PwC’s Metrics for Sustainability Solutions, Part II

Kathy Nieland, who leads PwC’s Sustainable Business Solutions practice and is the partner in charge of the firm’s New Orleans’s practice, learned about sustainability quite personally while living through the devastating hurricane there six years ago.

While the firm was already growing its corporate responsibility efforts, that ‘aha’ moment eventually led to six capabilities, including two examined in Part 1: devising strategy and integrating new metrics with traditional.

Four other capabilities help take sustainability reporting to the next level:

Translating Sustainability Performance into Financial and Tax Terms

“Typically companies are measuring sustainability through non-financial metrics,” Nieland says, “and we discuss how to translate environmental and social activities into financial outcomes for the company.

“The kind of thing you might see in companies’ internal reporting might be ways of making links between greenhouse gas (GHG) to financial issues, like amount of GHG emitted per revenue equivalent, ton of product produced or per revenue dollar earned.”

She adds that translating social aspects of sustainability, such as impact on the community, into financial terms is more leading edge. Understanding and translating the impact of company actions on the community–for instance, the impact of Wall Street layoffs on various supply chains, like food companies–is complex. “How far down the supply chain do you go and what are we actually valuing?” she asks.

Helping Companies Automate Sustainability Reporting

One key was recognizing that, while business has been reporting financial information for years, and with the guidance of significant regulation since 1933, it has been reporting sustainability data for a very short time. As a result, much of the data collection and reporting aren’t as mature–both in the rules for calculating impact, as well as the processes to collect and report data throughout the value chain.

The firm also realized that some skills, processes and systems used to measure financial data might be transferred to measure effects of water, energy, emissions, waste and so on–first by designing the right reporting strategy, then by aiding companies to integrate reporting practices into business and supply chain operations, and then by automating those practices.

Integrating Sustainability into the Business

Often that means integrating sustainability not just into the reporting process but into the business lines, helping to open up channels between environmental and social decision-makers and those responsible for finance and operations, for instance. Much of PwC’s value has come by helping companies design criteria to integrate such issues into their core systems and establish standards to determine the most effective suppliers, geographical locations and other key sustainability elements.

Even more important may have been the realization that sustainability metrics, unlike traditional metrics, require long-term thinking, versus “short-term needs, like quarterly earnings and revenue per person,” Nieland says.

Going forward, the hope is to get business to focus on integration, in both operations and reporting. “In this economy, where companies have few resources, it’s almost a plus” to combine traditional financial and sustainability reporting, since sustainability often have very positive financial results.”

New Trends

As for new trends in metrics, in addition to integrated reporting, Nieland says environmental profit and loss (P&L) statements could be the next big thing, though it’s still in the early stages. “We’re supporting companies if they want to go down that path, but it’s a lot of work for those who take it on,” she says. Such reporting “creates a different vision of environmental impact, understanding the company’s impact on the environment, both positive and negative, and putting it in financial terms.”

And the industries most likely to need special attention? They’re likely to be in the consumer goods, apparel and heavy industrials, which have a big footprint on the environment and international sourcing and supply chain. Says Nieland: That’s where customers expect a lot.”

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