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5 More Reasons Every Business Should Care About New Metrics
The argument for human capital valuation: If people are a company's most important asset, why do they continue to appear as an expense on the balance sheet? | Image credit: HIP Investor
If you are a regular or even semi-regular reader of Sustainable Brands’ digital content, you are likely familiar with our New Metrics (#NewMetrics) events and publications. In case you are new to this topic, the frame around it is fairly straightforward: New Metrics is an umbrella term for the most successful ways businesses are creating and capturing entirely new forms of value, or quantifying previously ignored economic, social and environmental impacts and opportunities. The number of examples is growing — and trust me, having studied them for a few years now, I can spend all day listing their benefits to you. A few of my recent personal favorites, just so you get a specific taste, include The Social Value Index, the Future-Fit Business Benchmark, and voluntary corporate use of carbon pricing.
Last summer I published a blog outlining five basic arguments as to why every business should care about and investigate the evolving New Metrics landscape. Given that the adoption rate of even the most proven New Metrics is still quite slim in the grand scheme of dominant mainstream business management practices, those arguments are still standing fresh. That said, a lot of fantastic new developments have appeared since then and so I am writing this piece to share five more reasons you should consider deepening your company’s engagement with New Metrics:
Leading methodologies for quantifying social impacts are getting sophisticated. While clear rules and standards for environmental LCA have existed for many years, corporate sustainability professionals around the world have suffered from the lack of commonly accepted methodologies for 'social LCA.' To respond to that need, PRé Sustainability convened twelve sustainability experts from leading companies — including BASF, BMW Group, DSM, Goodyear, Philips, L'Oréal, Marks & Spencer and Steelcase — in its Roundtable for Product Social Metrics, aiming to make social impact assessment more accessible and meaningful through the development of a handbook containing an explicit, clearly defined set of principles and metrics. Elsewhere, The Shared Value Initiative and partners have been perfecting a new measurement model for companies creating shared value. Fair Trade USA has announced a new Impact Measurement and Management Framework, which generates new insight into the complex relationships between value creation (risk management, reliable production, profitable growth), sustainable livelihoods (human well-being, income empowerment, environment sustainability) and consumer activation (product choice, preference for Fair Trade).
The bar on what constitutes ‘ambitious enough’ sustainability goals is being raised significantly. As SB collaborator Bill Baue points out in his e-book on this subject, there is a strong undercurrent — at least among those who take corporate sustainability seriously — critiquing the inherent incrementalism of what currently passes for corporate 'sustainability' goals. Multiple conversations in the Sustainable Brands community over the past year have focused on next-generation goals, leapfrog goals, end-zone goals, context-based goals, science-based goals, reality-based goals ... all terms to indicate goals that, in Bill’s words, ‘catapult past business-as-usual, squarely into the realm of true sustainability.’ Or even past that, to regeneration or ‘net positive’ impacts.
Studies of consumer perception of sustainability product attributes are becoming more scientific and yielding fascinating results. I have an irresistible example here based on TripAdvisor's GreenLeaders initiative, allegedly the largest 'green hotel' rating program in the world with a unique database of both sustainable hotel practices (over 4,000) and traveler reviews of those sustainable practices (over 30,000). In an effort to find out how travelers feel about the hotel practices in question, and whether that affects the overall perception of respective properties, TripAdvisor set out to uncover customer insights by looking closely at its unique database. It is the first time guest perception research has been done with a very large sample set of unprompted responses, and the results, to be revealed next month at New Metrics ’14, promise to be fascinating!
More and more proof is emerging that certain types of high-impact investment portfolios can outperform Wall Street. We have observed for at least a few years now that roughly 80 percent of S&P 500 stock market valuation is driven by factors that are not accurately captured and valued on financial statements — including people (human capital), natural resources (ecological capital) and trust (social capital). In a breakthrough new research project, HIP Investor shows how sustainability considerations can lower risk and enhance potential financial returns for investment portfolios, all while creating net benefit for society. Moreover, not only can sustainability-driven investment portfolios outperform traditional ones, but they also strongly suggest that Modern Portfolio Theory may be significantly outdated.
