Links: Sustainability, Measurement and Software Solutions - Part 1 and Sustainability, Measurement and Software Solutions - Part 3.
The Sustainability, Measurement and Software Solutions - Part 1 described three main reasons why a business should become more sustainable. These were:
If a business decides that it wants or needs to become more sustainable, then it still needs to work out where to invest the finite resources it has available.
This blog looks at an approach a business can use for making sustainability decisions. The Sustainability, Measurement and Software Solutions - Part 3 will explain how measuring the cost and impact of sustainability investments based on data derived from software solutions, such as SAP’s Business Suite 7, can help a business make those decisions easier, faster and better.
As the Sustainability, Measurement and Software Solutions - Part 1 explained, Interface Inc., the world’s largest commercial flooring company, generated enough savings, by reducing waste, to pay for the rest of the company’s sustainability initiatives. It also generated good will that helped increase sales.
However before this or any other significant business decision is made, a business should go through a decision process. For example, if the goal is to reduce waste in a business, then it will require the answers to many questions. Here’s a starter list:
In other words as with most business decisions, whether around sustainability or not, a business case is needed that is derived from answers to questions such as those above. Moreover, to succeed, it needs to demonstrate a return on investment.
A business case for making a decision needs to vary, in the detail, depending on the size of the investment, the potential impact on and benefits for a company, the risks involved and the decision making/risk culture of the company. Historically though, they are often a paper that evaluates an investment just in terms of its financial impact.
As a management consultant, I had to develop business cases, sometimes as part of a proposal, for information technology projects which then had to be "sold" to executive management. However, business cases based on financial impact often only told part of the story. There was always a need to explain the less tangible benefits as well as the risks.
Although sustainability investments can be considered from purely a financial perspective, it is often the less tangible benefits and risks that have the greatest impact. For example:
It’s also unwise to assume risks won’t materialize, after all Mattel’s reputation as a toy supplier was "stellar" before the problems occurred. When problems arise they need proactive proper management to resolve. For example Nike, back in 2000, was roundly criticized for child labor practices yet now, they make good sustainable practices a core part of their business practices and in 2006 were named the top US company for social responsibility reporting.
So the net of this is that a decision on where to make sustainability investments requires a balance between maximizing the upside, e.g. by reducing costs, or increasing sales; while minimizing the downside, e.g. by identifying and mitigating risks; so that there is a net benefit to the business and the society in which it operates.
So if the goal is to balance maximizing the upside while minimizing the downside, there is still the problem of how does a business measure the upside (and/or downside) of potential sustainability investments so that more accurate predictions can be made of the outcome.
Much of the information that is needed to measure the cost and impact of sustainability investments can often be derived from business software that a business runs.
The Sustainability, Measurement and Software Solutions - Part 3 will examine approaches for measuring the cost and impact of sustainability investments in more detail and how software solutions such as Business Suite 7 help a business make easier, faster and better sustainability decisions.
Links: Sustainability, Measurement and Software Solutions - Part 1 and Sustainability, Measurement and Software Solutions - Part 3.