The Biggest Problem with Sustainability
By Anthony Gilbreath
Sustainability is many things to many people and many organizations. For some it is all about the environment and climate change. For others its all about risk and how to avoid it. For some its a concept thrust upon them by their supply chain. For those on the cutting-edge of sustainability, it is about a better, more efficient and innovative way to do business. There are positives to all of these views. There are great things that happen when companies take tangible steps to address these areas.
So, if there is so much good about sustainability and the effect it has on how businesses and people conduct themselves, what could possibly be a problem? Sustainability lacks definition.
To illustrate this point, just imagine this example. What if is was generally agreed upon in the business world that it was good practice to keep track of stuff, like money, inventories, purchases and many other things. You know, accounting stuff. It had been noticed by businesses all over the world that when the amount of money available in the bank is tracked at the same time that purchases are being made, things seem to run smoother. Other firms notice that relations between buyer and supplier are better when the buyer keeps track of how much they buy and they make a decision to pay for the goods in a timely manner. Everything seems to run better. However, now imagine that all of these seemingly obvious and logical decisions are made independent of any standards and at the description of each organization. Some organizations are great at some of these things, but in other areas, they don’t even track these things. How would the business world operate under these circumstances? Not very well. Luckily the business world came together many years ago and established things like GAAP accounting standards, banking rules and regulations and many other ‘rules of the road’ that define business conduct and actions. Unfortunately such standards don’t currently exist for sustainability.
This example may seem far-fetched but it actually comes from a real-world experience while I was consultanting in Russia. The year was 1994 and I was just beginning my career at PricewaterhouseCoopers in the Management Consulting Services Department in Moscow. At that time, the business world in Russia was undergoing a rapid transformation. Before the fall of the Soviet Union, businesses in Russia used Russian accounting standards and not international accounting standards, such as GAAP. Due to the nature of the Soviet economy, the Russian standards were based on physical units and the location of these physical units, as opposed to monetary values.
A good friend of mine at the time worked in the audit department and he told me a very entertaining story. He was reviewing the financial records of formerly Soviet enterprises to ensure they were implementing GAAP correctly. However, in the sea of unprofitable enterprises he was examining, there was one diamond in the ruff. It was a concrete factory not far from Moscow. The factory has not only cash flow, but it had a good book value. This justified a site visit to see what they were doing right. Upon closer inspection, the factory was no more impressive than any of the other firms, it had simply been amortizing its pigs incorrectly. At the time, many enterprises raised their own food for its employees. What had happened is that on the books, every time they would get a new pig, it would go on the books and its value would stay there – giving a false impression that they had hundreds of thousands of dollar of value – but these were just pigs! Long story short, when standards are not followed or don’t exist, a common understanding is very difficult to achieve. The same can be said for sustainability in 2016.
It would not be accurate to say that no standards exist. In fact, there are a lot of standards, too many many would argue. There are standards from such as Global Reporting Initiative (GRI), Carbon Disclosure Project (CDP), Leadership in Energy and Environmental Design (LEED), Dow Jones Sustainability Index, Practice Greenhealth, BREEAM, and the list goes on. However, the problem with these standards and certification frameworks are that they each cover a narrow area of sustainability. LEED covers buildings. GRI concentrates on economic, environmental and human rights metrics, CDP concentrates on carbon. But none define of cover the whole of sustainability. That would be like having several accounting standards covering different areas of accounting, but no standard to tie them all together. It makes it an incomplete patchwork where it is impossible to compare apples-to-apples.
Business sustainability is often defined as managing the triple bottom line – a process by which companies manage their financial, social and environmental risks, obligations and opportunities. These three impacts are sometimes referred to as profits, people and planet. While this does provide a good general and accepted definition of sustainability, it does not define its scope. This can be seen in CSR reports. Some companies define sustainability as their charitable activities, others as their environmental achievements. Others have a combination of both of these and throw in some random good deeds. In short, its all over the map.
What is needed is a definitive standard, a framework, that defines what business functions and activities should be included in sustainability and how these functions should conduct themselves in a sustainable manner. For example, supply chain management is an essential function of an organization. The same can be said about facilities management, IT management, HR and many others. What a sustainability framework defines is 1) what are these business functions that have a sustainability element, and 2) how should the sustainability performance be measured in these areas. Once a standard framework is agreed upon, then, and only then will we be able to truly compare apples-to-apples.
I have spend significant time at Caelus developing such a framework. I truly believe that this is the one missing piece of sustainability. I have called the framework the “Sustainability Management Framework™“. It breaks sustainability into three main categories – facilities, green IT and business. These categories contain sub-categories. In short, every aspect of sustainability has a home somewhere in the framework. This gives organizations the ability to see the whole of sustainability in one snapshot. They can see all the areas in which they excel, where they need work and where they had never considered activity.
In conclusion, sustainability is lacking a strong framework that defines it. At present, there are many different and often competing areas of focus. This causes confusion in the market, with consumers and with investors. It is impossible presently to compare the sustainability performance of one organization with that of another in a meaningful way. Whether the industry embraces the “Sustainability Management Framework™” or some another framework, it needs to adopt one. Until then, sustainability will remain at drift, never achieving its true potential.
Anthony Gilbreath has over 15 years experience in oil & gas, alternative energy and sustainability consulting. He authored the CurrentState Sustainability Audit for Caelus as well as many sustainability consulting services for Computer Sciences Corporation (CSC). He has managed CaelusGreenRoom.com and been a Principal at Caelus Sustainability Consulting since 2011.