How to create and measure a successful sustainability performance dashboard

In this article, we outline how we support clients in establishing tangible key performance indicators (KPIs) within a sustainability dashboard, designed to measure progress and provide insights to executive teams. Having a clear set of agreed metrics with targets, aligned to executive remuneration, can unlock the sponsorship needed for any sustainability programme and address the key ‘so what’ questions often raised.

Sustainability is a rapidly changing landscape, with many new and continuously evolving reporting frameworks and standards. It can be hard for organisations to know where to focus their efforts and how to measure progress. 

Beyond regulatory compliance, it is important for organisations to reflect on what success looks like for their sustainability programmes. Inevitably this means seeking to measure performance and progress. Sustainability is a broad subject, and what matters most to any individual firm needs to be calibrated to their context. Despite sustainability being a relatively new topic, many of the underlying themes are far from new, and so every organisation has far more information in practice than it might realise.

Working with our own Crowe executive to establish a sustainability KPI dashboard, we have had to balance a number of factors in selecting the right mix of metrics. The process of developing and testing the dashboard is a unique opportunity to engage with key stakeholders across the entire business and understand what sustainability means for them.

Implications for organisations

Who is the target audience?

Who is the dashboard intended for, and what do they need to know? Based on Crowe’s experience, the dashboard was originally created for quarterly reporting to the Executive team. However, being a partnership, we found that all partners were interested, so we expanded its reach to include all partners, who by definition have a stake in the business’s success.

Often, the creation of a dashboard is an exercise in what you leave out more than what you add. Just because you have information, including it can lead to information overload. So, what are the key indicators? Some metrics will be a given, such as greenhouse gas emissions, but for one organisation social mobility metrics will be critical, and for another it might be employee retention.

What matters most?

Sometimes it helps to take a step back and ask the simple questions. If there were no regulations or reporting requirements, what would we need to know, and how would we go about measuring it?

Two good sources for determining what matters to the organisation from an internal perspective are:

• materiality assessment – what are the most important sustainability aspects recognised by internal and external stakeholders. How are these factors best measured and reported on? A simple example might be greenhouse emission reduction relative to Net Zero commitments and Science Based Targets (SBTi)
• sustainability strategy – what have you already committed to achieving, and how can this best be measured. This also allows metrics to be reported against agreed targets or desired outcomes. Good examples include employee engagement survey scores or learning hours delivered to employees.

What must be reported?

Boards and management will want to receive assurance over certain key processes they are accountable for. For example, information security breaches may be critical to many organisations, whereas gender or ethnicity balance across management will be imperative to others. The sustainability dashboard can act as an aggregator of these requirements, a one-stop shop to measure the enterprise's sustainability health. It can also lead to a simplification of reporting through adopting a more integrated approach.

What data is available, and what is its quality?

Stepping back, what information can the organisation collect and at what frequency? Many business processes only occur on a quarterly basis. Equally the information quality is only as good as its source. Typically, ethnicity data, which must be provided on a voluntary basis, can have quality limitations. Persistent data quality issues can be a barrier to external disclosure. Management attention and the challenge of reports are often catalysts for step changes in reported data.

Benefits 

Having invested in implementing a robust sustainability dashboard, the firm can, in our experience, potentially leverage the following benefits:

Employee value proposition

Increasingly, sustainability reporting is an important factor in attracting and retaining talent. Having invested in developing a sustainability dashboard, organisations can choose to be brave by being transparent. Initially this might be by sharing parts of the dashboard with existing employees through intranet posts or townhall meetings. Employees are generally keen to know they are working for an organisation that aligns with their own values, is committed to improve in this area, and sharing regular updates makes the programme feel more authentic.

Similarly, prospective candidates increasingly have a choice of where to work and are doing more personal due diligence before accepting roles. Having powerful sustainability commitments that are backed up by evidence of progress can be a strong differentiator as part of an overall employee value proposition.

Executive remuneration

Stakeholders often push for long-term executive remuneration to be aligned to many strategic programmes, including sustainability. The challenge with adopting a narrow focus, for example, limited to greenhouse gas emission reduction, may incentivise inappropriate behaviours. Equally, executives may resist the adoption of metrics that they don’t understand or buy in to. Having a balanced sustainability scorecard, which has been developed in conjunction with management, might provide a more robust approach, especially if these KPIs have previously been disclosed publicly.

Sustainability linked loans

Increasingly, Banks are offering loans linked to sustainability KPIs with preferential interest rates, where organisations can deliver stepwise improvement in key measures of diversity and inclusion (D&I) or environmental performance. However, as we outline in our incentivising sustainability-linked loans article, this only works when senior management have endorsed a clear improvement plan capable of driving performance improvement over the medium term to address the typical performance ratchet included in these types of loan structures. Having made the investment in sustainability, most chief financial officers would be delighted to gain a resultant reduction in interest charges.

Sustainability disclosures 

Public disclosure of sustainability performance can be challenging to get right. There is temptation to disclose as little as possible. However, developing internal dashboards can provide management with the confidence in the underlying data to share metrics aligned to its strategy and therefore meaningful to stakeholders. 

Data quality will typically grow over time, with strengthening of internal controls and formalising of reporting processes. Management may feel able to gradually include KPIs from the dashboard in external reports, supported by assurance testing conducted by internal audit. 

The results of management confidence in the subject KPIs will further endorse transparency and improve a business’s reputation, thus reinforcing the outlined benefits above.

Knowing how fast to move and when to grasp opportunities to embed changes can be challenging. Often making things more tangible and grounded in business performance metrics can make the difference. At Crowe, we support our clients’ sustainability reporting journey by:

• providing practical insights into how to implement sustainability strategies and change management plans
• helping to determine how to get the balance right between being ambitious and bringing colleagues along on the journey
• providing an overview of the existing frameworks and initiatives, as well as the current market and industry insights
• Shaping existing climate risk and sustainability processes to integrate new and evolving requirements. 

Please contact your usual Crowe contact for more information.