News | 15th January 2015

What makes a company fit for the future?

By Dr Geoff Kendall

This deceptively simple question is actually very difficult to answer. That’s because until now we’ve lacked a common definition of what “enough” means. To see why, let’s look at the three benchmarks by which sustainability performance is typically assessed:

  1. Relative to a baseline year The first approach is to compare performance today to that in an earlier – or “baseline” – year. If you’ve ever read a sustainability report you’ve likely seen statements like “we’ve reduced our water use by 50% since 1990.” On the face of it such progress sounds impressive. But what if the company was just really wasteful back then?
  2. Relative to short-term targets The second approach is for companies to report their performance relative to goals they have set themselves, typically over a fairly short (2 to 5 year) timeframe. For example, “we will reduce our greenhouse gas emissions by 20% in the next 5 years.” Great, but how was that target set? Was it based on an in-depth analysis of how quickly the company must decarbonize its business model, in line with what science tells us must be done to avoid catastrophic climate change? Or – more likely – did the company choose a number it thought it could safely deliver through relatively low-cost efficiency measures?
  3. Relative to peers The third approach is to compare a company’s performance with its peers. This is what corporate sustainability ratings do. There are over 100 such ratings, all of which award scores that supposedly convey how sustainable companies are. Every rater has its own formula for calculating scores, and – since these formulae are usually considered to constitute valuable intellectual property – the way they work is usually kept secret. So it can be extremely hard to draw meaningful conclusions about what a company is doing well, and what it’s doing badly. But the biggest problem with the current crop of ratings is that because they compare companies with each other, all a company has to do to get a great score is to be slightly less bad than its peers.

All three approaches assess performance relative to where companies are now, rather than relative to where they need to be. So is it any wonder than many CEOs and investors believe that doing better than last year – or better than ‘the next guy’ – is enough? If only that were the case, but – as regular readers of 2degrees will know – we need to radically and rapidly rethink the ways we do business if we are to address society’s most pressing challenges.

That’s why we need a new benchmark: one grounded in best-available natural and social science, that identifies how much is enough for every area of business activity. Only then will we be able to tell how far away any company is from where it needs to be, and thus the degree to which it is helping – or hindering – progress toward a sustainable future.

The Future-Fit Business Benchmark is a new free-to-use tool, published under a Creative Commons license, which aims to meet this need. It sets out a comprehensive suite of future-fit goals that collectively define the performance thresholds any company must reach if it is to be considered truly sustainable.

If you’ve read this far, you probably agree that companies need to do more if we are to accelerate our transition to a sustainable future. So let’s help them to understand what “do more” really means. Let’s give CEOs and investors a clear destination to aim for. The Future-Fit Business Benchmark is a work in progress: we’d love to hear your feedback on what we’ve done so far, plus any ideas you may have for carrying it forward.

This article first appeared on 2degrees

Dr Geoff Kendall Co-Founder & CEO

Geoff is an entrepreneur whose experience spans sustainability consulting, high-tech startups, corporate communications and academic research.

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