Companies can no longer afford to ignore sustainability. It is not just a trend but a major factor that drives where most businesses are headed. According to Globescan’s The State of Sustainable Business 2019, reputational risks, consumer demand, investor interest, operational risk, and employee engagement are some of the catalysts behind the sustainability efforts of most organizations.
Manufacturing is one of the industries that are pressured to realign their activities with the mounting call for sustainability practices. Sustainable manufacturing refers to developing products with minimal negative environmental impacts and maximum contribution to the conservation of natural resources. These products are expected to be economically sound and safe for employees, communities, and consumers.
Sustainable manufacturing aims to reduce the intensity of materials use, energy consumption, emissions, and unwanted byproducts while maintaining or improving the value provided for society and organizations.
Some relevant key performance indicators that are often considered when evaluating the sustainability of manufacturing companies are:
Environmental performance KPIs, such as: # Air emissions, % Energy utilization, % Hazardous waste etc.
Economic performance KPIs: % Product reliability, % Conformance to specifications, $ Material cost, % Labor cost etc.
Social performance KPIs: % Occupational health and safety, % Turnover rate, % Supplier commitment etc.
Sustainability standards are observed to ensure quality, transparency, compliance, and results in terms of making organizations accountable for their economic, environmental, and social performance.
The GRI Standards
Among the internationally renowned frameworks is the Global Reporting Initiative’s (GRI) Sustainability Reporting Standards. The GRI Standards consist of Universal Standards, which apply to all organizations and report on human rights and environmental due diligence, the new Sector Standards for sector-specific impacts, and the Topic Standards that come with the revised Universal Standards and relate to a particular topic.
Their vision is to create a sustainable future enabled by transparency and open dialogue about impacts. In this regard, they are a provider of the world’s most widely used sustainability disclosure standards.
With GRI Standards, companies can publicly present the outcomes of their activities in a structured way. This allows their stakeholders and interested parties to better see their status of how they are responding to calls for sustainability. GRI Standards can be used by any type of organization, whether large or small, public or private, or from any location or industry.
As cited in the report “A Short Introduction to the GRI Standards,” the Reporting Process for organizations using the GRI Standards involves determining impacts and their significance, identifying material topics, or topics that are relevant to the organization’s activities, and reporting disclosures. The final stages are reporting the organization’s most significant impacts on the economy, environment, and people and publishing information and GRI content index.
The GRI Standards comprise three series of Standards: The GRI Universal Standards can be applied to your reporting. The GRI Sector Standards are for sectors while the GRI Topic Standards are used to report specific information regarding material topics.
Daimler’s Sustainability Report
An example of a sustainability report that is developed based on the GRI Standards comes from Daimler, one of the biggest producers of premium cars and the world’s biggest manufacturer of commercial vehicles.
In 2006, Daimler joined the multi-stakeholder network of the Global Reporting Initiative (GRI), where it initially was an organizational stakeholder. It later became a Gold Community Member and is now a member of the GRI Community.
Their report is based on the Daimler Group’s sustainable business strategies. It contains two conceptual levels: “Spurwechsel” section, which refers to the external sustainability developments and trends into a context with the internal strategies and measures and “Reporting” section which provides a detailed description of the goals, due diligence approach, measures, and achievements.
The Reporting section focuses on six areas of action: climate protection and air quality, resource conservation, livable cities, traffic safety, data responsibility, and human rights as well as on three enabler topics, which are cross-sector themes that can influence areas of action. The enabler topics are Integrity, People, and Partnerships.
As part of the Climate protection & air quality area of action, the manufacturer frequently monitors the compliance with the internal and external environmental protection requirements. This way, they can take proactive actions to eliminate possible damage.
As a result, the reduction of air emissions is an important focus of their sense of responsibility for the environment (Figure 1).
They consider the consumption of resources in production as an important factor in the environmental compatibility of their vehicles. Thus, they are working to make production more efficient and more environmentally friendly by using less water, energy, and raw materials.
Daimler evaluates in a consistent and transparent way the economic, environmental, and social impact in order to find the best solutions to remain climate-neutral and sustainable in the future.
In addition to this, they maintain regular contact with representatives of business, government, and other interest groups that advocate for the same goal.
Daimler also plays an active role in upholding the UN Global Compact, a voluntary initiative that encourages companies to integrate sustainability practices into their activities. Daimler shares on their website that they are involved in the thematic and regional working groups and initiatives of the pact.
“In the reporting year, these included the action platforms “Reporting on the SDGs” and “Decent Work in Global Supply Chains” as well as the UN Global Compact Expert Network and the German Global Compact Network,” Daimler states.
