18.3 Benchmarking and continuous improvement in sustainability
4 min read•july 30, 2024
and are crucial for measuring . Companies compare their efforts to industry standards, identify gaps, and set targets. This process helps organizations stay current with best practices and regulations while enhancing transparency.
Effective benchmarking involves using frameworks like GRI and CDP, setting , and tracking progress. Industry-specific resources provide tailored guidance. Regular assessment and communication of sustainability efforts foster accountability and drive ongoing improvements across various environmental and social metrics.
Benchmarking for Sustainability
The Role of Benchmarking in Continuous Improvement
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- Benchmarking compares an organization's sustainability performance against industry peers, best practices, or established standards to identify areas for improvement
- Enables organizations to set realistic sustainability targets, track progress over time, and continuously improve their sustainability performance
- The benchmarking process involves:
- Defining
- Collecting and analyzing data
- Identifying gaps and opportunities
- Implementing targeted improvement initiatives
- Regular benchmarking helps organizations stay current with evolving sustainability best practices, regulations, and stakeholder expectations (GRI standards, CDP reporting)
Benefits of Benchmarking for Sustainability
- Provides a structured approach to identifying areas for improvement in sustainability performance
- Allows organizations to learn from industry leaders and adopt proven best practices (, waste reduction)
- Facilitates the setting of ambitious yet achievable sustainability targets based on industry norms and trends
- Enables tracking of progress over time and helps maintain momentum in sustainability initiatives
- Enhances transparency and credibility of sustainability efforts by aligning with recognized standards and frameworks
Best Practices in Sustainability Benchmarking
Sustainability Reporting Frameworks and Standards
- provides a comprehensive framework for sustainability reporting, including standardized performance indicators and disclosure requirements
- offers industry-specific sustainability accounting standards to help organizations identify, manage, and report on financially material ESG issues
- CDP (formerly Carbon Disclosure Project) runs a global disclosure system for companies, cities, and regions to measure and manage their environmental impacts, particularly in the areas of climate change, water security, and deforestation
- and assess companies' sustainability performance and provide benchmarks for investors and other stakeholders
Industry-Specific Benchmarking Resources
- Industry associations and professional organizations often develop sector-specific sustainability benchmarking tools and guidelines
- Examples include:
- The for the real estate sector
- The initiative for the chemical industry
- The for the fashion and footwear industry
- These resources provide tailored guidance and benchmarking data to help organizations compare their performance against industry peers and identify best practices
Sustainability Target Setting and Tracking
Developing Effective Sustainability Targets
- Conduct a to identify the most relevant and impactful sustainability issues for the organization and its stakeholders
- Set SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) sustainability targets aligned with the organization's overall strategy and informed by benchmarking data
- Examples of SMART targets:
- Reduce by 30% by 2030 compared to a 2020 baseline
- Increase the proportion of renewable energy in the company's energy mix to 50% by 2025
- Achieve across all manufacturing facilities by 2035
Tracking and Communicating Progress
- Establish a robust to consistently track sustainability performance across various metrics and business units
- Regularly review progress against targets and adjust strategies as needed to ensure continuous improvement
- Engage employees, suppliers, and other stakeholders in sustainability target-setting and implementation to foster ownership and accountability
- Communicate sustainability targets and progress to stakeholders through:
- Website updates
- Social media channels
- Investor presentations
Continuous Improvement in Sustainability: Case Studies
Unilever's Sustainable Living Plan
- Sets ambitious targets for reducing environmental impact, improving social outcomes, and enhancing livelihoods across its value chain
- Regularly reports on progress and has achieved significant improvements in areas such as:
- Greenhouse gas emissions (reduced by 52% per consumer use since 2010)
- Water use (reduced by 49% per tonne of production since 2008)
- Sustainable sourcing (62% of agricultural raw materials sustainably sourced by 2019)
Patagonia's Worn Wear Program
- Encourages customers to repair, reuse, and recycle their clothing, reducing the environmental impact of the apparel industry
- Uses benchmarking to continuously improve the sustainability of its materials, supply chain, and operations
- Achievements include:
- 68% of fabrics used in products are made from recycled materials
- 100% of electricity used in US operations comes from renewable sources
- 87% of products are made from preferred materials (recycled, organic, or renewable)
Key Terms to Review (22)
Annual sustainability reports: Annual sustainability reports are comprehensive documents that organizations produce to communicate their environmental, social, and economic performance and impacts over the past year. These reports serve as a tool for transparency and accountability, providing stakeholders with insights into the company's sustainability goals, initiatives, and progress toward meeting those objectives. By evaluating performance against set benchmarks, organizations can identify areas for continuous improvement in their sustainability practices.
