is the online magazine of BSI Group, highlighting the vital role that standards play in today's business environment by helping organizations improve quality, save money, reduce risk and be more sustainable. Features include interviews with leading business figures, as well as news on the latest developments in management systems, standards, testing, healthcare and certification.
Sustainability, success and standards
17 May 2011
Topics: Sustainable performance, Entropy Software, ISO 9004
What is sustainable performance, why does it matter, and how do Entropy and standards in general help achieve it?
In its recently published list of the Global 1000 Sustainable Performance Leaders[1], analysts CRD Analytics placed the major pharmaceutical company Merck in the number one spot, and another major pharma player, GSK, into the top ten. Both of these companies, and two more on the list besides, are using BSI's Entropy Software.
Sustainable performance
Using CRD Analytics' methodology, the G1000 rankings calculate the average of four performance dimensions: financial, environmental, social and governance to work out 'sustainable performance'. The four performance dimensions themselves are sub-divided into five headings, each of whose metrics are aggregated to produce an overall 'sustainable performance value' or score.
This was applied to organizations that are publicly traded, have a minimum market capitalization of US$1bn and have produced publicly available corporate responsibility or sustainability reports. In all, more than 5,000 global organizations were considered for ranking and 1,000 made the final list, with Merck coming out on top.
Why is 'sustainable performance' a good thing for organizations? Well, the primary objective of the G1000 list is to identify investment-worthy companies. The logic is that in adding social, governance and environmental performance data to purely financial criteria, investors will find organizations that are better investment bets. These are organizations that commit to improved risk management, that uncover profit opportunities and identify trustworthy management. This leads to companies that offer sustainable long-term investments that maximize shareholder value. That's the theory, anyway.
But the list's publishers back it up with some fact. CRD Analytics have calculated that there appears to be a clear correlation between sustainable performance and profitability. Michael Muyot, founder and president of CRD Analytics points out that using the well-respected MSCI World Index[2], the global companies that improved their ESG (Environmental, Social, Governance) performance between 2006 and 2008 out-performed their peers by a significant 11.6 per cent from 2008 to 2009[3].
Muyot explains it thus: "... companies that report better in terms of quantifiable (ESG) metrics that matter also perform better, which could be because they are measuring and monitoring, and stakeholders are driving them to be more efficient, productive and thus profitable."
Meanwhile, recent work done by the Boston Consulting Group and MIT Sloan Management Review agrees that sustainable performance increases shareholder value.
It found that thought leaders believed sustainability efforts have an influence on all the levers that companies use to create value: from a stronger brand that endows more pricing power to reduced operational risk, greater operational efficiency, more efficient resource use, and improved customer loyalty. The Sustainability Initiative 2009 Survey[4] concluded that sustainability is changing the competitive landscape and reshaping the opportunities and threats that companies face. And that sustainable performance equals increased shareholder value.
Measuring and monitoring
So what can we make of the fact that both Merck and GSK, and in addition two more of the G1000's top-ranked organizations - drinks giant Diageo and Italian petrochemicals concern Eni - are users of BSI Entropy Software? How does Entropy help with 'sustainable performance' and with successful ranking? The logic is clear to Paul Stanfield, BSI's Product Marketing Manager, Entropy Software, EMEA.
"Whether an organization is a Global 2500 company or a small or medium scale enterprise, the effective management of performance is key to its sustained success," he says. "So improving information management practices is at the heart of the drive towards sustainability and Entropy can play a valuable part."
Stanfield points out that organizations need commitment and tools to achieve their targets and objectives, and Entropy provides the tool that can change board-level aspiration into operational action and results. "A business requires systems to be in place that benchmark what's happening now, make sure you're on track to success and keep you there as you continually improve."
He points out that Entropy is not just a sophisticated web-based spreadsheet that collates and crunches data and generates reports. The software also puts action management in place: allocating activity and tasks to a role, a person or a department, with a timescale, plus notification, escalation and reporting capability. As Stanfield says, "It is a people-based system."
The result is a tool that transforms data into information and information into action, and does so profitably. It is capable of generating striking returns on investment. "There are intangible benefits because you are improving brand and reputation, staying compliant, mitigating risk and so on, but really businesses invest in Entropy solutions for hard-nosed pounds, shillings and pence reasons," notes Stanfield. "Entropy can save organizations huge amounts of time, which can equate to millions of pounds a year."
And, returning to sustainable performance, he adds, "Profit comes from efficiencies, doing things faster and better, and better supply chain management, so Entropy helps with performance and sustained improvement and sustainability, however you define it: for the planet, for making a company greener, for long term business survivability - all these definitions can be impacted on by Entropy."
