In a world of big data, radical transparency for corporations and sustainability reporting on the rise, we should see a major shift in how businesses are tackling the most intractable environmental and social issues, as well as a rapid pace of progress towards improving our overall standard of living as well as the health of the planet. Correct?
In the last twenty years, sustainability reporting has risen sharply, and by most estimates, over half of the S&P 500 companies are now issuing reports to track environmental, social and governance performance. What we are not seeing on the same scale, however, is the necessary translation of that information at the scale and pace to generate true transformation within business. We are not seeing this transformation because for most businesses, the metrics collected on an industry or company-wide level are still too generalized to have an impact on the day-to-day decision-making that must take place to generate that transformation. For the same reasons that it is difficult to mobilize the general American populations’ concern about climate change into actions that matter, it’s difficult to mobilize a merchant in a company to manage towards a greenhouse gas (GHG) reduction goal or a pro-human rights policy: it’s too vague to operationalize within the business framework that already asks many things of today’s leaders in addition to making decisions to maximize profit.
What is necessary is to drive a more rapid consensus at the product level: on both the issues and how we measure them. Most importantly we must define the improvement opportunities that supply chain partners can work on together to make progress and identify proper incentives to promote delivery not just on reporting, but on the improvement opportunities themselves. Without that last step, you can have ambitious goals and beautiful metrics, but the pace of progress will remain painfully slow.
The Sustainability Consortium (TSC®) is a membership organization focused on improving the sustainability of consumer products from source to shelf and beyond. Our members, representing over $2.4 trillion in revenue, participate across industries – from corporations to food and consumer packaged goods manufacturers, to government, civil society, and academia. TSC is driving a science-based approach to consumer product sustainability that has been missing from the field to date. We do this through rigorous methodologies and translating the research we generate into a toolkit for business that drives a new generation of sustainable products. Our toolkit – the “Sustainability Management and Reporting System” or SMRS – is the first one that is science-based with application at the product level. Simply put: use of our work has been proven to generate positive change in goods that end up in the arms of consumers, which can roll up in to rapid achievement of overarching goals.
The Opportunity for Standardization of Product Impacts
TSC looks at an array of products sold across the retail spectrum: from milk and beef, to laptops and plastic toys, to household furnishings. We determine what areas within a business – e.g., raw materials, packaging, energy use, distribution – will have the most impact (hotspots) and then we use the data to highlight the improvement opportunities that a buyer and supplier can work on together to make progress, plus the questions, or key performance indicators, businesses can use to monitor these activities. This enables companies to evaluate this information in a whole new way. Even if a company might have had a measurement system before, the information is layered in holistically, with a standardized and consistent format across all products throughout the consumer product value chain.
Implementation at Walmart: Impact through Products
When a consumer buys a laptop, typically it doesn’t come with the energy saving setting already turned on. As consumers, we have the option to turn on this setting, but most people, even if they are energy conscious, may not get around to doing so. Through our research, we identified the potential to save a large amount of energy by changing this simple setting further down the supply chain. A proactive buyer at Walmart determined that about 30% of its laptops sold had these settings and were shipped at the optimal energy-saving rate. The Walmart buyer took this research and set a company goal: 100% of laptops sold with this option would have that power setting activated, before ever reaching consumers. Given the volume of laptops sold by Walmart, this translates into many thousands, if not millions, of machines over time. Walmart institutionalized this process and will themselves save hundreds of thousands of metric tons of GHG emissions through working with suppliers at the factory level. Consumers are also benefitting and saving money by using less energy at the residential level.
Lesson learned: Simple things can yield significant results when we put information into the hands of people who have the power to make changes at scale.
Building Blocks to Impact at TSC and Opportunities for Investors:
- Research: A science-based approach has been lacking in identifying environmental and social issues across a broad swath of product categories. In a world of strategy, platforms, goals, initiatives, greenwashing and bluewashing, it is essential that we are able to step back and examine the validity of the basis for those strategies. Information that has the potential to change business decision-making must be deeply rooted in and based on a rigorous, science-based, transparent methodology and process. While the metrics for environmental issues such as carbon, waste and water have long been established, the metrics on the social side are still in need of more rigor. TSC’s approach brings lifecycle analysis and scientific approaches to all issues. In addition, an investor could use our information to evaluate a company’s shifting product and service portfolio over time to see if the businesses’ overarching goals and investments mitigating the risks to the commodities they rely on are really the right goals based on their product impacts.
- One System: The sustainability field does not lack for indicators, surveys, ratings schemes, cross-sector working groups or industry initiatives. The gap that TSC fills is to provide an approach for companies who sell, buy, produce and/or procure multiple products to look across their product portfolio and implement one system – SMRS. All of our product categories are available there and shortly, for the first time ever; we will have data sets in the aggregate across the product level.
- Accessibility of Information: Any system that is created needs to be easily accessible, broadly available, and remove as many barriers to entry as possible. We’ve recently partnered with SAP to enable the first cloud-based solution to support this implementation.
What Does an Investor Need to Know?
Information is becoming more specific and granular. However, that does not have to mean it becomes more confusing. The enhanced analytics that are now available to companies, NGOs and investors provide a much deeper and more nuanced picture of the impacts of a company’s product portfolio – and with it, the risks and challenges throughout the supply chain.