Benchmarking: Benchmarking is the process of comparing a company's performance metrics to industry bests or best practices from other companies. This method helps organizations identify areas for improvement and gauge their own performance against peers, ultimately driving innovation and efficiency.
Carbon Disclosure Project (CDP): The Carbon Disclosure Project (CDP) is a non-profit organization that helps companies and cities disclose their environmental impact, specifically regarding carbon emissions and climate change. By providing a platform for organizations to report their greenhouse gas emissions, CDP aims to promote transparency, accountability, and sustainability practices in global business operations. The data collected by CDP is used to encourage continuous improvement in environmental performance and supports the establishment of global reporting standards.
Continuous Improvement: Continuous improvement is an ongoing effort to enhance products, services, or processes by making incremental improvements over time. This practice emphasizes the need for organizations to evaluate their operations regularly and implement changes that promote efficiency, reduce waste, and enhance sustainability, ultimately fostering a culture of innovation and accountability.
Data collection and management system: A data collection and management system is a structured approach used to gather, store, and analyze data efficiently to support decision-making processes. These systems are crucial for organizations aiming to monitor performance, track progress, and identify areas for improvement in sustainability practices. They help in ensuring that accurate data is available for benchmarking and continuous improvement, allowing businesses to measure their impact and effectiveness over time.
Dow Jones Sustainability Indices (DJSI): The Dow Jones Sustainability Indices (DJSI) are a series of global stock indices that evaluate the sustainability performance of publicly traded companies based on economic, environmental, and social criteria. These indices serve as benchmarks for investors looking to incorporate sustainability into their investment strategies while encouraging companies to improve their practices in sustainability, thereby promoting long-term value creation.
Global Real Estate Sustainability Benchmark (GRESB): GRESB is an organization that assesses and benchmarks the environmental, social, and governance (ESG) performance of real estate assets worldwide. It provides a framework for real estate companies to measure their sustainability practices against industry standards, promoting transparency and continuous improvement in sustainability efforts within the real estate sector.
Global Reporting Initiative (GRI): The Global Reporting Initiative (GRI) is an international framework for sustainability reporting that helps organizations communicate their environmental, social, and governance (ESG) performance in a transparent and standardized way. GRI promotes accountability and informed decision-making by providing guidelines for measuring and reporting on the Triple Bottom Line, which encompasses economic, environmental, and social dimensions of business operations.
Key Performance Indicators (KPIs): Key Performance Indicators (KPIs) are measurable values that demonstrate how effectively an organization is achieving key business objectives. They are used to evaluate success at reaching targets, providing a clear framework for assessing performance in various areas, including sustainability, operational efficiency, and stakeholder engagement.
Materiality Assessment: A materiality assessment is a strategic process used to identify and prioritize the environmental, social, and governance (ESG) issues that are most significant to a business and its stakeholders. This process involves engaging with stakeholders to understand their perspectives and concerns, ultimately guiding companies in their sustainability strategies and reporting efforts. By determining what matters most, organizations can align their sustainability goals with stakeholder expectations and create value for both themselves and the broader community.
MSCI ESG Ratings: MSCI ESG Ratings are a measure of a company's environmental, social, and governance (ESG) performance, providing investors with insights into the sustainability practices of various firms. These ratings assess companies based on their exposure to industry-specific ESG risks and their ability to manage those risks effectively, helping investors identify which companies are aligned with sustainable practices. The ratings are crucial for benchmarking and facilitating continuous improvement in sustainability efforts among businesses.