As part of its obligation, Daimler reports its initiatives on areas like human rights, labor standards, and environmental protection in its Sustainability Report
Reporting sustainability key performance indicators constantly, in a clear and transparent manner, can provide a clear overview of the environmental, social, and economic impacts, and based on this, the organizations can take proactive actions to reduce the negative impact.
In this context, The GRI Standards offer a consistent structure for companies to report information in a way that covers the most significant impacts on the economy, environment, and people.
To learn more about KPIs, visit the world’s largest database of documented KPIs: smartkpis.com.
Compared to previous decades, the world has more innovative and safer cities that take better care of their citizens. A smart city represents an area that uses information and communication technology (ICT) to enhance administrative performance, disseminate information to the public, and boost the standard of services and the welfare of residents. A 2022 study reports that between 2000 and 2016, there was a global decline in the number of deaths from lower respiratory infections among children under the age of five, which fell by 54%, and roughly 13% overall.
Making a city smarter has been identified as the most effective method for enhancing residents’ quality of life and tackling urban challenges. According to a 2022 top from Ranking Royals, the smartest cities in the world have developed in the Nordic countries (namely Norway, Finland, and Denmark), Singapore, Switzerland, Taiwan, New Zealand, Spain, Austria, USA, and South Korea.
Boosting Sustainability and Citizens’ Wellness
While getting smarter, urban regions have implemented sustainable systems and tools that contribute to the Green Deal agreement. The EU Green Deal’s primary goal is to achieve climate neutrality as the first continent by 2050. That will lead to a cleaner environment, cheaper energy, smarter transportation, new jobs, and a better lifestyle. The strategies of smart cities aim to improve life quality for inhabitants by using innovative technologies and saving resources.
For example, in Graz, a smart city in Austria, energy efficiency is considered essential for future developments. In 2010, the “Smart City Graz” project, whose purpose was to transform the territory into a sustainable and energy-autonomous urban district, was launched.
Denmark demonstrates its strength and sustainability level by covering the needs for energy production without using foreign energy resources. It secures its place as the greenest country in the world by continuously practicing a sustainable economy. For instance, a 2020 case study presents one of the wealthiest areas in the world, a Danish island called Bornholm. Bornholm’s wealth comes from developing new energy market mechanisms to control energy networks with a high proportion of renewable energy resources.
To support sustainable initiatives and contribute to citizens’ welfare, Vitoria-Gasteiz city (Spain), the European Green Capital of 2012, launched a secure bicycle parking network called VGBiziz. It is a low-cost initiative comprising 9 parking sites for around 400 bikes (including electric and cargo bikes). In 2009, Valencia, Spain’s largest city, joined the Covenant of Mayors, and in 2010, it announced its first Sustainable Energy Action Plan (SEAP). The agreement should reduce GHG emissions by 40% by 2030 in accordance with the goals set forth by the Mayors’ Covenant on Climate and Energy Program. By using the VLCi Platform, a global platform for smart city management, Valencia moves forward with its Smart City Strategy.
In the 2022 Environmental Performance Index (EPI) rank, Denmark received the highest EPI score (77.90), with 14.90 points increase compared to last decade. The Environmental Performance Index is a tool for measuring the environmental performance of a state’s policies. The United Kingdom earned the second position with a very close score, 77.70. Finland occupied the third place with 76.50 points, followed by Malta (75.20), Sweden (72.70), and Luxembourg (72.30).
How to Monitor and Improve Citizens’ Wellness
Sustainability concerns not only the welfare of the planet, but also the well-being of its inhabitants. The environment can positively or negatively impact human health. People need good resources to evolve and stay healthy: fresh air, good food, and drinking water. But how can people know if they have all of these? To evaluate life quality, municipalities usually use publicly available and updated key performance indicators (KPIs), such as:
# Outdoor air pollution
# Air quality complaints
# Risk Management Index
# Environmental Sustainability Index (ESI)
% Households with a reliable supply of water
% Drinking water compliance rate
% Households with access to safe water
% Satisfaction with food quality
Since respiratory infections are influenced by air quality, specific KPIs for measuring the air level of pollution should be included in weather updates. Individuals that suffer from chronic respiratory conditions such as asthma and chronic obstructive pulmonary disease (COPD) are susceptible to the negative effects of air pollution. Asthma and COPD are aggravated and triggered by air pollution, raising respiratory morbidity and mortality. Also, cholera, diarrhea, dysentery, hepatitis A, typhoid, and polio are just a few of the illnesses that can spread due to contaminated water and poor sanitation. People are exposed to health risks when water and sanitation services are absent, unsatisfactory, or improperly managed.
