the north star of managing non-financial performance: science-based goal-setting and analysis
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TheNorthStarofManagingNon-FinancialPerformance:Science-basedGoal-settingand
Analysis
Bob Willard, Sustainability Advantage @bob_willard
Andrew Winston, The Big Pivot @AndrewWinston
Jeff Gowdy, J.Gowdy Consulting @JGowdyConsult
Bill Baue, Reporting 3.0 @bbaue
Martin Rich, Future-Fit Foundation @FutureFitBiz
Astrid Fellingham, Analyst @FutureFitBiz
Besuretoengageintheapp:sb16app.com
1)Checkintothesessionbyselectingsession fromtheprogramandselecting'checkin'
2)Poseand'up-vote' questions tobeposedduringQ&A:Insession description, select'submitaquestion'
PivotGoals.comThe ESG, science-based, and visionary targets of the largest companies
Jeff GowdySustainable Brands New Metrics// Boston// November 14, 2016
Outline• Part I: Pivot Goals Overview and topline results
• Part II: Results from the GF100
• Part III: Science and Ethics-based Goals• Results from GF100• What Next
• Part IV: Example Analyses using Goals data• Future Fit example• Transportation sector example• Biodiversity example
Part I: Pivot Goals Overview The Global Fortune 500�s Sustainability Goals
PivotGoals.com Search Criteria:•Keyword search
• Company Name, Goals (e.g., search for �Future Fit� or “deforestation”)
•Checkbox search/narrowing to…• 29 ESG Focus Areas (Climate, Water, Human Rights, etc.)• By Industries, Macro and Micro• Value Chain stage (from supply chain to end of life)• Absolute/Intensity• Goal Type (specific & dated; undated; intentional)
* Note: the full Fortune 200’s goals are loaded; some of companies 201-500 are loaded
Part I: Pivot Goals Topline Results
• 85 of the Fortune 100 (85%) have sustainability goals• Total: 970• Min: 1 (PEMEX)• Max: 91 (Nestle)• Average: 9.7/company (all 100)• Average: 11.4/company (85 with goals)
Note: Calculations as of Sep 2015; results change as new data is loaded
Part I: Pivot Goals Topline Results
• 85 of the Fortune 100 (85%) have sustainability goals
• How do they communicate the goals?– Report: 81 (95.3%)
• Standalone Report: 74 (87.1%)• Annual Report: 7 (8.2%)
– Website: 4 (4.7%)
Note: Calculations as of Sep 2015; results change as new data is loaded
Part I: Pivot Goals Topline Results
• 85 of the Fortune 100 (85%) have sustainability goals– 81 publish Reports
• What Kind of Reports?– Sustainability Report: 26 (32.1%)– CSR/CR Report: 23 (28.4%)– Other Standalone Report (not called Sustainability/CSR): 18 (22.2%)– Environmental Report: 7 (8.6%)– Annual Report: 7 (8.6%)
Note: Calculations as of Sep 2015; results change as new data is loaded
Part I: Pivot Goals Topline Results
• Goals of F100 are:• Specific and mostly time-bound (68%)• Mostly absolute (88%) vs. relative/intensity (12%)• Predominantly about operations, although cover value chain:
• Supply chain: 17% • Operations: 66% • Use phase: 13% • End-of-life: 2%
Note: Calculations as of Sep 2015; results change as new data is loaded
Part II: Results from the GF100
• Goals by ESG Focus Areas
• Goals by when they are due
• Companies with most goals
Number of Goals by ESG focus areas
10Note: Calculations as of Sep 2015; results change as new data is loaded
0
20
40
60
80
100
120
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29PivotGoalscategories
Number ofGoals
We Like Round Numbers (and open endedness)
Note: Calculations as of Sep 2015; results change as new data is loaded
0
50
100
150
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350
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2017 2018 2019 2020 2025 2050 Ongoing Open Other
WhentheGoalsAreDue
Number ofGoals
Companies with Most Goals
Note: Calculations as of Sep 2015; results change as new data is loaded
0
10
20
30
40
50
60
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TwentyorMoreGoals
Number ofGoals
Part III: Science and Ethics-based Goals
Definitions•Science-based
– Based on scientific knowledge or inherent logic of thresholds in vital capitals in the natural world
– Goals that are in line with these externally-based thresholds can be considered science-equivalent, even if not explicitly stated as based on science
– E.g., for carbon: 6%+ reduction in carbon intensity per year, or 3% per year in absolute emissions
•Future Fit or Ethics-based– Express aspirations or performance in terms of fairness, justice, or equity –
the conditions we need to build human capital and create a thriving, prosperous world
– In terms that don’t have science-based thresholds
•None– Goals that do not satisfy any of the above definitions.
