Sustainability indicators: definition, types of KPIs and their use in the sustainability plan 

Sustainability indicators are a must for companies. Over the years, environmental concerns have grown. These organisations have a lot to contribute, especially in reducing their negative externalities. This must be done through their plans and strategies, but it is essential that there is a suitable method of determining how successful these measures have been.

What are sustainability indicators and what are they used for?

These are tools with which the success of a company’s strategies can be measured. These actions are set out in a corporate sustainability plan and are linked to specific targets. For example, reducing the carbon footprint or waste during production. Their implementation is used to assess if progress is being made in the right direction.

The main reason for using these indicators is to determine whether the company is meeting its objectives. In case of a deviation, corrective measures can be introduced. Thus, sustainability indicators evaluate the company’s performance as well as how it carries out its plans. However, it is important that the right parameters be selected and that they be closely linked to the proposed objectives. Otherwise, they will become largely ineffective.

Sustainability indicators are also closely linked to different standards. Such standards are voluntary and cover a wide range of subjects, including environmental, social or ethical safety. By adopting them, companies demonstrate their commitment and performance in specific areas, as well as having a framework to guide their actions. Today, there are more than 500 different standards, one of them being the financial disclosure recommendations of the TCFD (Task Force on Climate-related Financial Disclosures) from the Financial Stability Board.

What are the indicators that measure corporate sustainability?

Sustainability indicators are grouped into three main categories. Each refers to a specific set of objectives, such as environmental, social and governance. It is in these areas where companies’ strategies and plans will have an impact. By becoming familiar with them and looking at some examples, it will be easier to understand what they have to offer.

Environmental sustainability indicators

They evaluate the success of measures taken in minimising negative externalities on the environment. Such externalities are a consequence of business activity, which is by no means harmless. Manufacturing, especially in industry, requires consumption of resources and energy, which damages the environment through waste generation and, thus, pollution.

Environmental sustainability indicators focus on measuring the mediation of these externalities. Some examples include:

• Amount of water used.
• Life cycle of the product.
• Raw materials used.
• Carbon footprint.
• Carbon dioxide emissions during transit.

Social sustainability indicators

Social indicators measure how the company interacts with its local community and society as a whole. As with the environmental externalities, these organisations have the ability to affect large groups of people, including employees, customers, suppliers or shareholders. The decisions taken by management can impact these groups directly or indirectly.

Therefore, companies must develop an ethical approach to business and take into account how they manage their human resources. This translates to adequate salaries, healthy work environments and the absence of individual employee discrimination. Ultimately, it is critical to remember the importance of the social aspect of ESG and neglecting it will only lead to poor results. Here are some useful indicators:

• Handling of diversity.
• Compliance with equality policies.
• Transparency in human resources management.
• Support for balancing work and family life.
• Health and safety of employees.

Sustainability indicators for governance

Governance sustainability indicators focus on economic and financial aspects. The organisation has to be profitable in order to balance its operations. To achieve this, the company must follow rational and risk-reducing governance criteria. A bad decision, such as acquiring a deficient business, can lead to bankruptcy.

Furthermore, there must be counterweights within the organisation to limit the managerial power. At the same time, the role of adequate governance criteria must be emphasised in order to develop a corporate culture rooted in sustainability and transparency. The indicators include:

• Working capital.
• Debt.
• Turnover.
• Overall profitability.

What is a corporate sustainability plan?

A corporate sustainability plan outlines the strategy that the organisation will follow. It defines the objectives to be pursued at different points in time. Some will be achieved in the short term, but others will only be achievable in the long term. In addition, each goal will be developed through a series of actions, which must also be defined.

Naturally, the objectives will be aligned along three main axes: environmental, social and governance. In this way, the main areas of action are covered. Furthermore, several phases for the implementation of the plan will be established, along with an implementation period. It will be communicated to all participants and decision-makers in good time, allowing them to prepare for their tasks and to avoid mistakes that could hamper implementation.

In conjunction with this, the plan must be realistic in order to be useful and effective. If you do not have this in mind, you will be creating a document that will only be a statement of intent. It will have no value and will not lead the organisation to achieve any objectives. It is essential to avoid this type of behaviour that leads to symbolic and irrelevant actions.

How a corporate sustainability plan can be made

When designing a sustainability plan, it is essential to follow a series of steps. These steps will allow the creation of a solid document, which will be adapted to the company’s situation. Each company has to develop its own plan according to its needs, ensuring that the impacts generated are positive and significant in all areas.

Sustainability indicators

The first step is to establish sustainability indicators, which will be based on a materiality analysis, a process that helps the company determine which areas to focus on. This leads the company to prioritise between objectives, while taking into account stakeholder concerns, providing a solid foundation to cover the rest of the steps.

Define sustainable objectives

Objectives are the fundamental part of any plan as they encapsulate what you want to achieve. Each goal must be attainable, measurable, specific, relevant and time-bound. By following this guideline, you avoid forming goals that are too vague, general or unrealistic. This would only lead to a poorly designed plan that would not be very practical.

Moreover, without clear and easy-to-understand objectives, those in charge may not know how to proceed. They would carry out their tasks without conviction, doubting whether they are doing the right thing. It is therefore advisable to take sufficient time defining appropriate goals.

Defining sustainable measures

Each objective is broken down into a series of specific actions organised according to priority. This pattern helps to avoid actions overlapping or interfering with each other. However, it is important not to create too many actions or to divide them into sub-actions. The more complexity that is added, the weaker the results will be. Therefore, the plan needs to be coherent for all participants and stakeholders.

In addition, the actions should be tied to a specific time period, which will prevent them from taking too long, motivating those responsible to act diligently. A budget will be allocated for compliance and any other resources required. Ideally, this should be kept as tight as possible to avoid unnecessary spending, which would reduce their sustainability.

Establishing follow-up procedures

Finally, the plan needs an established process to track its performance. It aims to evaluate the progress of measures taken within the plan. It also ensures that the budget is not surpassed or that the allocated resources are not exceeded. It helps to anticipate problems, visualise progress and correct deviations.

The monitoring process requires regular reporting of results, enabling managers to make decisions in real time. Moreover, by reporting every few months, it will be possible to check the plan’s evolution. Sustainability indicators will be taken into account as they help to check whether the objectives are being met.

Follow-up meetings involving stakeholders and decision-makers will also be planned. Their role is to provide feedback on the interim results of the plan and the views of the participants. In this way, information on progress will continue to flow.

In conclusion, sustainability indicators are vital for creating a robust plan. Otherwise, it is difficult to make sure you are moving in the right direction and your targets are being met. Therefore, the indicators ensure that the company’s actions generate the positive impacts that were expected, benefiting society as a whole. Do you want to make this process a success? Get in touch with us.

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