New Metrics 2012 9/28 9.15 - 10.30 Mark McElroy

1. Standardizing Sustainability Context
Brief Introduction: What Is Sustainability Context?
A Presentation by Mark W. McElroy, Ph.D.
Executive Director, Center for Sustainable Organizations
New Metrics of Sustainable Business Conference
Wharton Business School
September 28, 2012

2. What Is Sustainability Context?
 Let’s start with GRI’s definition (GRI 3.1)
 Performance information should be placed in context
Copyright © 2012 Mark W. McElroy, Ph.D.

3. What Is Susty Context? (cont.)
 GRI’s definition (cont.)
 Performance information should be placed in context
 The underlying question of sustainability reporting is how an
organization contributes, or aims to contribute in the future, to
the improvement or deterioration of
economic, environmental, and social conditions, developments
and trends at the local, regional, or global level
Copyright © 2012 Mark W. McElroy, Ph.D.

4. What Is Susty Context? (cont.)
 GRI’s definition (cont.)
 Performance information should be placed in context
 The underlying question of sustainability reporting is how an
organization contributes, or aims to contribute in the future, to
the improvement or deterioration of
economic, environmental, and social conditions, developments
and trends at the local, regional, or global level
 Reporting only on trends in individual performance (or the
efficiency of the organization) will fail to respond to this
underlying question
Copyright © 2012 Mark W. McElroy, Ph.D.

5. What Is Susty Context? (cont.)
 GRI’s definition (cont.)
 Performance information should be placed in context
 The underlying question of sustainability reporting is how an
organization contributes, or aims to contribute in the future, to
the improvement or deterioration of
economic, environmental, and social conditions, developments
and trends at the local, regional, or global level
 Reporting only on trends in individual performance (or the
efficiency of the organization) will fail to respond to this
underlying question
 Reports should therefore seek to present performance in relation
to broader concepts sustainability
Copyright © 2012 Mark W. McElroy, Ph.D.

6. What Is Susty Context? (cont.)
 GRI’s definition (cont.)
 This will involve discussing the performance of the organization
in the context of the limits and demands placed on
environmental or social resources at the
sectoral, local, regional, or global level
Copyright © 2012 Mark W. McElroy, Ph.D.

7. What Is Susty Context? (cont.)
 GRI’s definition (cont.)
 This will involve discussing the performance of the organization
in the context of the limits and demands placed on
environmental or social resources at the
sectoral, local, regional, or global level
 For example, this could mean that in addition to reporting on
trends in eco-efficiency, an organization might also present its
absolute pollution loading in relation to the capacity of the
regional ecosystem to absorb the pollutant
Copyright © 2012 Mark W. McElroy, Ph.D.

8. What Is Susty Context? (cont.)
 GRI’s definition (cont.)
 This will involve discussing the performance of the organization
in the context of the limits and demands placed on
environmental or social resources at the
sectoral, local, regional, or global level
 For example, this could mean that in addition to reporting on
trends in eco-efficiency, an organization might also present its
absolute pollution loading in relation to the capacity of the
regional ecosystem to absorb the pollutant
 GRI’s Technical Protocol Section
 e.g., water consumption might be expressed “in relation to
available supply in a particular location”
Copyright © 2012 Mark W. McElroy, Ph.D.

9. 9
Ecological Footprint Method
Year when
performance
Number of Planet Earths
first became
unsustainable
Gaps
The world’s first
Sustainability
Threshold
Source: World Wildlife Fund, 2012
Copyright © 2012 Mark W. McElroy, Ph.D.

10. Types of Metrics
 Conventional
 “Absolute”
 e.g., Gross CO2 emissions or water use by a company
 Doesn’t take changes in company size, etc. into account
Copyright © 2012 Mark W. McElroy, Ph.D.

11. Types of Metrics
 Conventional
 “Absolute”
 e.g., Gross CO2 emissions or water use by a company
 Doesn’t take changes in company size, etc. into account
 “Relative”
 Expresses absolute emissions relative to some other variable of
interest (e.g., emissions or water use per unit of production, dollar
of revenue, FTE, etc.)
Copyright © 2012 Mark W. McElroy, Ph.D.

12. Types of Metrics
 Conventional
 “Absolute”
 e.g., Gross CO2 emissions or water use by a company
 Doesn’t take changes in company size, etc. into account
 “Relative”
 Expresses absolute emissions relative to some other variable of
interest (e.g., emissions or water use per unit of production, dollar
of revenue, FTE, etc.)
 New Metrics
 “Context-Based”
 Expresses impacts relative to social and/or environmental limits or
thresholds – a more literal measure of sustainability performance
Copyright © 2012 Mark W. McElroy, Ph.D.

13. e.g., Context-Based CO2 Metric
Source: Wigley, Richels and Edmonds, 1996
Copyright © 2012 Mark W. McElroy, Ph.D.

14. 2005 2006 2007 2008 2009 2010 2011
Absolute
- tCO2 78,122 74,777 76,924 80,827 80,372 77,576 76,577
     
Relative
- kgCO2 per 1000 370.21 343.51 355.50 343.89 309.94 259.45 213.33
lbs. of product      
produced
Context-Based
- Actual 1.000 0.905 0.740 0.871 0.794 0.822 0.762
emissions/normativ s
O s
O s
O s
O s
O s
O
e emissions
Notes:
1.  = Trending Favorably;  = Trending Unfavorably
s
2. O = Sustainable
3. Any Context-Based Score of < 1.0 = Sustainable; > 1.0 = Unsustainable
Multi-Metric Study of Cabot’s CO2 Emissions
Copyright © 2012 Mark W. McElroy, Ph.D.

15. 2005 2006 2007 2008 2009 2010 2011
Absolute
- tCO2 78,122 74,777 76,924 80,827 80,372 77,576 76,577
     
Relative
- kgCO2 per 1000 370.21 343.51 355.50 343.89 309.94 259.45 213.33
lbs. of product      
produced
Context-Based
- Actual 1.000 0.905 0.740 0.871 0.794 0.822 0.762
emissions/normativ s
O s
O s
O s
O s
O s
O
e emissions
Notes:
1.  = Trending Favorably;  = Trending Unfavorably
s
2. O = Sustainable
3. Any Context-Based Score of < 1.0 = Sustainable; > 1.0 = Unsustainable
Multi-Metric Study of Cabot’s CO2 Emissions
Copyright © 2012 Mark W. McElroy, Ph.D.

16. Summing Up
 Different ways of defining context for measurement
and reporting purposes
 ‘Sustainability Context” per GRI, in which social or ecological
limits or thresholds are involved, or…
 Context more broadly defined
 Different contexts serve different purposes
 Question is: How do each of the 4 existing and
emerging standards define context; what is its role in
the standards; and what is its future?
Copyright © 2012 Mark W. McElroy, Ph.D.