15
Area CriteriaScience/Data BasedGHG/Climate 3% absolute or 6% intensity reduction per yearEnergy 3% absolute or 6% intensity reduction per yearRenewables Similar pace of change as above or 100% goalAir Zero target or Context/Science-based indicationWater "Water-neutral", "watershed", "water stress"Waste/Pollution Zero target (<1% landfill or incineration)Haz Waste Zero targetPackaging 100% certified target or zero deforestationToxics Zero target or indication of green chemistry guidelinesBiodiversity/Land Use Zero net impact or context/science mentionForest Large certified target or zero deforestationFood & Ag (Sourcing) All sustainability sourced
Health & Wellness (Nutrition) Reduction based on dietary standards
Future-Fit
Governance Zero incidents of corruption, unethical practice, 100% transparency
Safety Either zero injuries/fatalities or certification for all facilitiesEmployees 100% employees getting living wage and othersHuman Rights Zero violations
PivotGoals CriteriaforScienceandEthicsbased
Science-equivalent/Ethics Goals• 2 categories…
– Science-equivalent (for a large part of business, not full value-chain)– Ethics-equivalent: moral, ethical, or based on flourishing model
• Of 970 goals of the GF100, 20.6% are in the ballpark…– 110 (11.4%) Science-equivalent ( >1% explicitly science-based)**– 52 (5.4%) Very close to Science-equivalent but missing one aspect– 37 (3.8%) F2 & Ethics-equivalent
– 768 (79.2%) are none of the above
• Trends– Slow and Steady increase in Science and Ethics based– But, the pace is not fast enough given the timeframe dictated by science
Note: Calculations as of Sep .2015; results change as new data is loaded
Top 10 – Companies with Most Science/Ethics-based Goals
Note: Calculations as of Sep .2015; results change as new data is loaded
0
5
10
15
20
25
30
35
Nestle E.ON Nissan Microsoft P&G Honda Costco Kroger BankofAmerica
ENI HP
Top10Companies
Number ofScience/Ethics Goals
What Next?
• Science and Ethics based as the “floor” rather than the “ceiling”
• Transparency and ownership of goals: the case of the disappearing goals
• Are science and ethics-based enough? (hint: context)
Context-based Goals include Allocations
Source:http://www.sustainablebrands.com/news_and_views/new_metrics/mark_mcelroy/science%E2%80%93_what%E2%80%99s_difference
Part IV: Example Analyses using Goals data
• Future Fit example
• Transportation sector example
• Biodiversity example
Future Fit Business Benchmark
• Afuture-fitbusinessisonethat innowayundermines–andideallyincreases– thepossibilitythathumansandotherlifewillflourishonEarthforever.