Patagonia's Worn Wear Program: Patagonia's Worn Wear Program is an initiative aimed at promoting sustainability by encouraging customers to repair, reuse, and recycle their outdoor gear. This program helps extend the life of products, reduce waste, and foster a culture of mindful consumption, aligning with continuous improvement in sustainable practices within the business.
Renewable energy: Renewable energy refers to energy derived from natural sources that are replenished at a faster rate than they are consumed. This includes sources such as solar, wind, hydroelectric, biomass, and geothermal energy. Embracing renewable energy is crucial for reducing greenhouse gas emissions, promoting sustainable development, and enhancing energy security.
Responsible Care: Responsible Care is a voluntary initiative by the chemical industry aimed at improving health, safety, and environmental performance. It encourages companies to engage in continuous improvement, ethical practices, and transparency while fostering accountability for the products they produce and their impact on society. This approach connects to broader goals of sustainability, guiding organizations to benchmark their practices against best-in-class standards and make ongoing improvements.
Scope 1 and 2 Greenhouse Gas Emissions: Scope 1 and 2 greenhouse gas emissions refer to the direct and indirect emissions of greenhouse gases that a company is responsible for. Scope 1 includes all direct emissions from owned or controlled sources, while Scope 2 encompasses indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the company. Understanding these emissions is crucial for organizations aiming to benchmark their sustainability efforts and drive continuous improvement.
Smart targets: Smart targets are specific, measurable, achievable, relevant, and time-bound goals used in the context of planning and assessing sustainability initiatives. This approach allows organizations to clearly define their objectives and track their progress over time, facilitating continuous improvement. By focusing on these five criteria, smart targets help ensure that sustainability efforts are not only ambitious but also realistic and impactful.
Stakeholder Engagement: Stakeholder engagement is the process of identifying, analyzing, and interacting with individuals or groups that have an interest in or are affected by a company's operations. This approach helps organizations understand stakeholders' needs and expectations, ultimately leading to more sustainable business practices and better decision-making.
Sustainability Accounting Standards Board (SASB): The Sustainability Accounting Standards Board (SASB) is an organization that develops and disseminates sustainability accounting standards that help businesses disclose material environmental, social, and governance (ESG) information to investors. These standards are designed to enhance the comparability and reliability of sustainability reporting across industries, ultimately promoting transparency and accountability in corporate practices related to the Triple Bottom Line.
Sustainability performance: Sustainability performance refers to an organization's ability to achieve its sustainability goals and objectives while balancing economic, social, and environmental factors. This concept encompasses how well a company implements sustainable practices and measures its impact on the planet and society, reflecting its commitment to responsible stewardship. By evaluating sustainability performance, businesses can identify areas for improvement, drive innovation, and ultimately enhance their overall effectiveness in creating a positive impact.
Sustainable Apparel Coalition's Higg Index: The Sustainable Apparel Coalition's Higg Index is a comprehensive framework designed to measure and improve the sustainability performance of apparel and footwear products. This tool enables brands, retailers, and manufacturers to evaluate their environmental and social impacts, promote transparency, and drive continuous improvement in sustainability practices across the industry.
Unilever's Sustainable Living Plan: Unilever's Sustainable Living Plan is a comprehensive framework launched in 2010 aimed at driving growth while reducing the company's environmental footprint and increasing positive social impact. The plan is built on three main pillars: improving health and well-being, reducing environmental impact, and enhancing livelihoods, all while integrating sustainability into Unilever's core business strategy. This approach not only helps communicate the company's green value propositions but also aids in conducting thorough sustainability assessments and encourages continuous improvement through benchmarking.
Zero waste to landfill: Zero waste to landfill is a sustainability strategy aimed at diverting all waste from landfills through recycling, composting, and reuse. This approach not only reduces the environmental impact of waste disposal but also encourages businesses and communities to rethink their waste management practices, focusing on resource conservation and efficiency.