Leaders can use key performance indicators to improve quality of life and make decisions based on the results. Some KPIs, which they can consider are:
# Initiatives to promote greater environmental responsibility
# Water recycled and reused
% Current projects that are environmentally friendly
% Waste reused, recovered, or recycled
By monitoring the energy-related KPIs, community leaders can see if they can satisfy the needs of citizens, using only renewable energy resources. Additionally, KPIs such as # Initiatives promoting greater environmental responsibility and % Current environmentally friendly projects help raise environmental protection awareness.
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An understanding of global business trends is essential these days. Changing international market structures and integrations can affect decision-making and strategies in the corporate environment.
New trends are percolating at the grassroots level. The role of trends may influence larger organizations over the coming years. Nowadays, adapting to new ways of working and workplaces is no longer a challenge for innovators and early adopters. Innovations in working style and work setup quickly become mainstream and rudimentary for most companies. Get ready to embrace these new approaches, or you may find that most other organizations already got it and moved on.
As suggested by Nobel Prize laureate Paul Krugman, ”Let us just consider climate change as the root of the whole problem lies in the carbon-dominated industry. To change it may give a strong impetus to the research and development of carbon-free energy resources and may open an era of new technological development.”
New trends come with several driving forces, such as the integration of corporate, economic liberalization, free trade, transfer of technology, corporate financial flows, and transnational companies.
All trends are affected by technology and vice-versa. Technological developments are and will be affected by social, economic, and marketing trends.
The rate of change in work and the workplace is shifting into a much higher gear. Today, work is conducted across an increasingly broad range of settings, geographies, and time frames propelled by four major trends. These trends can impact how sustainability is managed and the fulfillment of a sustainable corporate environment:
Image Source: Md Ahbabur Rahman
The availability of enabling technologies and social collaboration tools. Technologies for collaborating with co-workers continue to become cheaper, easier to use, and ubiquitous. They are already being combined and synthesized into platforms that feature a wide range of tools to collaborate asynchronously and synchronously.
On the other hand, it becomes more difficult for workers to stay engaged and connected as they are more dispersed physically. So planners need to link conscious workplace strategies with social technologies and work policies to encourage socialization.
The shortage of knowledge workers. There will be a shortage of younger knowledge workers in the coming years. The Baby Boomer generation retires and younger workers take their place. Organizations will have to compete for workers who are more comfortable with and seek flexible work and alternative workplaces.
As for the solution, there’s a need for cultural change. The hardest part of changing the workplace is not the physical environment or technology but changing the people.
Knowledge workers are the core of an organization. They possess a high level of creativity and productivity. These workers are described as people who “think for a living.” Knowledge workers invent new products. They create and develop ideas and strategies rather than doing manual labor.
To sustain knowledge workers, they should be given platforms where they can nurture ideas and create. Also, knowledge workers need to have a working environment where voices and opinions can be shared during the planning process.
Knowledge workers are technology-dependent. So keeping up with the trends is a must for them. Allow them the choice of when, where, and how they are comfortable working. Let knowledge workers choose what working style and setup is beneficial as learning and growing are valuable for them while working.
The demand for more work flexibility. Workers will demand more work flexibility—the ability to decide how they should define and tackle specific problems and tasks and when and where work is done.
To develop a solution, corporations can adopt new workplace practices. With workers increasingly scattered geographically, work practices need to adapt because it is no longer possible to communicate casually with a distributed work team. Leaders need to formalize good work practices for the team.
The World Economic Forum predicts that we are on the cusp of a fourth industrial revolution. Technological, socioeconomic, and demographic shifts are transforming the way we work. These shifts have made flexibility important in the way individuals, teams, and organizations work.
There are many ways to incorporate flexibility into the corporate environment. These are the ability of employees to include the opportunity to change their working hours, work remotely, learn new software, and take on new roles. Flexibility also concerns employers as they need to assess strategy quickly according to the working style and personal needs of their employees.
Some companies are switching to a hybrid work setup. This means that employees will report to the office on specific days and work from home for the rest of the weeks. This system comes with challenges and inconveniences, such as communication issues, coordination in terms of schedule, and the availability of resources in both types of workstations.
Some companies are also configuring the office layout in response to the hybrid work setup. One of the drawbacks is not everyone will have their own desks in the office anymore. This change means that employees may encounter problems with accessing and moving the resources they need for work or making sure they have a spot each time they return to the office.
