The perfect storm

Rising energy bills, carbon pricing, and increasing regulation and reporting requirements are challenging business leaders to be more sustainable and accountable at a time of stress and volatility on global markets. This ‘perfect storm’ of events brings complexity to the management of energy, facilities, environmental issues, finances, reputation and corporate governance.

One consequence is that executives need greater insight into their sustainability performance, including access to financial-grade data to inform decision-making about big-ticket items like electricity, gas, water, waste and supply chains. Another is that business is being pressured to think and perform outside the box - to do business in ways that have a positive social, environmental and financial legacy beyond the next financial quarter.

Old-school sustainability was governed by a regulatory compliance-based tick-the-box mindset where the priorities were risk mitigation and a dash of eco-efficiency branding. This mindset still informs sustainability thinking in far too many organisations - typically seen where reporting is done to comply with one of the myriad reporting regimes, such as NGERS, EEO, NPI and GRI.

But more scrutiny from customers, investors, regulators and the media has raised the bar on organisations to be more accountable for their sustainability performance - glossy reports containing selective, unverified ‘sustainability achievements’ accompanied by a couple of ecofriendly images have a use-by date. Old-school sustainability thinking is being superseded by a performance management mindset where sustainability drives business transformation across the organisation. Moreover, sophisticated companies view sustainability as more than the responsibility of an isolated, mid-tier, manager; it governs every aspect of business - product development, sales, finance, risk, service - the whole ecosystem. What’s more, leading companies see sustainability as more than an internal business function; they’re targeting their entire supply chain, collaborating with suppliers and customers to embrace an entire life-cycle assessment of their products and services.

The rise and success of sustainable business practice demands new expertise and tools to measure, manage and report sustainability outcomes with transparent audit-level assurance. It also requires financial-grade business data that executives can rely on to make informed decisions about the targeting, payback and return on investment of sustainability spending.

This is critical as more capital flows into sustainability investment - Australian sustainability spending is forecast to exceed $1.8bn in 2011, grow to $2.1bn in 2012 and reach $2.5bn in 2013, according to Verdantix.

At the same time, sustainability management and reporting have become more complex and onerous, especially for those that don’t have the requisite staff and technology.

Some organisations track and report their performance with manual spreadsheets and other legacy systems. This will become untenable as greater accountability demands rigour about how to manage issues like energy, waste streams and the impacts of carbon pricing.

Leading companies are adopting cloud-based enterprise sustainability software to streamline and automate the capture of sustainability data, including utility and supply chain data. Now widespread around the globe, this technology reduces the time and cost of managing data and delivers timely, financial-grade business and compliance reporting ability.

These platforms provide granular data across an organisation by capturing data from any source, including smart meters, supplier reports and internal business systems, allowing information to be rapidly processed and communicated.

Critically, these tools allow CFOs to assess the impact, payback period and return on investment of energy-efficiency and carbon-abatement programs - two pressing issues in the Australian context.

Like it or not, the necessary shift to a low-energy, low-carbon economy means sustainability management and reporting will be subject to increasing review and audit - making their governance and oversight central issues for senior executives and company boards.

Organisations that act now to establish responsibility and business systems to track, report and manage their broad sustainability performance will be well positioned to offset risks to their brand, costs and market power, while driving new opportunities in a low-carbon economy.

*by David Solsky is CEO and co-founder of CarbonSystems - www.globalcarbonsystems.com/