Setting bold goals: 6 ways to shoot higher on sustainability
With investors and customers upping the pressure on companies to demonstrate environmental commitment corporate goals are increasing in importance.
Sustainability has stretched into nearly every corner of the global economy, from national leaders to corporate boards and executives to local chambers of commerce and mayors.
Investor expectations and customer requirements, rather than regulations, are driving a growing number of organizations to establish and publicly announce their own specific goals around sustainability. The most notable — the United Nations’ Sustainable Development Goals (SDGs) — outline 17 bold goals and 169 targets that cross a broad range of environmental, social and governance (ESG) issues that affect all of society.
More recently, we have witnessed some very specific goal setting activity around climate change, as nations and corporations prepared for the COP21 Paris climate talks. In the run-up to the December 2015 meetings in Paris, 187 countries pledged collective action to cut carbon emissions and more than 80 major U.S. corporations signed the American Business Act on Climate Pledge.
Companies on board include Alcoa, American Express, Apple, AT&T, Berkshire Hathaway Energy, Dell, GE, General Motors, Goldman Sachs, Google, Johnson & Johnson, McDonald’s, Nike, Pepsi, Pacific Gas & Electric, Salesforce, Starbucks and UPS.
On April 22, at the United Nations in New York, 174 countries and the European Union officially signed the Paris Agreement.
Why should you care?
Reason No. 1 to take note of this flurry of activity: investors care.
In February, BlackRock Chairman and Chief Executive Officer Laurence Fink penned a letter to CEOs at S&P 500 and large European corporations, urging them to focus on long-term management practices for sustainable growth. He cited the Paris Climate Accord and the quantifiable financial impacts of ESG issues.
Climate disclosure group CDP provides higher scores to companies with time horizons greater than six years. And the 2016 Dow Jones Sustainability Index (DJSI) questionnaire asks whether a company has long-term targets for the top three material issues with the greatest impact on the business and the generation of long-term value — and whether executive compensation is connected to performance on those targets.
Customers also care. An ever-increasing number of large institutions (federal, state and local governments, plus academic institutions, not-for-profit healthcare institutions and multinational corporations) expect suppliers to demonstrate a commitment to sustainability.
Goals must embrace the magnitude of this crisis. They must be bold enough and fast enough.
Leaders in the health care industry recently unveiled the new Greenhealth Exchange to supplement Environmentally Preferable Purchasing (EPP) practices. Additionally, a growing number of procurement policies stipulate that suppliers demonstrate their sustainability commitment by reporting privately and publicly on ESG performance.
Goals, targets and overall governance are an increasing part of these ESG requests.
For instance, the world’s largest single procurement agency, the United States’ General Services Administration (GSA), is collaborating with the U.S. Department of Defense (DoD) and the White House Council on Environmental Quality to understand the GHG footprint of the government’s purchasing decisions and to engage and educate suppliers on GHG reduction strategies.
The Federal Supplier Greenhouse Gas Management Scorecard lists the largest suppliers to the U.S. government by spend and identifies whether the supplier discloses its emissions and whether it has set emissions targets:
This information comes from public sources and creates added market pressure on public and private companies to measure, manage and report on GHG-related activities.
For corporations, this is an opportune moment to refine sustainability efforts, including setting new goals and targets in the areas that drive long-term business value and specifically align to the overarching SDGs.
Step one, however, is understanding how to set sustainability goals.
Setting bold goals
Organizations are at different points in their sustainability journeys, but all agree that sustainability goals must connect to economic growth and drive value for the organization.
The following process — driven by a cross-functional leadership team — will help your organization to set meaningful, long-term sustainability goals.
1. Determine priority topic areas
Based on industry and third-party research, as well as internal and external stakeholder perspectives on your organization’s impacts, risks and opportunities, determine the ESG topics most significant to the organization’s long-term success.
If your organization has conducted a materiality assessment, start with the highest priority topics in the top right of your materiality matrix. If you plan to set truly bold goals, select the five to seven topics where you can make the greatest impact.
