Latest News

Being an advocate of triple bottom line reporting we think it's time to embrace a new approach to how we measure and monitor performance, starting with the incorporation of environmental measures.

Recent talk in the accounting world has been of cutting back the amount of information we are required to report in the financial statements, in a bid to allow businesses time to focus on what's important. The question remains - is the traditional way in which company performance is reported really useful to business owners and other stakeholders?  Being an advocate of triple bottom line reporting I think it is time to embrace a new approach to how we measure and monitor performance, starting with the incorporation of environmental measures.

Although traditionally accounting has always been about the numbers, the true measure of business performance undoubtedly goes beyond that to which a monetary value can be attributed.  A recent study conducted by Nielsen Media surveyed 293,000 Monday Herald readers. The results clearly show the importance of environmental responsibility:

• 50% of those surveyed agreed that when buying a product or service, it's very important that the company shows a high level of social and environmental responsibility
• 51% like companies to tell them about how they are making a positive difference to society or the environment so they can support them.

However, the benefits of environmental reporting go beyond simply enhancing a business' public image. An improvement in environmental sustainability is also expected to invariably have a flow on effect to better financial performance. Consider a manufacturing business which implements an environmental improvement and reporting strategy. Key performance Indicators (KPIs) may include a decrease in raw materials wastage, improved power efficiency and decreased fuel consumption through better logistics. All of these will clearly have a positive long-term financial impact - namely more money in the bank.

The challenge - how do you accurately measure and report on environmental factors?  This, no doubt has been the primary road block for many organisations when it comes to implementing a system of non-financial performance measurement. 

The key is to start by looking at the information that is available and selecting sources that are reliable, measureable and relevant to the user. If the business is working towards improvements in specific areas then time bound targets also need to be set. This often involves considering ways to measure things which have typically been written off as immeasurable.

A range of tools and calculators are now available to calculate the impact of air travel, total carbon emissions, power use and the like. That said, a more humble approach will still prove valuable for businesses without the resources to measure and monitor to this level of detail. Measures such as kilowatts of power used, kilometres travelled or litres of fuel consumed are generally easy to obtain and still give an accurate estimation of a business' environmental impact, particularly when tracked over a period of time.

A thorough reporting approach will also consider the costs required to implement new strategies, and the period over which these can be recovered. Take for example the installation of motion sensors as a step to reducing energy costs, the cost of which should be measured against the relevant energy savings.

With a growing number of consumers advocating for corporate responsibility, gone are the days when it was just the greenies who were concerned with environmental sustainability. Undoubtedly, the fundamental principal remains that what we focus on is where we will get results.

The opportunity to gain a stronger competitive advantage with customers, while also driving bottom line efficiencies, makes the incorporation of environmental KPIs into business performance reporting seems a natural step forward in growing a stronger business.

Shareemail+1