainability index can optimize decision-making
In the first two parts of this series, we explored the motivations behind creating a sustainability index, and the steps to take when creating an index. In this final part of the series, we will explore how organizations can deploy an index to make consistent decisions to support a sustainability strategy.
After the index has been designed and created, the next task is to deploy it into the decision-making structure. Let’s explore some examples of how other organizations have deployed this approach to make more sustainable products.
Identifying more sustainable products
A common use of a sustainability index is in evaluating products and product alternatives on their sustainability performance. Many organizations use an index approach to ensure that products they are producing (or in the case of retailers, the products they are selling) are evaluated consistently and that choices are in line with the sustainability goals and strategies of the organization.
BASF is a good example of a company using an index approach to evaluate the sustainability attributes of its individual products. Long before it developed its Sustainable Solution Steering method to evaluate the sustainability aspects of its roughly 50,000 relevant product applications, the company used an approach known as the Eco-Efficiency Analysis (EEA), which allows users to clearly and easily understand the environmental, social, and economic values and trade-offs between different products and decisions. The EEA framework “looks at environmental impact in proportion to a product’s cost-effectiveness,” summarizing the relevant information about a product’s sustainability and economic attributes into an easily understood set of indicators.
Evaluating supplier performance
When deploying a sustainable supply chain strategy across a very large set of products, it often makes more sense to start by evaluating the performance of companies as a whole instead of evaluating individual products. The index, in this case, would be designed to consider the actions and policies of supplier companies, along with information on the sustainability attributes of its product portfolio.
P&G developed a supplier scorecard that seeks to track improvements in the sustainability performance of its suppliers and supplier chains. The scorecard – built from a number of globally recognized measurement standards – is meant to foster continuous improvement of supplier and supply chain performance by allowing them to share ideas and capabilities for best practices.
Other organizations have also taken a similar approach. Walmart, the world’s largest retailer, has been working in conjunction with The Sustainability Consortium to develop the basis for a Supplier Sustainability Index. This index will evaluate the performance of supplier companies as a whole, not on individual products, and will include metrics to measure both environmental and social sustainability performance. Walmart intends to fold the Supplier Sustainability Index into its broader supplier assessment framework, effectively integrating sustainability assessment into the buyer-supplier relationship.
Evaluating facilities and production regions
Another common use of a sustainability index is to evaluate the relative performance of individual production facilities. Manufacturing and production facilities often produce different types of products and have differing capacities, making direct comparisons difficult. Using a sustainability index can help to compare the relative performance of facilities with different characteristics.
This could be as simple as comparing energy use per unit of output, from the approach used by Interface to promote energy efficiency at its factories, to a more complex approach such as the McDonald’s Global Sustainability Scorecard, which measures the performance of its operations, employees, and suppliers across a number of categories such as Nutrition and Wellbeing, Supply Chain, and Employee Experience. The US Army Corps of Engineers has also deployed a scorecard aimed at driving more consistent sustainability decisions.
A rich and robust sustainability index should be designed and deployed carefully and strategically and should evolve over time with the strategies and goals of your organization. Measuring sustainability is a complex task that presents many challenges, but using a carefully crafted index can help to reduce confusion and simplify the decision-making process.
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.