How to Design and Measure Sustainability KPIs for Your Business

As a company that designs sustainability measurement software and regularly advises leaders on sustainability strategy and data, we're often asked what the best sustainability KPIs are. Sustainability is cross-functional by nature, encompassing a wide range of metrics and data around a company’s supply chain, energy use, products and packaging, environmental impact, and more. Sustainability KPIs need to material, specific, and relevant to a company's business model: water use might be an important KPI for a clothing company, but not a software startup.

Effective sustainability KPIs should be comprehensive, but not overly complicated. Good sustainability KPIs enable clear operational performance measurement and reporting around a company's material environmental topics, without overburdening teams with too much administrative work or micro-management.

In most cases, smart sustainability KPI selection, operational measurement, and performance go hand-in-hand. Being able to make a strong business case for sustainability initiatives (and their outcomes) - then backing up your sustainable ROI case with compelling measurement and reporting - is the best way to win executive buy-in and mindshare, while also making your sustainability performance clear to investors, employees, customers, and other key stakeholders.

In our work with sustainability leaders and teams, we typically recommend and work around a 6-step KPI design process:

1. Use materiality to connect the dots between sustainability standards, stakeholders, KPIs, and business strategy

Your sustainability KPIs should reflect your brand, business model, and value chain. For example, if you’re a technology company, energy usage and greenhouse gas (GHG) emissions from your servers should be a priority carbon accounting KPI. By comparison, a consumer goods company should focus on its materials, products, packaging, and Scope 3 emissions from its value chain, because those are most material to its sector.

A thoughtful, thorough Materiality Assessment process can be a helpful initial step in designing sustainability KPIs (all of which can be encoded into Brightest's software for easy data collection, performance tracking, and stakeholder communication)

Look at your company's business model, brand, and purpose: sustainability KPIs should tie back to that foundation and be a vehicle for positive environmental change and organizational performance improvement. Your materiality market screen should analyze industry benchmarks, peers, and leading sustainability standards, which will help provide an initial universe of KPIs to select from.

For more on this topic, please read our materiality guide here. Or feel free to contact us directly for materiality help or questions.

2. Map your priority sustainability initiatives to measurable KPIs

Once you’ve established your material sustainability themes and topics, work with different stakeholders in your organization - finance, operations, supply chain, product - to design a focused set of KPIs to track them.

Generally, for most organizations, a common, universal accounting unit for sustainability measurement is the greenhouse gas carbon dioxide (CO₂), and "carbon equivalents" (CO₂e) - the sum of carbon plus all other emissions like methane converted into carbon. Most medium and large companies now practice "carbon accounting," the process of counting up all their carbon and other emissions from operations, and converting it into one total CO₂e number which represents the company's annual carbon footprint.

In most cases, your first steps in sustainability measurement should be to map and count all your carbon, typically in tons or metric tons (tonnes), and set KPIs for emissions reduction.

For example, measuring your greenhouse gases (GHG) in terms of Scope 1, 2 & 3 emissions of carbon equivalents (CO₂e) generated from operations should be one of your top sustainability KPIs. For most companies, annual, quarterly, or even monthly Scope 1, 2 & 3 GHG emissions is a KPI that should be tracked and improved.

Beyond emissions measurement, depending on your industry you may want to consider additional sustainabilty KPIs, such as those related to:

Make sure to always select environmental KPIs that are material and relevant. For example, employees picking up plastic bottles at a beach cleanup is a nice community gesture, but it probably isn't a strategic sustainability KPI for your business, unless you operate in a plastic-intensive sector like CPG or cosmetics with a broader set of targets to reduce plastic usage across your value chain. When sustainability KPIs aren't material (and then get communicated publicly) it raises the risk of provoking external criticism for "greenwashing" or being insincere.

The more your sustainability initiatives and KPIs are grounded in materiality, material change and credible, data-driven claims, the stronger your overall environmental reputation will be with your stakeholders.

Similarly, rather than trying to appease everyone, focus on doing (and measuring) a few specific KPIs well, then build from there.

3. Engage stakeholders, suppliers, and partners

While you know what's best for your business or brand, often your partners (ex: suppliers, third party experts, independent standards organizations, or sustainability measurement firms and systems like Brightest) can provide helpful best practices for setting sustainability KPIs and performance targets.

This is one of the main reasons we invest so much in supporting cross-organizational collaboration inside our sustainability software. Whether it's internal collaboration, cross-team data gathering, supplier sustainability scorecard engagement, or environmental data from offices and facilities, the theme's always the same: it's always some combination of hard, slow, or an incomplete picture pulling together your sustainability data and reporting in a silo.

Positive internal and external relationships are critical for sustainability KPI and measurement success.

Be sure to listen, collaborate, and engage your partners throughout the measurement and KPI conversation.

4. Supplement your sustainability KPIs with product lifecycle analysis (LCAs)

Make sure to consider your products, each input ingredient, and its related environmental impacts and intensity when designing your sustainability KPIs. Your lifecycle scope or lens should include:

Where are your biggest environmental impacts? How can the business set KPIs and targets against improving them?

For example, in their initial 501 Jeans LCA, Levi's identified six material LCA themes (and sustainability KPIs) to measure the product's lifecycle impact.

Source: Levi's

5. Create the right measurement and KPI system

Most sustainability professionals understand the relationship between strategy, actions, impact, data, and outcomes. The challenge is creating a consistent process to efficiently get the data you need to measure results, report on success, and reaffirm business performance. The reality is most sustainability professionals we know spend way too much time gathering and organizing data. Yes, we need the right data to track our KPIs and create reporting, but we shouldn't spend all our time on that when there's other valuable sustainability work we can be doing.

The more you simplify, centralize, and streamline your sustainability data collection, management, and business intelligence capacity, the more time you'll have to focus on sustainability program implementation, project oversight, cross-company engagement, and improvement, rather than just reporting.

In our experience, a system like Brightest can save and automate hours of sustainability data work per week to unblock valuable team time and productivity.

6. Close the loop between sustainability measurement, reporting, and communication

Effectively understanding and communicating environmental performance to stakeholders is one of the most important responsibilities for any sustainability team. Your sustainability reporting strategy and KPI approach should be closely tied to your communications strategy: where, when, how, and why are you authentically telling your brand's sustainability story? All the pieces need to fit together.

There are a lot of potential channels for sustainability storytelling if and when you have the data and results to back it up: internal communications, annual reports, websites, social media, press, sustainability ratings providers - where are you focusing? Does your sustainability KPI approach provide credible proof your organization's achieving the impact its pursuing (or claiming)?

Wherever you are in your sustainability measurement journey, we wish you all the best as you continue making (and measuring) positive impact. If we can be helpful at all (at any step in your process), please get in touch. A central part of our mission here at Brightest is enabling better data-driven decision-making (not to mention actions and communication) for good.