à 20“futurefit”goalsthatanyandeverycompanyneedstodotoensureitsabilitytosurviveandthriveinthefuture
If Future Fit were a company in Pivot Goals
• Itwould…
• CoverallfourmajorstagesoftheValueChain
• HavefullcoverageoftheESGfocusareas(17inPivotGoals)thathaveascienceandethicsbasedthresholds,whichnoF500hasreachedyet
à ProvidesStepbystepguidetosettingscienceandethicsbasedGoalsthatcoverthefullgamutofESG
Science-based goal setting example
EntireOperations
PlusPartofValueChain
AllofValueChain
PartialOperations0%
50%
100%
100%+ornetpositive
ExtentofGoalCoverageSource:PivotGoals.com,companywebsites
PivotGoalsScience-basedThresholdforWaste
Wasterecycling,reuse,energy
Auto Makers, company goals
0%
50%
100%GeneralMotors Honda PivotGoalsScience-based
ThresholdforWaste
EntireOperations
PlusPartofValueChain
AllofValueChain
PartialOperations
Source:PivotGoals.com,companywebsites
100%+ornetpositive
Wasterecycling,reuse,energy
ExtentofGoalCoverage
0%
50%
100%PivotGoalsScience-basedThresholdforWaste
Component Makers, company goals
EntireOperations
PlusPartofValueChain
AllofValueChain
PartialOperations
Source:PivotGoals.com,companywebsites
100%+ornetpositive
Wasterecycling,reuse,energy
ExtentofGoalCoverage
0%
50%
100%PivotGoalsScience-basedThresholdforWaste
Product Makers (e.g. tires), company goals
EntireOperations
PlusPartofValueChain
AllofValueChain
PartialOperations
Source:PivotGoals.com,companywebsites
100%+ornetpositive
Wasterecycling,reuse,energy
ExtentofGoalCoverage
Transportation Sector, company goals
0%
50%
100%EastJapanCompany
PivotGoalsScience-basedThresholdforWaste
EntireOperations
PlusPartofValueChain
AllofValueChain
PartialOperations
100%+ornetpositive
Source:PivotGoals.com,companywebsites
Wasterecycling,reuse,energy
ExtentofGoalCoverage
0%
50%
100%Wal-Mart PivotGoalsScience-based
ThresholdforWaste
Retailers, company goals
0% EntireOperations
PlusPartofValueChain
AllofValueChain
PartialOperations
Source:PivotGoals.com,companywebsites
100%+ornetpositive
Wasterecycling,reuse,energy
ExtentofGoalCoverage
0%
50%
100%
AutoMakers
Products,e.g.Tires
Components
TransportationSector(outside of
Auto)
Retailers
PivotGoalsScience-basedThresholdforWaste
Summary plot of goals
0% EntireOperations
PlusPartofValueChain
AllofValueChain
PartialOperations
Source:PivotGoals.com,companywebsites
100%+ornetpositive
Wasterecycling,reuse,energy
ExtentofGoalCoverage
Biodiversity example from WHC Conservation Conference
EntireOperations
Plus PartofValueChain
AllofValueChain
PartialOperations
0%
50%
100%
ImpactReduction
ExtentofGoalCoverage
Mapping of Biodiversity Goals of GF500 from Pivot Goals
Future-FitBusiness Benchmark
AstridFellinghamastrid@futurefitbusiness.org
Welcometothe“Anthropocene”or“GreatAcceleration”
Environment
Wemustrethinkhowwedo– andvalue– business
Environment
Society
BusinessEnvironment Society
Business
Society
ShareholderValue SharedValue SystemValue
Business
Business isallthatmatters:companiesprivatizegainswhilesocializinglosses
Businesscomesfirst:negativeimpactsarejustifiedby‘doinggood’elsewhere
Business innowayhindersandideallyacceleratesthetransitiontoaprosperousfutureforall
Future-FitBusinessAbusinessthatcreatesvaluewhileinno
wayundermining– andideallyincreasing–thepossibilitythathumansandother
lifewillflourishonEarthforever
Inasustainable society,natureisnotsubjecttosystemicallyincreasingconcentrationsof
minedsubstances
Inasustainable society,natureisnotsubjecttosystemically
increasingdegradationbyphysicalmeans
Inasustainable society,people arenotsubjecttosystemicbarrierstohealth,influence, impartiality,
competenceandmeaning
Inasustainable society,natureisnotsubjecttosystemicallyincreasingconcentrationsof
substances producedbysociety
Thestartingpoint:Earthasasystem
Sowhatmusteverycompanystrivetodotoensurethatitbecomesfuture-fit?
…andwhatcananycompanydotocreatesystem
valueinandbeyonditspursuitoffuture-fitness?
Everybusinessispartofacomplex,interdependentvalueweb
Afuture-fitbusinessreaches(orexceeds)extra-financialbreak-eventoensurethat…
Saleschain
Supplychain
CompanyOperations
…itdoesnotbreachthesystemconditions
through itsownoperationalactivities
…itdoesnotexternalizebreaches
throughout itssupplychain
…itdoesnotforcebreaches tooccur
through thesaleofitsgoodsandservices
Anybusinesscancreatesystemvalueinandbeyonditspursuitoffuture-fitnessthrough...
