Sustainability has a big problem and that problem is data. Consider this sentence:

"Large data sets grounded in solid fundamental metrics and given expert analysis are the key to the health and success of a sustainability program."

There's a lot to swallow in that sentence, right? Today we're going to unpack it. Welcome to Climate|Money|Policy where we explore climate change as a business issue and an opportunity to grow your organization. Let's get right to the bullets.

"Large Data Sets" this usually means demand side data. How are you using water & power? When do your internal customers order and reorder products? What parts of your business need the most maintenance and when? How do you stay in touch with external customers and suppliers in such way that you understandtheir demand side needs? (We'll come back to how this differs from the supply side question in a minute.)

"Grounded in Solid Fundamental Metrics" All of your decisions about the organizations policies, purchasing, hiring, employee training, marketing logistics etc., all of these must relate back to the balance sheet, cash flow and P&L. There's just no point in measuring something if you can't trace the impact of that thing to the company's financial health. Note here that "financial health" is a tricky term. It depends largely on the time scale you want to be healthy over. More on that later.

"Expert Analysis" For our purposes we won't consider analysis to be expert unless it fulfills these criteria: a) the analysis is technically competent and critical of the data, b) the analysis is aligned with the timetable the organization is working under, c) the analysis frames issues in a way that is easy understood across different business units.

Let's look again at why these are important. The goal of a corporate sustainability program is to build processes and practices that foster growth without sacrificing growth in the future. In this way a company is better insulated from disruptions in the market and grows the overall size of a marketplace.

What you don't know can (and will) hurt you.

Once an organization understands that the time has come to make sustainability an internal priority (for more on when to to do that read this article) you have to start somewhere. Most companies begin by looking at their supply side data. How much power do we use? What is the mix of energy? How much do we pay for it? Questions like this. Someone comes up with a spreadsheet for what each of the buildings at each of the facilities use and crunches numbers until there's a metric that can be sent to the purchasing department. This can be done for power or water or paper or any business input. Very often that's where the effort ends until an internal champion show up.

Demand side data.

On his or her arrival the internal champion starts asking much more detailed questions that are a lot harder to answer. Face it, it's easier to ask the CFO how much was spent on electricity last year than it is to document when all of your machines run, what their power loads are and how often they're being productive. Those questions starts to look like a pretty deep rabbit hole when you consider all the things that get plugged in an outlet. Lighting in all it's forms and options, servers, air conditioning to say nothing of the factory machines, computers and mobile devices that get plugged in or used intermittently.

Every device has a baseline number to calculate, an optimal efficiency and a dizzying array of options for replacement on the market. That's the data set we're talking about. The demand side of your power, water, paper and other raw materials. Truly large companies could find themselves stunned at the cost and carbon liability in Post-it notes alone. (That's not to say you should be getting to that level of granularity but you certainly could) Each of those data points represent an expense you may not have even known about and an opportunity to get ahead of the competition. With the arrival of carbon regulation or water restrictions (80% of California is under extreme drought conditions as I write this) you may find yourself suddenly losing market share to others who innovated to a more sustainable model before you.

So you have good data now what?

Map the data and trace outcomes to organizational health. There are tons of ways to relate processes to time and money. You need to make the decision on how each of those hundreds of data impacts the larger system in your organization. The most important thing to bear in mind here is that success and financial health may not be the same thing and they may not be looked at over the same time horizon. Let's take an example.

An investor buys a company for $5M. Quickly looking at the books he can break up the company assets and sell it for $6M within a year. On the other hand they have a new product offering that should capture market share and grow revenues substantially. Selling the company is clearly a viable financial choice. It's terrible for the organization's health and clearly not a sustainable way to profit since you only get the proceeds once.

There are lots of short term choices like that that look great if your focus in on the short term (and let's be clear selling could be the best option) but if the goal is to create long term value and maximize profits then there are a lot of apparently viable options that make no sense. For this reason you need expert analysis.

Hire the best help.

Purchasing is too important to be left to the purchasing department, facility maintenance is too important to be left to the maintenance team, etc. etc. etc. Whoever you find to manipulate that data you've acquired is going to need to be able to talk across the different business units and speak the language of the CFO. This person (or company) isn't an accountant, they're a doctor. Many of the prescriptions they may conclude should be looked at will need to be sold to the various internal and external stakeholders. If may be enough to dictate to your purchasing department what to look for but how are you going to do that with your suppliers' purchasing departments? Or their facilities managers? Remember that part of a sustainability program is building a better market so that you can prosper from the existence of that market and avoid unplanned disruptions. If you haven't looked at your supply chain or distribution channels with the same keen eye toward data (like this manufacturer hadn't) then you have a long way to go.

Look for someone that communicates well, understands the long term direction you want to take and (of course) proves that they have the chops to do the work.

Climate | Money | Policy