Reliable ways to enable informed and impactful purchasing decisions through effective in-store labels are emerging. Consider How Good, a new product rating system aiming to serve as a tool that grocery shoppers can use to identify the healthiest, most sustainable food products right on the shelf. The How Good team works closely with academics, industry experts and farmers to review the impact products make on the entire food system, and then crunches the data down to simple and elegant labels added directly to grocery store shelves. Customers in pilot stores have reacted notably positively, contributing to significant shifts in purchasing behavior across a number of locations and product categories.
So, the question remains: Are you advanced enough to take advantage of the developments mentioned above?
If not, you're not alone. New Metrics are indeed, well, new and being upgraded constantly, as business executives and their sustainability teams figure out how to put them to ever more productive use. That is why I encourage you to join us at our New Metrics ‘14 conference, taking place on September 24-26 in Cambridge, MA, in collaboration with the MIT Sloan School of Management. All topics mentioned above and many more will be covered in depth and you will meet some of the most recognized thought leaders in the space, along with dozens of brands already leveraging New Metrics to help lead the way to a sustainable economy.
Dimitar is the Director of Content Development at Sustainable Brands. He joined the team after earning a Master’s degree in Management Science & Engineering – focused on sustainable business – from Stanford University. Before Stanford, Dimitar worked in international development…
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PeterBurgess
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dvlahov • 2 days ago
Thank you for sharing your (rather cynical, if I may say) view. As you may guess, I happen to disagree with you... but it's far from just me, or the Sustainable Brands team. It's much bigger than that, with many (hundreds, if not thousands) finding value and good applications of New Metrics out there -- 'doers' and indepdendent, external assessors alike! Why should it only be one of those groups that uses New Metrics? And who says that New Metrics are to be used only for 'hard-core' investment/equity analysis? There happen to be many other reasons to use said metrics... why does it leave you 'absolutely concerned' that more and more metrics are being used in more than just traditional investment/equity analysis? What is wrong with using more precise information for internal management purposes at a company, for example?
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absolutelyconcerned • 2 days ago
Your Sustainable Brands initiative is becoming increasingly bogus and losing credibility - doubly reinforced with this attempt to mobilise 'New Metrics'. Its not up to 'doers' to create the metric they'd like to be assessed or scored by. Valuation metrics are used by independent, external assessors - such as investment/equity analysts - to determine the aggregated value of corporate activities from operational efficiencies, market efficiencies, consumer franchise integrity etc etc. A self-architected metric such as this Fair Trade USA Impact Measurement and Management Framework are just irrelevant for hard-core investment/equity analysts because Fairtrade in terms of market position is a nano-detect and non-scalable (and no matter which way they cut it paying a few extra pennies to poor producers keeps them poor). There are all these Sustainable Brand machinations to build complexity for something that is just straight-forward. Brand owners need to report their sustainability/CSR impacts in terms of: f-ROI (financial), s-ROI (social), e-ROI (ecological) and this aggregates to deliver m-ROI (marketing) and drive net brand asset value (NBAV). Methodologies exist for all these (but of course benchmarking needs be in place from the outset). These metric make the business case of sustainability the rest is incestuous, blow-smoke, fluff concocted by those with vested interest in trying to 'prove' the worth of what they are doing. No doubt the Sustainable Brands team will push 'New Metrics' but odds on it'll just become another frivolous go-nowhere duping initiative for the starry-eyed guilty of romanticising the sustainability 'movement'.
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David O'Flynn • 2 days ago
It is admirable that the bar on sustainability continues to rise, but I hope companies continue to ensure that they are mindful of 3 main pillars of sustainability rather than creating (pardon the pun) an unsustainable bubble around sustainability. It is certainly possible to keep raising the bar, but this will require ever more innovative ways of increasing social and environmental performance while also ensuring that companies continue to derive economic value from their initiatives.
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