To a great extent — and unfortunately — “sustainability” is a quality that exists in the mind of the beholder.
Earlier this month, Apple posted a report on its website announcing that the company had created or supported 514,000 jobs in the United States, portraying itself as adhering to one of the key tenets of sustainability.
In our current economy, job creation is a key to economic and social sustainability. Further, when we talk about sustainability, we are really talking about the entire planet, not just the United States.
In a global context, many feel that Apple’s social and economic sustainability have fallen short of the ideal, particularly in China. After all, before Apple posted that bullish U.S. jobs report, stories appeared in The New York Times and elsewhere of dreadful working conditions at FoxConn, a huge manufacturer of iPads and iPhones in China.
“Shifts ran 24 hours a day, and the factory was always bright,” a January 26 Times report read. “At any moment, there were thousands of workers standing on assembly lines or sitting in backless chairs, crouching next to large machinery, or jogging between loading bays. Some workers’ legs swelled so much they waddled.”
So how do we measure Apple’s social and economic sustainability: by the company’s 514,000 jobs in the United States, or thousands of workers in backless chairs in 24-hour-a-day shifts in China? This is not to single out Apple, which seems to be responding vigorously to the situation, but to show how subjective sustainability metrics can be — and why practical-minded CFOs are often skeptical of the term sustainability.
While any good finance executive will focus first on the costs and revenue opportunities in proposed energy-saving plants, the risks and benefits to company employees and external society will be squarely on his or her radar, because they potentially affect the company’s brand reputation.
But doing good deeds is and should be the gravy in this discussion. The corporation, by its very nature, needs to benefit from any sustainability effort to go ahead with it and be motivated to succeed at it. Self-interest needs to be the prime driver, and the extent of self-interest needs to be benchmarked.
Of course, there are sweet spots where what’s good for the planet melds seamlessly with what’s good for the bottom line. For example, Costco found that changing its energy consumption helped cut its costs. Obviously, it makes all sorts of sense for CFOs to be on the lookout for cost savings that lead to sustainability wherever they can find them.
But where can corporations find such sweet spots? This is where metrics come into the discussion. Unfortunately, as I said at the outset, sustainability today is too much in the mind of the beholder, too subjective.
The reason for this is that for corporations, metrics for sustainability — in particular the environmental kind — amount to just so much greenwash. There are few environmentally based metrics to match the financial metrics most corporations run on.
For example, while measuring a company’s “carbon footprint” may be a good way to prove how good a corporate citizen it is, it addresses finance only tangentially — perhaps by increasing sales among environmentalists, or making it less a target of lawsuits. But really, what does a carbon footprint have to do with an income statement, balance sheet, or cash-flow statement?
The challenge of sustainability at the corporate level is to find a way to answer that question in hard, numeric, provable ways that take into account the self-interest so basic to our free-enterprise system. Then, if the metrics are there, the incentives needed for productive action will be too.
David M. Katz is editor-in-chief of CFO Online/Mobile.