Restorativeoperationsgoingbeyondbreak-evenwithinitsownfourwalls
Valuewebfitnessincreasingthefitnessofothersinthevalueweb
Valuewebinclusivitycreateinclusivesupply/sales chains, beneficialproducts
Broaderinterventionsactionstoimprovefitness beyondthesupply/sales chain
Supplychain
Saleschain
CompanyOperations
Itequipsbusinessleaderswithacleardestinationtoaimfor
Ithelpstoguidestrategicinnovation
Itoffers actionableinsight onnature/sizeofperformancegaps
Itinspiresandhighlightstruesustainabilityleadership
TheBenchmarkisdesignedtobeusefulandusable
Usecase1ExploretheSDGsanddevelopanauthenticresponse tothem
HowyoucanstartusingtheBenchmarktoday
Future-FitBusiness Benchmark
HowcanyoumakesenseoftheSDGs?
Anddevelopanauthenticresponsetothem?
Future-FitGoalshelpanybusinessrespondtotheSDGS…
…whichcanbeusedtoengageandexcitestakeholders
Usecase2Runa‘healthcheck’ofyourbusinessmodels,processesandproducts
HowyoucanstartusingtheBenchmarktoday
Future-FitBusiness Benchmark
Future-FitBusiness BenchmarkFutureFitBusiness.org
Goals relating to
the environment,
communities and
employees also apply
to a company’s core suppliers Future-Fit
Business Benchmark
Ifafuture-fitgoalseems‘impossible’youneedarethink!
Community concerns
are actively solicited,
impartially judged
and transparently
addressed
Future-Fi
t
Business Benchmark
1 goal specific to communities
7 goals specific to the environment5 goals specific to employees
5 goals specific to customers
All goals relating to the environment, employees
and communities extend to certain suppliers too
3 goals specific to society as a whole
Future-FitBusiness BenchmarkMaterials derive
from sources that
respect the welfare
of ecosystems, people and animals
Future-FitBusiness Benchmark
Every company relies to some extent upon third-party suppliers – as, in turn, do they. Such interdependencies leads to extremely complex supply chains. So where should mutual accountability for supplier impacts end?A future-fit company takes responsibility for any impact resulting from the provision of supplied goods or services if their absence would seriously affect its business. We consider two types of such core suppliers:• Outsourced functions: A company is mutually accountable for the
operational impacts of any direct supplier to whom it outsources core business functions (e.g. customer support, manufacturing, logistics).
• Product inputs: A company that sells goods (or services whose delivery requires goods to be consumed) is mutually accountable for all cradle-to-gate operational impacts caused by the creation of its product inputs (raw materials and their derivatives).Future-fit goals relating to operations (grouped under the environment,
employees and communities) must ultimately be reached by all of a company’s core suppliers if the company as a whole is deemed to be future-fit. That’s because a company’s ability to create value depends on the actions – and thus impacts – of its core suppliers. Future-FitBusiness Benchmark
Runafuture-fit‘healthcheck’onyourbusiness…
Future-FitBusiness BenchmarkThankyou!
The North Star of Managing Non-Financial Performance
• Bob Willard – Exercise: The Future-Fit Goals
FUTURE-FIT BUSINESS
If it were to operate forever, it would not only do no harm, it could do well by doing some net good.
A Future-Fit Business creates value while in no way undermining
– and ideally increasing –the possibility that humans and other
life will flourish on Earth forever.
FOURTH BENCHMARK
Requiredstate
Baselineyear
Othercompany
Short-termgoals
Othercompany
Company today
Currentstate
Future-FitCompany
ß Past Futureà
Posterisdownloadable fromsustainabilityadvantage.com/books-dvds/future-fit-business-benchmark/
All renewable energy.
All environmentally responsible and socially equitable water use.
All materials derive from sources that respect the welfare of ecosystems, people and animals.
All concerns addressed.
Operations emit no GHGS.
All products can be repurposed.
All products emit no GHGs.
All products do no harm to people or the environment.
All concerns addressed.
Informed about all impacts.
Operations emit no substances which cause harm.
Operational byproducts are repurposed.