Before making any modifications to how work is done, organizations should establish a system that will harmonize the time, tasks, and resources of employees. It would help ensure that everyone’s goals are aligned and the workplace remains a happy and productive environment.
Pressure for more sustainable organizations and workstyles. Perhaps the 800-pound gorilla is the push for organizations to drastically reduce their carbon footprint, whether through regulations or market-driven incentives and disincentives.
Organizations will have to examine all major sources of greenhouse gas emissions, in relation to how, where, and when people work. Group locations, building efficiencies, commute patterns, and air travel practices must be observed.
Employees have different workstyles also. Some feel comfortable when working independently, and some are more productive when collaborating. Some employees are emotionally aware and create supportive work environments. Some are ideal and detailed-oriented workers.
Edelman Data x Intelligence, an independent research firm, conducted a survey among 31,092 full-time employed and self-employed workers across 31 markets between January 12, 2021 and January 25, 2021.
In 2021, some employees were given the freedom to choose where and when they work. While 67% of employees chose in-person work collaboration, 73% of 31,092 full-time and self-employed people decided to stay at home and continue to work remotely.
Sixty-six percent (66%) of leaders considered redesigning their office spaces to accommodate employees. The same study shows that leaders faced challenges and implemented changes just to give the best of both worlds to their employees.
The world is moving towards a more sustainable business practice. Investors, advocacy groups, and academics have asked corporations to take on added purpose beyond the traditional pursuit of shareholder value. Even the business leaders from Business Roundtable stated that major companies are investing in their employees and communities because they realize it is the only way to achieve long-term success.
The fundamental concept behind this shift is the Triple Bottom Line (TBL), where companies must measure not only their financial performance but also their environmental and societal performance as well. The TBL concept is not new; the term had been coined by John Elkington in the 1990s. Later in 2003, Amanco pioneered in measuring the impact of its TBL strategy, building on the idea of Balanced Scorecard (BSC) from Kaplan and Norton. The new sustainability BSC included environmental and social dimensions in addition to the basic dimensions of the initial BSC.
In a recent article, Kaplan stated that the demands for sustainability today are even higher. In summary, there are three different perspectives from three main stakeholders categories:
Customers: The customers’ preferences in every product category shifted towards more sustainable products. Over the past five years, there is a 71% rise in online searches for sustainable goods globally in countries with either developed or emerging economies.
Employee: Reports of unsafe working conditions at Amazon warehouses caused many criticisms. Their employees protested for fair pay and COVID protection. This example reflects the importance of social and ethical issues. Fulfilled workers are more loyal and likely to stay compared to those who only work for a weekly paycheck. Worse, incidents like this would probably affect consumers’ perception badly and hurt the company’s brand image.
Environment and social: As more consumers demand transparency and accountability, companies must consider the environmental and social aspects in every decision they make. For example, major fashion brands are beginning to pay attention to the demand for more sustainable practices.
The stakeholders have always played an important role in the business ecosystem. But in today’s post-pandemic era, the stakeholders expect even more from companies in terms of environment (e.g., sustainability, health) and social (e.g., inclusive, ethics, social welfare) aspects. As with any crisis, there are chances to learn and make a positive difference.
This article aims to remind companies of the criticality of environment and social dimensions. Taking note of its importance, this might be the opportunity to revisit the idea of sustainability BSC. The sustainability BSC can be used as a groundwork for a future BSC that is environmentally, socially, and ethically responsible. For more on utilizing the Balanced Scorecard, The KPI Institute has developed the Certified Balanced Scorecard Management System Professional to help organizations maximize the tools’ potential.
The EFQM Model, or the European Foundation for Quality Management (EFQM) Excellence Model, is a globally recognized management framework that allows organizations to achieve success by measuring where they are on the path towards transformation. The EFQM Model helps them understand the gaps and possible solutions available and significantly improve an organization’s performance.
The excellence also recognizes the role that organizations play in supporting the goals of the United Nations. Those goals have also helped to shape the latest edition of the EFQM Model. It covers the United Nations Global Compact (ten principles for sustainable and socially responsible business) and the United Nations 17 Sustainable Development Goals, which are a call to action for all countries to promote social equity, sound governance, and prosperity while protecting the planet.
The strategic nature of the EFQM Model, combined with its focus on operational performance and results, makes it the ideal framework for testing the coherence and alignment of an organization’s ambitions with the future and referenced against its current ways of working and its responses to challenges and pain points.
The EFQM Model in 2020 has seven criteria:
Purpose, vision, and strategy: An outstanding organization is defined by a purpose that inspires, a vision that is aspirational, and a strategy that delivers.
