How to set sustainability goals amidst change
The following is a sponsored story from Mohawk Industries.
Google "2020 sustainability goals" and you’re likely to turn up a Who’s Who of U.S. companies and a lengthy roster of targets and commitments.
Perhaps the final year of the decade lends itself to rallying internal support. Or maybe the math behind carefully calculated targets simply emerged by coincidence.
Whatever the case, 2020 is out there as a line in the sand for dozens of companies, including Mohawk Industries.
Our 2020 goals emerged in late 2009 when we began formalizing our global sustainability practice. With 2010 as an appropriate baseline year, a 10-year horizon felt like the right period of time to work toward meaningful reductions of 25 percent — in energy, emissions, water and waste intensities.
Fast forward to 2015, when we’ve been using the mid-term point as an opportunity for thoughtful evaluation.
A big takeaway: The line in the sand remains a constant but the sands around that line are constantly shifting. Business cycles, market demand, organizational structure and new technologies are among the many dynamics that affect progress toward our static goals.
That realization means we can’t wait until 2020 before taking a thoughtful look at our goals. Instead, we are asking the relevant questions now:
1. Are our goals still material and in line with business goals?
When many companies were establishing initial goals, the concept of materiality was not applied as widely as it is today. As we transition to GRI G4, we’re seeing the value of using materiality to inform our reporting practices, as well as to examine our strategy and goals periodically.
Materiality, of course, goes hand-in-hand with business relevance. At Mohawk, we credit much of our progress to the fact that sustainability goals are furthering business objectives.
We’re more than halfway towards achieving our 2020 water intensity reduction, for example, in part because water conservation initiatives not only drive progress toward our goal, but also contribute to expense reduction — a key business strategy.
We’re also seeing that sustainability goals can drive business process. Our waste-to-landfill intensity goal served as the precursor to the development of an internal zero-waste manufacturing program that we are now scaling on a global basis.
In addition, we credit our goals with helping to nurture a culture of workplace efficiency — something that helps drive business value through improved product quality, increased asset use and cost reductions.
2. When and how often should goals be reconsidered or reset?
When it comes to sustainability long-term goals, patience is absolutely a virtue. The urge to reset goals, particularly when progress is not panning out as expected, can be tempting. The problem is that when goals are reset every calendar year, they automatically are reduced to an annual target.
Yet, for those of us who spend quarter after quarter mired in the minutiae of data, there is a need to take a step back periodically. This midterm evaluation is one such opportunity we plan to institutionalize going forward.
Major business events are another opportune time for evaluation. In our case, those events have recently come in the form of acquisitions. In late 2012, we began an accelerated level of global expansion, investing several billion dollars in acquisitions over a two-year period. These purchases translated into a 35 percent increase in revenue and transformed our product mix.
As we’ve integrated newly acquired manufacturing facilities, we’ve discovered that sustainability drivers such as modern, efficient equipment and best practices vary tremendously across geographies and markets — all of which factors into the pace of progress toward our goals.
3. How far and how fast should goals stretch?
This is the question we wrestle with the most. On the one hand, no organization wants to fail. Setting unattainable or aspirational goals can put a damper on the internal buy-in from both senior management, as well as rank and file employees, both of whom are critical to the process.
On the other hand, stretch goals — even if always achieved — ultimately can result in more progress and impact. According to a PWC study, companies succeed in achieving impact reduction goals two-thirds of the time. Companies with more ambitious goals have a lower success rate, but achieve the largest impact reductions.
We believe it’s essential to strike the right balance between goals that are attainable and those that provide an appropriate amount of aspiration.
Longer-term goals also require some leap of faith. In the case of a 10-year goal and beyond, it’s not always clear how you’ll get there. Will the technology evolve quickly enough? Will required investments satisfy hurdle rates?
How does business growth factor into the rate of progress? Perhaps these and other considerations point to the idea of setting long-term stretch — even aspirational — goals of 20-plus years that have interval, five-year targets.
By asking the right questions in 2015 rather than 2020, we hope to strengthen our ability to realize continued progress over the next five years.
At Mohawk we think it’s wise — even necessary — to continue to raise our sustainability sights, even if the initiatives and technologies necessary to reach our destination are not fully in hand. It’s among the best ways that we’ve found to drive truly meaningful progress and deliver significant impact.