Operations do not encroach on ecosystems or communities.
Business conducted ethically.
Right taxes paid.
Lobbying does not undermine FF
Safeguard employee health.
Pay at least a living wage.
No discrimination.
Fair employment terms.
All concerns addressed.
* 13 goals also apply to suppliers in the company’s core supply chains
futurefitbusiness.org
FUTURE-FIT GOALS*
*
*
*
*
*
*
** *
*
*
*
GOAL COMPARISONSCommon SustainabilityFrameworks
Future-FitBusinessB
enchmarkG
oals
GlobalR
eportingInitiative(GRI)
BCorpC
ertificationAssessm
ent
ISO26000
CER
ES21stC
enturyCorp
WBCSD
Action2020PriorityA
reas
CKG
lobal100Criteria
SASBM
aterialIssues
DJSIR
obecoSAMQuestions
IntegratedReporting<IR
>
UNGlobalC
ompact
CDP–
Carbon,W
ater,Forests
UNSD
Gs
PivotGoalsD
atabase
TransformationalC
ompany
21 149 462 37 35 9 12 30 88 5 10 77 17 29 19
sustainabilityadvantage.com/books-dvds/future-fit-business-benchmark/
F2B2-RELATED DOWNLOADS
sustainabilityadvantage.com/books-dvds/future-fit-business-benchmark/
• F2B2 Context Poster: Maps the SDGs and the foundational science that define the society we want to the F2B2 goals for the five categories of sustainability initiatives that contribute to the SDGs.
• Goals Comparison: Maps the 21 F2B2 goals to 13 other sustainability reporting and standards frameworks, (e.g. GRI, SDGs, B Lab BIA, DJSI, ISO 26000, Global 100 KPIs)
• Companies with Similar Goals: Fortune 200 companies that already have F2B2-like goals, from the Pivot Goals database and other sources.
• KFI Calculations: Summary of KFIs for the 21 F2B2 goals as explained in detail in F2B2 Part 2, including metrics for supply chain aggregation.
• Stakeholder Map: Maps 21 F2B2 goals to its six stakeholders.• Threat Comparisons: Eight sources for threats to society cited in F2B2.
• Wellbeing comparisons: Maps principles to 7 society wellbeing frameworks.
The North Star of Managing Non-Financial Performance
• Bill Baue – MultiCapital Scorecard and ThriveAbility: how do they all relate?!
PositiveMavericks
• Workproductively(notobstructively)towardpositivechange• Aremotivatedmorebyultimateends,withintermediateendsandmeansservingasvehicles,notdestinations
• Challengetheconstraints,structurallimitations,unconsciousbiasandshadowagendasoftheinstitutionsandorganizationstheyworkwith
• Backcast fromadesiredfuture,buildingbridgefoundationsonthefarsideoftheriver
• Workcollaborativelyinne(x)tworks withotherpositivemavericks
• Thinkandactatsystemslevels• Seektransformative(notjustincremental)change
Goal-Setting&TransitionPlanning
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
• FutureFitBusinessBenchmark
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
• FutureFitBusinessBenchmark• Science-BasedTargets
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
• ThriveAbilityFoundation
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
• ThriveAbilityFoundation
• EmbeddingProject
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
Measuring&Accounting
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
• ThriveAbilityFoundation
• EmbeddingProject
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
Measuring&Accounting
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
• ThriveAbilityFoundation
• EmbeddingProject
• TotalContribution
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
Measuring&Accounting
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
• ThriveAbilityFoundation
• EmbeddingProject
• TotalContribution• MultiCapital Scorecard®
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
Measuring&Accounting
Reporting
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
• ThriveAbilityFoundation
• EmbeddingProject
• TotalContribution• MultiCapital Scorecard®
NextGenerationSustainabilityInitiativesCycle
Goal-Setting&TransitionPlanning
ImplementingStrategies
Measuring&Accounting
Reporting
• FutureFitBusinessBenchmark• Science-BasedTargets• PivotGoals• PreventableSurprises
• ThriveAbilityFoundation
• EmbeddingProject
• TotalContribution• MultiCapital Scorecard®
• Reporting3.0
NextGenerationSustainabilityInitiativesCycle
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