Setting Sustainability Goals ‘Improves Bottom Line’

Firms that set tangible, public sustainability goals improve their financial and environmental performance, according to a white paper released today by CH2M Hill.

Sustainability Goals that Make an Impact says as companies work to meet their goals, they cut energy use, greenhouse gas emissions, water consumption and waste — all of which result in cost savings and boost the bottom line and can result in increased employee satisfaction and productivity.

While firms with goals are four to five times more likely to improve their performance compared to those with none, firms with three to four goals show the best performance improvement (see chart), the paper says. CH2M Hill says this is because three to four goals drive companies to improve without diverting resources in too many directions, which can hurt progress. Additionally, companies that have set five goals typically already achieved easier-to-reach goals, the paper says, and are now working toward goals that require more time and resources to achieve, such as net zero waste.

Sustainability goals send a positive message to shareholders, too, the paper says. CH2M Hill research found that when companies don’t publicly disclose their goals, they face more shareholder resolutions intended to assess how the company will address risk. They’re also more likely to face stakeholder opposition to capital-intensive projects and business expansion.

CH2M Hill conducted research in 2012 and 2013, using a proprietary benchmarking methodology that includes analysis of publicly available sustainability and financial data, third party analysis and rankings, along with interviews with sustainability executives from client organizations.

The paper also includes the following findings and recommendations:

• Companies should set multi-year, organization-wide goals. Sustainable development requires long-term thinking, so multi-year goals, coupled with annual targets and milestones most effectively drives performance. In the most sophisticated companies, a goal leader supported by multi-disciplinary teams manages each corporate sustainability goal.
• Robust, business-focused progress monitoring processes are critical. Sustainability leaders that employ robust processes to help set, monitor and track progress, with regular reporting to executive leadership, were more successful in making sustainability a top agenda item for their boards. An increasing number of companies tie executive compensation to sustainability goals.
• Stakeholders should be involved in goal setting. The goal-setting process brings most business value when it involves a broad group of stakeholders. Internal stakeholders will be responsible for achieving the goals and will be more aligned with them if involved in the process. Fully engaged external stakeholders help calibrate goals, may be more aware of socio-economic trends and can help improve corporate reputation.

PricewaterhouseCoopers’ latest survey, released earlier this month, found firms are putting greater emphasis on efforts to drive financial savings and build a competitive advantage in the market by being more ecologically efficient and reducing their environmental impact. The survey results coincide with a PwC report that offers ideas for companies considering eco-efficiency strategies.