Editor's note: This is the sixth in a multi-part series that examines the pitfalls of sustainability measurements while drawing on lessons learned from outside the business world. For additional context, see Part I, Part II, Part III, Part IV and Part V.
In Part V of this series, we talked about paradigm shifts as the most powerful way to change a system. This came to mind when something extraordinary happened in early August to the American economy. Overnight, it grew by more than half a trillion dollars. The actual news here is that the Bureau of Economic Analysis added new categories to the definition of Gross Domestic Product (GDP). But the bigger story, as this New York Times op-ed points out, is that this change “raises important questions about what we consider economic value and costs, and what we leave out. [Emphasis added]"
The editors called out the GDP’s lack of natural accounting: "The failure to account for environmental degradation is a serious shortcoming of our measurement system.” They also touch on the GDP’s silence regarding human capital, which Robert F. Kennedy described as “that which makes life worthwhile” in this stirring 1968 speech.
So why do we bring this up? We raise it not for the news story itself, but as a model for a potential paradigm shift for metrics in the sustainable business world. The U.S. government now thinks of intellectual property — clearly a non-tangible asset — as an investment for future earnings. That shows a rare leap in thinking, beyond a traditional mindset. Which raises the question: What else now becomes more feasible? Could we next see national accounting deducting for similarly intangible ecosystem services — such as a clear-cut forest’s lost ability to sequester carbon?
Call it the Kris Kringle defense: When the U.S. government says something is real, it gains legitimacy. It even may accelerate Wall Street’s consideration of the business-equivalent. As GreenBiz has reported, a number of companies already have started accounting for their use of ecological goods and services. It makes sense that progress in government and business accounting should be on similar tracks.
Pitfall 12: Don’t neglect the development of the ecosystem services area and how it is starting to be incorporated into business accounting.
This is not a trivial development. So consider whether you want to go next.
Further, keep an eye on the more advanced “Context” movement, too. This field’s argument that many ecological and even social assets have limited capacities is a good one. And the implicit equity issue of just how these fixed levels are allocated to companies to use, while it has no easy answer, needs more sustainable metrics developers to ponder, too.
Pitfall 13: Don’t neglect the lessons from sports, particularly "Moneyball"
One theme of this article (and to a degree, the entire series) is to consider what you’re not measuring and the possible relevance to sustainability. Other than the education field, probably nothing shows this more starkly than sports.
We’ll leave aside for now the clearly myopic disasters where “the numbers” served to mask real problems for the sake of winning. These include examples such as the horror of Penn State’s culture of overlooking a coach who repeatedly abused children, performance enhancing drugs in baseball and concussions in football. Instead we’ll look at the newer, revised metrics we’re seeing in baseball which have more nuanced lessons.
The book Moneyball by Michael Lewis describes how Oakland A’s general manager Billy Beane used a new generation of quantitative sports data, known as Sabermetrics, to win when he didn’t have, or couldn’t keep, big name players. The 2011 movie of the same name starring Brad Pitt put the book onto the best-seller list. It cemented the idea that nontraditional analytics had changed the business of sports forever.
Beane’s success seemed to say that the new metrics were much better than the old ones, while the “old dogs” of the game had little left to offer. A decade on, a rebranded “creative empiricism,” shed of its amateur roots, is right at home in Wall Street board rooms and trading desks.
Today, while there is still a touch of snide in a March 2013 Bloomberg News headline reading “Revenge of the Nerds Nears Completion as Sports Taps Big Brains,” the point remains: Metrics are mainstream and quants are kings.
So what’s the problem? If seeing the world through a more sophisticated quantitative lens better helps show actual player value (on-base plus slugging percentage versus home runs), helps teams win and is strategically smart businesses, where’s the pitfall?
Sabermetrics tells us with more certainty what happened in the past. But when you use the past to predict the future, as we’ve talked about before with weather forecasting and in other areas, you’ll miss things — maybe important things, just as the old metrics did.
Numbers aren’t and never will be the full story. And this isn’t just in the philosophically abstract sense, as we saw with steroids in the “70-plus” home run era. Baseball’s management now knows to take PED use seriously, but has it learned to look at what it might be missing right now?
You still need human judgment calls to steer the ship and smooth the curve. Baseball broadcasting legend Hawk Harrelson hit a nerve when he challenged statistical analysis’ newly emerged primacy by coining his own true grit (if fake) metric to make a point. He called the “stat” tWtW — the will to win. Regardless whether you want to jump on his tWtW bus (Sabermetrics die-hards excoriated him), the guy’s got a point. Baseball is played by human beings, not numbers in a spreadsheet. (The analog likewise holds for implementing sustainability actions in business.) Seabiscuit (OK — not quite a baseball player) was a loser on paper. Numbers never adequately described the leadership qualities of a Derek Jeter.
Even in the "Moneyball" film, Beane had to find ways to square two circles originally raised by his hidebound-appearing management team if he wanted his new numbers to work. He gave a pep talk to his aging star player, finding a way to reach him at a human level, and he needed to trade away a party-loving player. Then the new numbers could do their job. Maybe the old guys knew something worth keeping.
Another subtle change in sports also may have an analog in sustainability. We were told by our Little League coaches to "keep your eye on the ball," perhaps their version of our field’s ubiquitous “you can’t manage what you don’t measure.” More recently, though, super-athlete Wayne Gretsky (not from baseball but, again, the same thing) said, “I skate to where the puck is going to be, not where it has been.”
Now if the new numbers actually can help to understand and get ready for the challenges of the future, then fine. But both the old numbers and seasoned human judgment may, like Mariano Rivera at age 42, not quite be ready for retirement.
Sustainability, like baseball, has its own curves and maybe a few knucklers. You have to get good at anticipating and adjusting to those late-breaking surprises.
Our advice is this: Yes, use numbers; but take the best from the new way of looking at things without throwing out the best of the old, and don't forget the nature of the subject of what you're measuring.
Sustainability never will be achieved without accounting for ecosystem usage, either by government or by business.