Metrics and Standards Become the Rule

The paradox about sustainable business, say some, is that there are too many standards and not enough metrics. There's truth to that, though it's misleading. For all of the hundreds of eco-labels and certifications, there remain huge gaps -- product categories where there are few or no labels or certifications, from cars to clothing to cosmetics.

Many of the existing standards and certifications are limited in scope, focusing on, say, energy consumption or greenhouse gas emissions, but not necessarily on any of several other impacts a given product may impose on the environment.

State of Green Business

A number of organizations are stepping in to fill the gaps. Underwriters Laboratories is one example: Its UL Environment division began issuing a range of standards in 2010, such as one for cell phones that takes into account their entire lifecycle, from raw material extraction to customer use to disposal. (UL Environment is also partnering with GreenBiz to create a company-level sustainability standard, ULE 880, intended for manufacturing firms.) Green Seal expanded its scope with a new pilot standard that seeks to certify the sustainability of an entire company. The group's new GS-C1 certification is aimed at consumer goods manufacturers.

Some standards are coming from companies themselves. UPS launched a green standard for responsible packaging, which allows customers to ship their goods with a label attesting to that fact. Its Eco Responsible Packaging Program evaluates a customer's shipment packaging in three key areas -- damage prevention, rightsizing and packaging materials. The goal is to use the least packaging that offers the greatest protection. A group of apparel and footwear companies, including Levi's, Patagonia, and Timberland, banded together to launch the Eco Index, a set of guidelines, indicators and metrics for measuring the lifecycle impacts of their products. Meanwhile, Nike created a one-screen Environmental Apparel Design Tool, in which designers plug in what materials they're using, how much recycled or organic content they have, and other details. The tool gives the design an environmental score. Nike made the tool available for other companies to use. And Timberland announced that its Green Index, which rates the environmental footprint of about one in seven pairs of shoes it sells, will be applied to all of its footwear by the end of 2012.

Such efforts reflect the growing requests -- or, in some cases, demands -- from customers and stakeholders for manufacturers to measure, manage, and track the full impacts of their products and processes. That's given new life to the world of lifecycle assessments, whether through the use of formal LCAs or less-formal (though not necessarily less accurate) lifecycle measurement techniques.

One form of product assessment, called an Environmental Product Declaration, or EPD, is gaining favor. EPDs are structured and detailed documents disclosing the life-cycle impacts of products. Modular carpet maker Interface said it would complete EPDs for all of its products by 2012 and challenged other companies to set similar goals. UL Environment said it would launch an EPD program in 2011 as a means to provide greater product transparency.

The use of EPDs and LCAs is likely to grow in lockstep with the introduction of software tools and databases designed to help companies conduct such assessments. Those tools are just emerging. Seventh Generation, Walmart, and Tetra Pak are among companies that said they would test-drive something called Earthster 2 Turbo, an LCA tool with a companion open-source database. It aims to give companies greater knowledge of their supply chains in order to make smarter, more sustainable design decisions. Earthster is just one of a growing toolkit of software products being marketed to help companies track not just their products, but their entire operations. Several carbon accounting software products were on view at SAP's 2010 annual user conference, among the many software firms, large and small, eyeing the market for sustainability tools -- a market that's grown to north of a half-billion dollars a year.

And with new rules from the U.S. Securities and Exchange Commission, and increasing pressure from other regulators, investors, and customers, GHG accounting has become an expected practice for large companies, leading to a bevy of new software tools.

The state of the art of sustainability measurement and accounting is still relatively nascent, but should grow as demand accelerates overall for corporate sustainability (or corporate social responsibility) reporting. Reporting by companies of their environmental (and social) impacts continues to grow modestly, though there are forces that could shift the landscape.

One force for change is the increasing demands for transparency put on corporations by stakeholders and shareholders. This isn't a new phenomenon, but it is a persistent one, pressure that over time takes its toll on reluctant companies. Accounting giant PricewaterhouseCoopers reported that the number of sustainability reports has continued to increase despite the global economic recession, and that such reports have "become critical to a company's credibility, transparency and endurance."

Among the global organizations pushing sustainability reporting is the Organization for Economic Co-operation and Development, or OECD, a forum for industrialized nations. During 2010, the OECD teamed with the Global Reporting Initiative to bring "increased coherence and consistency" to sustainability reporting by big corporations. GRI's Sustainability Reporting Framework is the world's most widely used sustainability reporting mechanism.

GRI, for its part, is one of several global organizations pushing to marry sustainability reporting with financial reporting. The idea is that sustainability metrics be standardized and integrated into the financial reports required of all publicly held companies and, presumably, those voluntarily produced by non-public companies.

The notion of such an integrated annual report is the ultimate goal for reporting advocates, as it would embody the triple bottom line of social, environmental, and economic performance. Such reports will be forthcoming within a few years from a handful of leadership companies, though it could take a decade or more before integrated reporting becomes mainstream.

Photo CC-licensed by lissalou66.