According to the Environmental Protection Agency, sustainability is based on one simple principle: “Everything that we need for our survival and well-being depends, either directly or indirectly, on our natural environment. Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony that permits fulfilling the social, economic and other requirements of present and future generations.”
Although the EPA definition does provide a sense of what the term actually means, it doesn’t deliver a quantitative, mathematical understanding of what sustainability is and how it’s related to business. The definition also doesn’t include an important word: location. Business is financially impacted by where it’s located — the same is true for sustainability. Location is critical in measuring the true environmental impact of sustainability initiatives.
Sustainability has become the new Holy Grail for businesses. According to the 2011 Sustainability & Innovation Global Executive Study and Research Project by MIT Sloan Management Review and Boston Consulting Group, 68 percent of companies said their focus on sustainability increased in the past year, with 66 percent of respondents stating that sustainability was necessary for their business to be competitive.
Executives realize that demonstrating sustainability can be a big competitive differentiator in a crowded marketplace, and can also generate significant cost savings for a business. Despite this, there’s no universal agreement on just what sustainability is — and more importantly, how it’s measured. The result is that each business focuses on different metrics that count individual “environmental domains.” Some businesses focus on C02 reductions. Others, like Coca-Cola, focus mostly on reducing the amount of water it uses. Still others demonstrate sustainability through reduced electricity usage.
These reductions are usually further translated into cost reductions. While cost is important, it does not reflect sustainability. For example, for $10 in Massachusetts you could purchase about 3 gallons of gasoline, 100 kWh of electricity, or a few thousand gallons of water. These three items have a completely different sustainability value, but they cost the same. These costs change based on location and the discrepancy is based on the availability and abundance of the resources being used. If we can factor these changes into the cost structure, we need to factor these same things into the measure of sustainability.
Why Location Matters
For any available resource, different regions have different generation efficiencies. The efficiency of a resource is based on the resource mix, abundance or scarcity, etc. Take electricity for example — the efficiency of electricity in any region is dependent on the resource mix (renewable, coal, nuclear, etc.), generation, transmission and similar factors. The map below is a demonstration of the electricity “efficiency” across the U.S. Areas with an energy mix that includes more renewables, like California and Massachusetts, have higher electricity efficiency than areas where electricity is based off of coal, oil or other fossil fuels.
When you look at the efficiency of a resource in a specific location, you start to get a clearer picture of why location is important when measuring sustainability.
To further highlight the impact of location, let’s look at the example of a water footprint. There are a lot of businesses, including sustainability leaders such as Coca Cola, who are doing tremendous work in reducing water usage across the entire business.
That being said, is reducing water usage in a bottling factory located in Atlanta the same as reducing water usage at a plant in Albuquerque? In Atlanta, water is abundant, but expensive, while in Albuquerque, water is scarce, yet cheap. So is measuring the water amount reduced and the ancillary costs saved an accurate reflection of the true sustainability impact of these initiatives in the different locales?
Reducing water usage is a laudable goal — but simply looking at the reductions and the savings generated from these reductions doesn’t provide the true environmental impact of these initiatives. To accurately communicate the environmental value of these initiatives, location and water scarcity must be factored in and accounted for.
The same is true for energy (and every other sustainability domain). If your energy source is renewable as opposed to fossil fuel based, energy saving measures have differing sustainability impacts, even though the cost reductions may be equal, or even inversed.
During my time at HelioFocus, a solar thermal company, I realized that companies were making a serious attempt at becoming more sustainable, but the efforts were hindered by lack of substantial evidence as to how successful they were. I thought about the renewable energy we were generating, but wondered if that was offset by the pathway we took to generate the energy in the first place. There was no universal standard that we could measure ourselves against.
For too long, the industry has discussed sustainability either through domain-specific measurements (kWh, H20 reduced, CO2 abated, etc.) or by simply what sounds and feels good. Reductions of energy, waste and water are admirable goals and ultimately what we want to achieve — but all reductions are not equal when it comes to sustainability. The true impact varies based on location and the efficiency of the resource.
In order to get a factual understanding of the impact of our sustainability initiatives, and to accurately communicate the impact to customers, consumers and the world at large, we need to create a universal sustainability measurement that accounts for the vagaries of location, fuel mix, and other variances that influence the environmental impact of our sustainability measures.
Image: Anneka via Shutterstock