Setting Goals for Environmental Performance
This is the season that many companies publish their corporate sustainability reports, and in those reports, updates on their sustainability goals. Some companies have recently announced meeting or exceeding goals they’d set. Apparel maker H&M, for instance, recently disclosed that it blew through its goal on the use of organic cotton. Others, such as Walmart (carbon emissions) and Starbucks (energy consumption) received attention (here and here) for falling short of some of theirs.
There are broad differences in how companies set sustainability goals and which goals they choose to communicate publicly. In my many conversations with sustainability executives it’s become clear to me that many of them are not sure they are going about this in the best possible way.
Which Goals to Set?
With global warming the most prominent public environmental policy issue, it’s increasingly common for companies to establish goals for reducing carbon emissions. The specifics vary—from a percentage absolute reduction versus a prior year benchmark, to a reduction in “carbon intensity”—but carbon emissions reductions goals are table stakes for companies seeking to establish sustainability credentials.
Beyond carbon, many companies sensibly identify goals related to their major environmental impacts, or ones thematically related to their business. Given the attention that e-waste has received, it makes sense that electronics manufacturers like HP and Dell have set electronics recycling goals. The Coca-Cola Company has set a goal of neutralizing its water footprint by 2020.
Some companies, especially service businesses but also products manufacturers, are in setting goals regarding the environmental impacts their customers have while using their products and services. A common form of this is energy efficiency targets for products.
Who Sets the Goals?
Where in a company do sustainability goals originate? Are they set from the top down? Are they derived from the bottom up? In our interviews, we’ve seen approaches that are all over the map.
We heard the story about the global packaged goods company whose CEO set a goal that the sustainability team thought was absurd, unrealistic and unachievable. The sustainability lead at a large retail and pharmacy chain tells the story of how his CEO went on television and publicly announced a carbon emissions reduction target that was 50% higher than what he had agreed to the day before–to keep the sustainability leader “on his toes.”
Some companies take more of what might be called a bottoms-up approach. Dell told me, for instance, that it sets its sustainability goals with reference to science, input from engineering teams, and the product roadmaps of key partners.
A major automaker tells me that they’ve seen success setting sustainability goals from “the middle,” meaning that mid-level managers are asked to study a problem and establish a goal. They get together with their peers across different functions and look at technology trends, projections for the future size of the vehicle fleet, consumer expectations, regulatory trends, competitor behavior and so on. Middle management then proposes goals and an executive committee reviews and ratifies them.
Who Is Accountable?
The greater a company’s commitment to sustainability, the more likely sustainability goals will be managed like other business goals at the company. Today, though, accountability for sustainability goals is all over the map. Barclays, the UK based banking company, is a model of good management practice. The business-unit chief operating officers are responsible for proposing carbon mitigation goals (and capital expenditures to achieve them). Those goals are reviewed and/or revised by CEOs of the business units and ultimately approved by the board. The COOs retain accountability for meeting those goals and hold their own people accountable in turn. But there are plenty of counter examples.
At an $11 billion manufacturer I spoke with recently, for example, some but not all executives who have responsibility for environmental goals are accountable for those goals; only some have such goals listed on their “goal tree,” and there are no specific incentives associated with achieving them. A $23 billion telecoms manufacturer has set an audacious carbon reduction goal, intended to play well with the media, but the goal has not yet been operationalized, and functional heads sometimes feel it’s not “their goal.” The chief sustainability officer spends a lot of time and good will cajoling individual executives to commit to specific initiatives to help achieve the overall targets.
Which Goals to Communicate Publicly?
Some companies are very sparing in which sustainability goals they choose to communicate publicly, regardless of how many internal goals they may set. Alliance Boots, the British retailer, has dozens of business units operating in dozens of countries. Each unit has its own environmental goals. But the company overall has publicized just one quantitative target: to reduce the carbon footprint of “Boots legacy stores” by 30 percent by 2020 compared to 2005. Real estate management firm Jones Lang LaSalle has communicated a handful of sustainability goals but only one specific, measurable one: to reduce its clients’ carbon emissions by an amount at least ten times greater than its own carbon footprint each year. By contrast, some of the electronics firms I’ve spoken with have literally dozens of specific, quantitative goals. And UK retailer Marks & Spencer has received much attention for the 100 commitments it made in 2007 and the additional 80 in 2010, many of which are quantitative and specific.
At Green Research we are researching this topic will be to publishing a study on best practices for sustainability goal setting. If you’d like to participate in our research, have any suggestions, or have your own best practices to share, please leave a comment or drop me a line.
David Schatsky, principal of Green Research, is a consultant and adviser to businesses on a range of topics, from clean tech markets to corporate sustainability best practices to business strategy in the Internet and information technology markets. Having spent almost a decade as an analyst and senior executive at JupiterResearch, a leading research and advisory firm focused on Internet business, Schatsky is an expert in business strategy, industry analysis and market research.