Organizational culture & Leadership: Organizational culture is the specific collection of values & norms that are shared by people and groups within an organization that influence, over time, the way they behave with each other and with key stakeholders outside the organization.
Organizational leadership relates to the organization as a whole rather than any individual or team that provides direction from the top. It is about the organization acting as a leader within its ecosystem, recognized by others as a role model, rather than from the traditional perspective of a top team managing the organization.
Engaging stakeholders: Having decided which stakeholders are the most important to the organization, i.e., its key stakeholders, and independent of the specific groups identified, it is highly likely that there is a degree of similarity in applying the following principles when engaging with key stakeholders.
Creating sustainable value: An outstanding organization recognizes that creating sustainable value is vital for its long-term success and financial strength.
Driving performance and transformation: Now and in the future, an organization needs to be able to meet the following two important requirements at the same time to become and remain successful.
Stakeholder perceptions: This criterion concentrates on results based on feedback from key stakeholders about their personal experiences of dealing with the organization – their perceptions.
Strategic and operational performance: This criterion concentrates on results linked to the organization’s performance in terms of the ability to fulfil its purpose, deliver the strategy, and create sustainable value.
Why sustainability matters to businesses
Nowadays, an organization’s primary focus is to maintain continuous business development and the high satisfaction of its stakeholders while facing the pressure to reduce resources utilization and changes in the business ecosystem. Hence, the way organizations cope with competitiveness, data processing, and customers’ needs and taking a proactive approach in the market has become the main concerns in their strategic agenda.
By benchmarking themselves against their environment, organizations learn how to better position themselves in the market and assess their performance levels compared to their competitors and secure sustainability based on the three world-known sustainability pillars, Society, Environment, and Economic.
Ultimately, the application of a sustainability strategy enables a recalibration of improvement initiatives and strategic approaches to provide better products and services while using less resources to benefit the planet, the economy, and society.
Sustainability focuses on meeting the needs of the present without compromising the ability of future generations to meet their needs. The concept of sustainability is composed of three pillars: economic, environmental, and social, also known informally as profits, planet, and people.
Sustainability encourages businesses to frame decisions in terms of environmental, social, and human element impact for the long-term rather than on short-term gains, such as next quarter’s earnings report. It influences them to consider more factors than the immediate profit or loss involved. Increasingly, companies have issued sustainability goals, such as commitment to zero-waste by a certain year or to reduce overall emissions by a certain percentage.
The ultimate framework of sustainability is described in the UN Sustainability Goals, which set targets to be realized by 2030. Countries have announced their Sustainability Goals and are expected to be followed by leading organizations. Those organizations would design their own Sustainability Strategic Objectives to align with those of the UN SDGs.
The UN Sustainable Development Goals Agenda is a plan of action for obtaining 17 improvement objectives on society, environment, and prosperity by 2030. The Sustainable Development Goals and targets are integrated, indivisible, global in nature, and universally applicable, taking into account different national realities, capacities, and levels of development and respecting national policies and priorities.
What is a Sustainability Best Practice Framework?
The Sustainability Accounting Standards Board (SASB)’s Materiality Map determines sustainability issues that are likely to affect the financial condition or operating performance of organizations within an industry. SASB identifies 26 sustainability-related business issues or General Issue Categories, encompassing a range of disclosure topics and their associated accounting metrics that vary by industry.
For example, the General Issue: Category of Customer Welfare encompasses both the Health and Nutrition topic in the Processed Foods industry and the Counterfeit Drugs topic in the Health Care Distributors industry.
With SASB standards, companies can benefit from greater transparency, better risk management, improved long-term performance, and stronger, more valuable services. All of these while providing investors a more accurate picture of their sustainability performance to improve their image and contribution to the SDGs.
SASB standards and tools are helping organizations because they identify a handful of ESG and sustainability topics that most directly impact the long-term value creation; implement principles-based reporting frameworks including Integrated Reporting by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD); and communicate sustainability data more efficiently and effectively to investors.
SASB can be a core part of any reporting system. Whether used alone, alongside other reporting frameworks, or as part of an integrated report, SASB standards and metrics enable companies to communicate with investors in a detailed, powerful way. SASB standards and tools enable organizations around the world to identify and manage financial-material sustainability issues and communicate these issues to investors.
Today, organizations face unique challenges, from climate change and resource constraints to urbanization and technological innovation. Although financial statements provide valuable information on tangible assets and financial capital, investors are increasingly interested in how organizations also manage sustainability issues that affect their long-term value and the global economy.
