Yogi Berra once said, “If you don’t know where you are going, you might wind up someplace else.” There’s a lot of truth in that statement, particularly as it relates to sustainability: unless you have a good idea of what a sustainable version of your organization might look like, you may have some trouble getting there. But the problem cuts both ways. What if you don’t know how you stack up regarding your sustainability efforts? So a variant on that statement could be, “If you don’t know where you’re starting from, you might not find the right path on the road to sustainability.”
In 20+ years of working with customers, I have noticed that my clients frequently want to jump straight to the “solution” or “execution” phase. It’s not hard to understand why: these are the parts that get featured in media and case studies as the stroke of genius that solved an intractable problem. Why waste time in doing the strategy, planning and consensus-building exercises, when jumping to the end is so much more fun?
The problem with this point of view is that lack of clear data on your current performance (relative to others in your industry) will severely handicap the decision-making process, especially as it relates to initiatives where there is more than just a traditional financial return. Without good information on your status compared to competitors, it will be difficult to find out which areas you already excel in and which ones need work. Since sustainability is such a developing field, often the only hard data available will be what your competitors are (or aren’t) doing – traditional methods of investment evaluation, like NPV and IRR, don’t yet adequately capture the true return of sustainability initiatives.
By spending a bit of time understanding where you are at currently and going through a benchmarking process, you will gain valuable insight as to where to focus your sustainability efforts. Furthermore, benchmarking provides the quantitative and qualitative data required by management to prioritize competing investment proposals.
So what is Benchmarking?
Simply put, benchmarking is the process of measuring and comparing your performance for a set of functions, processes, metrics, financials, etc. with those of industry competitors. Basic benchmarking can be accomplished using publicly available information, directly from competitor’s websites or NGO and interest groups. In more comprehensive efforts, industry participants may agree to have a third-party conduct a “blind study” that delves into more detailed information.
What to Benchmark?
The scope of the benchmarking study can vary, depending on what you are trying to learn, and how much time you can spend. On the sustainability front, it is quite straightforward to benchmark the transparency of different industry players by reviewing their publicly available news, PR and CSR reports.
I typically like to look at what are they reporting (their reporting framework, key metrics and targets), who are they reporting to (GRI, Carbon Disclosure Project, CA Climate Action Registry, etc.), and how are they being rated (Dow Jones Sustainability Index, Calvert Social Index, Fortune 100 Best Companies, CRO Magazine, etc.). Other sustainability topics to benchmark could include: Energy Efficiency, Water Conservation or Waste Management efforts – again, many of these examples are publicly available. Keep in mind that your industry will surely have unique functions that give rise to metrics relevant only to your activities, and you should take special time to identify and measure those factors as well.
How to use the Data?
Once completed, the benchmarking data can be used to help with investment planning efforts, by identifying areas of potential under- or over-investment. More powerful still are the case studies of what companies are doing around each of their key metrics. Often it is the single story around what a competitor is doing (for example, a competitor investing in renewable energy) that motivates a management team to accelerate their journey on the path towards being a more sustainable company. How can you use benchmarking to advance sustainability initiatives at your company?
FairRidge Group is a team of management, strategy, and change experts focused on business transformation through the practical application of sustainability for operational improvement and strategic innovation. FairRidge brings a new framework for sustainability management that integrates strategy, operations, branding, measurement and organizational development to drive profitable business transformation.
Scott Johnson is a Principal at FairRidge Group, with over 20 years of management consulting experience, working at Andersen Consulting, Axiom Management Consulting and Cambridge Technology Partners. He has worked with clients such as Caterpillar, CSAA, Levi Strauss & Co., and Motorola. Scott holds an MBA in Operations Management from Purdue University.