Sustainable performance and standards
Stanfield notes that Entropy works with or without standards: it will operate within any management system that an organization has adopted or as a "point" solution to address a particular business issue or challenge. Notwithstanding those organizations without bespoke management systems, standards provide a clear roadmap towards sustainable performance in themselves.
Charles Corrie, secretary of the ISO 9000 series committee, for one, is unsurprised by the close correlation between the key performance indicators that comprise the G1000 ranking and the issues covered in ISO 9004 Managing for the sustained success of an organization. A quality management approach.
As he points out, ISO 9004 has already identified that success comes from balancing the needs of interested parties and being efficient in how you do it, possibly another definition of sustainable performance.
"Where we start with 9004 is how are you going to keep a business running into the future, how do you sustain success," he says. "You start with what the market is doing, your vision for what you want to do within the market and then how you are going to go about doing it, making sure you balance the needs of competing interested parties."
Where G1000 looks for Financial KPIs, ISO 9004 requires resource management that ensures organizations are able to fulfil current projects and future plans. Where it looks for Environmental Performance Indicators, 9004 asks for efficient processes and products that minimize resource use, including waste, energy, water and emissions. Under Social Performance, 9004 addresses people, motivation and participation and sees employees and communities as among the interested parties that need to be taken account of. Similarly under Governance Performance Indicators, 9004 considers shareholders as interested parties and identifies 'vision and strategy' as central to sustained success.
ISO 9004 essentially extends ISO 9001 beyond purely customer focus to thinking about all stakeholders.
What's more, ISO 9004 is only one of a raft of standards that embed sustainable performance in businesses. ISO 9001 itself delivers sustainable performance in financial terms in spades: BSI's latest client survey states that 69 per cent of clients using the standard saved money and 86 per cent saw operational performance improvements.
Meanwhile, a range of standards addresses environmental sustainability: BS EN 16001 tackles energy management, the being-developed ISO 14046 will deal with water footprinting; ISO 14064 and PAS 2050 address measurement of emissions; and ISO 14045 looks at environmental performance risk mitigation. Working in parallel with these specific standards, ISO 14001 tackles measuring and reducing environmental impacts across the board. Among surveyed BSI clients, 88 per cent using 14001 saw improved performance and 74 per cent reduced costs.
Lastly, BS 11000 is a new standard, which provides a best practice framework for Collaborative Business Relationships, often at the heart of sustainable business performance initiatives.
Under 'Social', BS 8904 - due to be published this summer - provides a guide to community sustainable development and SA 8000 and ISO 26000 look at human rights of employees. OHSAS 18001 addresses employee safety. BS 8903 looks at sustainable procurement. Under 'Governance', BSI Standards Development is already looking at the need for a suite of standards that will address governance issues.
One final thought harks back to Muyot's 'measuring and monitoring'. Perhaps a central contribution of Entropy and standards is that they structure how organizations measure and monitor sustainability performance: this leads to improvement, but also enables organizations to demonstrate their improvement and get on this list, or any other.
[1] http://www.justmeans.com/clientlist?type=insight
[2] Morgan Stanley Capital International
[3] http://www.justmeans.com/usercontent/companydocs/docs/company_docs_1284990669.pdf
[4] http://sloanreview.mit.edu/special-report/the-business-of-sustainability/
Business Standards © 2010. Editorial produced by Caspian Publishing in association with The British Standards Institution. Editorial opinions expressed on are not necessarily those of BSI Group or Caspian Publishing. Neither Caspian Publishing nor BSI Group accept responsibility for advertising or editorial content, nor for that appearing on linked third-party websites. Reproduction in whole or in part is forbidden without written permission from BSI Group or Caspian Publishing.
As part of its evolving governance, risk and compliance strategy, BSI has acquired the Supply Chain Security Division of First Advantage Corporation.
Rising waters: revising PAS 1188
For those living in areas that are prone to flooding, having the right protection resources available is essential. While images of emergency sandbags holding back rivers of water may fill the media, there is a much wider range of products available for flood protection.
How do you put a price on a brand? An international standard in the making will provide a consistent, reliable approach to brand valuation.
While there was a time when companies would never consider working alongside the competition, today's marketplace demands a more flexible approach. Collaboration is fast becoming par for the course. For example, large government contracts often require expertise that goes far beyond any one company's capacity to deliver. Forming a consortium brings together the right experience in the right place, and it can mean the difference between winning or losing a tender.
Until now, there has been no strict guidance in the UK relating to how audiovisual (AV) installations are carried out. This includes everything from computers and projectors to interactive whiteboards, plasma screens and loud speakers. For AV installation companies, processes can vary significantly.
Question: Can standards really help minimize the need for regulation?
Regulation and legislation keep business on a level playing field and help mitigate against risk, as was acknowledged by The Hampton Review in 2005.
Have a standards-related question for BSI or a comment on the website? We'll find the right person to answer.
