How to measure your organization’s sustainability performance and why it matters

For many organizations across industries, net zero has become the primary metric for measuring sustainability performance and climate impact. While the global effort to reduce greenhouse gas (GHG) emissions is undeniably crucial, there’s more to sustainability performance than the race to net zero.

 Sustainability measurement involves assessing an organization's direct actions and business operations within an environmental context, while still ensuring that the economic viability of the business is not compromised.

In today’s climate, it’s simply not enough for organizations to focus solely on the financial health of the business.

Here’s why it’s essential for businesses to evaluate their organization’s environmental, governance and social impact, and how to navigate it.

Why businesses must measure sustainability performance

1. It drives the financial and operational performance of a business

Traditionally, the sole focus of most businesses was always on financial profit. At the end of the day, it’s what’s needed to keep the engine running. But today, we’re seeing a shift, with more business leaders weaving in environmental and social factors into their decision-making on top of their revenue-centric mindset.

How does adopting this approach drive a business’ financial and operational performance? This can be proven in several studies, such as this 2021 research paper, which revealed a direct correlation between financial performance and corporate sustainability.

After assessing 116 Swedish companies in 2019, the study showed that the organizations that integrated sustainability practices within their internal operations and work culture performed better financially. This can be seen in several key performance indicators (KPIs) including earnings yield, return on asset, return on equity and return on capital employed.

It’s also been revealed that sustainability-driven businesses achieve better results compared to their industry counterparts. While it is true that companies leading innovation within the sustainability space have 3.3% higher operational costs, they also see significantly better shareholder returns, increased brand reputation, and higher employee engagement rates.

It’s safe to say that the sustainability performance of an organization should not be seen only as an ethical responsibility, but also as a strategic opportunity.

"Organizations have the opportunity and the obligation to drive growth in tandem with positive social and environmental outcomes. This starts with redefining what it means to lead responsibly. A new generation is leading the way, focused on driving value while honoring values."

— Ellyn Shook,Chief Leadership and Human Resources Officer – Accenture

2. It helps organizations understand their environmental and social impacts

When organizations assess their sustainability performance habitually, it allows them to understand their overall impact, which will ultimately help them reduce their carbon footprint in the long run.

 Several environmental and social factors worth measuring include GHG emissions, waste generation, resource consumption, energy usage, as well as an organization’s social practices. With these insights into their sustainability performance, business leaders can then identify potential areas of improvement, eliminate strategies that prove to be ineffective, and retain those that work.

Ultimately, the goal is to adopt more sustainable practices and conserve resources for the greater good of the planet, while also building a business that consumers want to support because of its commitment to the environment.

3. It strengthens overall brand reputation and builds trust with stakeholders

Today, both consumers and investors alike are looking out for organizations that make it a point to prioritize sustainability as part of their business instead of seeing it as a “nice to have”. It’s a powerful differentiator that sets apart good companies from great ones.

So, what’s in it for investors and other stakeholders? Transparent and consistent reporting provides essential information on a company’s overall sustainability performance, risk exposure and assessment, ESG challenges, and potential opportunities, ultimately helping them make informed financial decisions in the long run.

This also helps investors identify possible greenwashing claims and concerns, ensuring that their investment is going to the right hands.

“Corporate reporting needs to continue to evolve so it provides reliable, consistent and comparable information investors – and other stakeholders – can rely on.” —James Chalmers, Global Assurance Leader, PwC UK

4. It reduces risks associated with climate change

One of the benefits of thorough sustainability reporting that companies should leverage is the ability to mitigate risks associated with climate change, contributing to long-term business resilience.

From unfair labor practices to oil spills that can cause irreversible damage, improper practices can also damage an organization’s public perception and image, costing them customers and the brand’s reputation.

Understanding ESG metrics

One of the best ways to measure a company’s sustainability performance is by using ESG metrics, which assess an organization’s performance in environmental, social, and governance areas. These performance indicators not only monitor an organization's progress but also determine areas for overall improvement.

 Take a look at a few examples of the ESG metrics that may be relevant to you and your company during the sustainability reporting process.

Environmental metrics

• Greenhouse gas emissions (including Scope 1, 2 & 3 emissions).
• Waste management
• Energy usage
• Water consumption
• Environmental policies
• Air pollution

Social metrics

• Human rights and labor laws
• Employee health and safety
• Employee engagement
• Diversity, equity, and inclusion (DEI)
• Supply chain sustainability
• CSR efforts
• Gender pay gap

Governance metrics

• Board diversity
• Compliance and risk management
• Ethics and anti-corruption policies
• Corporate governance
• Accounting integrity and reporting

How to get started with measuring your organization’s sustainability performance

1. Identify your sustainability-related challenges within the organization

The first step is to identify any sustainability-focused issues that are relevant and unique to your organization. A great starting point is to use ESG metrics as a reference and benchmark to gain a clearer idea of the areas you wish to improve and work on within the company.