Many organizations find it useful to engage a third party to conduct a materiality assessment, ensuring the topic identification process is objective.
2. Craft a sustainability vision or commitment statement
Drawing upon the materiality assessment results, define the company’s overarching commitment to sustainability. To drive organizational value, this sustainability commitment or vision statement must clearly link to the organization’s purpose and long-term objectives.
Parker Hannifin, the world's leading diversified manufacturer of motion and control technologies and systems, shared their sustainability commitment: To responsibly solve the world’s greatest engineering challenges to foster enduring success for the company, customers and communities.
While terminology may differ, many companies also develop three to five supporting statements — aspirations, objectives, commitments — to frame the focus of their sustainability programs.
For example, consumer packaged goods giant Unilever’s Sustainable Living Plan has three focus areas: improving health and well-being, reducing environmental Impact and enhancing livelihoods. Your highest priority material topics should fit nicely under these focus areas.
3. Define your organization’s current state and desired future state
For each of the highest priority material topics, assess where the organization is and where you want it to be. Create a maturity continuum from beginning to advanced to best in class, or from compliance through leadership.
Discuss in which areas the organization is leading and where it is lagging — and then determine where you want to stretch the most. Determine the timeframe for the desired future state, minimally five years to enable significant progress.
4. Identify good, better and best goals and targets
Look at the organization’s peer set and aspirational peers; for the highest priority material topics, document what the peer set is doing in terms of good, better and best goals and targets.
Consider relevant SDGs and science-based targets as well. The Science Based Targets (SBT) initiative, a collaboration among CDP, the U.N. Global Compact, the World Resources Institute and the World Wildlife Fund, publishes the emission reduction targets set by more than 100 of the world’s largest companies.
5. Set bold and continuous improvement goals and targets
Using the desired future state and good/better/best goals, set bold goals for the organization’s top material topics and continuous improvement goals for other material topics.
At CleanMed 2016, Kaiser Permanente’s Raymond Baxter, senior vice president of community benefit, research and health policy, stated during his keynote speech, "Goals must embrace the magnitude of this crisis. They must be bold enough and fast enough."
While goals/targets need to be measurable and time-bound, the path to achieve truly ambitious goals is not clear when goals are set. If your organization is updating sustainability goals, build on the organization’s previous goals and progress.
Kaiser Permanente announced bold 2025 sustainability goals that leveraged the organization’s experience working toward its previous goals. Since the organization is on track to achieve its 2020 goal of reducing its GHG emissions by 30 percent nationwide three years early, it upgraded its 2025 goal to become "carbon net positive" by buying enough clean energy and carbon offsets to remove more greenhouse gases from the atmosphere than it emits.
Sometimes organizations need to delve into uncharted territory to address their most material issues. Gojo Industries, inventor of Purell hand sanitizer, set an ambitious goal to cut its chemical footprint in half by 2020. According to Mark Rossi of Clean Production Action, Gojo was "the first company to publicly state a goal of reducing its chemical footprint."
While an organization should limit the number of truly bold goals it sets, it is important to develop additional targets to continue to improve in other significant ESG topics.
6. Select goal owners and engage employees
For each new goal, identify a goal owner and develop action plans for how you will progress in this area. Achieving a goal extends beyond one department, so cross-company collaboration will be critical.
Publicize your goals, internally and externally, so employees and other stakeholders know what you are trying to accomplish. Encourage employees throughout the organization to contribute to potential solutions that will help your organization tackle these bold goals.
Think beyond your organization as well. As cities set their own sustainability goals, opportunities for businesses to collaborate with municipal governments and not-for-profit organizations abound.
Setting both ambitious and continuous improvement long-term goals makes good business sense.
Stakeholders increasingly expect organizations not only to effectively manage and minimize their negative environmental and social impacts, but also to identify opportunities to enhance positive outcomes through innovative solutions.
Beyond the cost savings that come through reduced energy and resource use, setting bold sustainability goals enables organizations to demonstrate leadership, encourages them to collaborate with other organizations and empowers them to develop new products and services that address significant societal needs identified in the United Nations Sustainable Development Goals.