Is it to increase the use of renewable energy across your business operations? Reduce overall greenhouse gas emissions? Improve employee benefits for increased engagement? Increase diversity across the board? Or perhaps to support underserved communities as part of the company’s CSR efforts?

Since there is no one size fits all, take the time to identify your challenges before moving forward to the next steps.

2. Data collection and analysis

The next step requires you to collect your sustainability data from both your own company and any suppliers you work with, in order to capture Scope 1, 2 and 3 data.

This is where an end-to-end ESG management tool like Zuno Carbon comes in. While many companies struggle during the data collection process with long paper trails and disjointed data, Zuno Carbon can help you establish a single source of truth for your emissions and provide a centralized platform for your ESG metrics.

This allows you to measure and understand baseline emissions, as well as how your current ESG efforts are performing. The data you collect can be easily analyzed on the platform dashboard so you can identify emission hotspots or ESG metrics that you can improve on.

3. Define the goals and key metrics you want to measure

Setting clear goals serves as your roadmap for the rest of your sustainability efforts. Based on the data you have collected you can then decide on the goals you want to set for your company or internal teams.

Here are examples of actionable plans you can execute and adjust depending on the nature of your organization:

• Reduce energy consumption across the company by 20% through the implementation of energy-efficient lighting and building upgrades.
• Ensure all suppliers comply with company labor standards to safe guard the well-being of all employees across the supply chain.
• Implement wellness programs to reduce employee stress and improve mental health, with a 95% participation rate by 2028

Also keep in mind that it’s important to regularly review the data and your goals and targets to ensure you are on track.

4. Develop an effective reporting strategy

There are several sustainability reporting frameworks that organizations can use in their reporting. Examples include:

The Global Reporting Initiative (GRI): this is an international organization that helps companies take responsibility and understand their impacts on the economy, environment and people. They are among the most commonly used guidelines for sustainability reporting.

The Carbon Disclosure Project: The Carbon Disclosure Project (CDP) framework is known for its focus on environmental transparency, specifically when it comes to themes such as climate, supply chain, water consumption, and forests. Entities can receive a rating, proving their commitment to sustainability.‍

International Financial Reporting Standards S1 and S2: These standards encourage disclosure around a company’s governance, risk management and strategy and enable transparent communication of a company’s sustainability efforts.

By assessing their environmental impacts through a series of questionnaires, corporations, authorities and cities alike can receive a verified sustainability rating, which serves as proof of their commitment to environmental sustainability to their stakeholders and the general public.  

Using a platform such as Zuno Carbon allows you to generate disclosure ready reports in minutes. The platform supports multiple global frameworks and allows for the creation and editing of reports with the in-built editor.

5. Consult and engage with stakeholders

There is a common misconception that organizations should only engage with their stakeholders after the sustainability report has been written. However, consulting with them during the process can actually be extremely valuable. This can be carried out through several methods including interviews, surveys, focus groups, as well as consultation sessions.

 Not only can they provide valuable feedback to improve your overall report, but they can also contribute to your sustainability goals through their credibility, experience, and expertise. On top of that, presenting your data and findings to them can also help build trust and transparency between both parties.

 Remember: they are just as committed to your company as you are.

6. Publish your sustainability report  

Consider the platforms and avenues in which the report will be published. This could be on your corporate website, or the online platforms of the sustainability reporting framework you’ve used. This provides stakeholders and members of the public with access to this information, promoting full transparency.

Why technology is the key to measuring and enhancing sustainability performance

It’s time organizations across industries worldwide harness the power of technology in sustainability reporting to its full potential. We can even go as far as implementing technology-driven sustainability initiatives across the company.

Through data and advanced analytical tools, companies can strike the right balance between profitability, environmental sustainability, and social responsibility, helping them make informed decisions on how to manage business operations in the best possible way.

Here at Zuno Carbon, we are committed to being your partner in measuring sustainability performance and ensuring robust reporting on your company’s ESG efforts.

Eager to learn more? Book a demo with us today to find out how to get started.

Frequently Asked Questions (FAQs)

How do you measure sustainable performance?

You first have to identify which ESG (Environmental, Social, Governance) metrics are relevant to you and your organization. Some metric examples include carbon emissions, waste management, recycling rates, supply chain sustainability, board diversity, and compliance and risk management, among others.

From there, there are a myriad of tools available to assist in measuring and reporting sustainability performance. From sustainability software solutions like data management and resource optimization, to analysis tools like carbon calculators and artificial intelligence (AI), the possibilities are endless.

How do you get started with measuring sustainability performance?

 First, identify your sustainability-related challenges within the organization, define the goals and key metrics you want to measure, develop an effective reporting strategy, consult and engage with stakeholders, and then write the sustainability report.

What is a KPI in sustainability?

Standing for ‘key performance indicator’, a KPI in sustainability refers to a measurable metric that organizations use as a benchmark to track and assess their overall environmental, social, and economic impact.