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Performance Management Goes Green

The Links Between Corporate Sustainability and Improved Financial Performance

Published: May 14, 2008

The same systems that support financial forecasts, operational analytics and balanced scorecards are the perfect residence for a corporate sustainability reporting effort.

Over the last few months, I have had correspondence with at least 3 of the larger business intelligence and performance management vendors (Infor, SAP and SAS) that noted how their clients are using performance management and business intelligence capabilities to help support corporate sustainability initiatives. This theme seems bigger than what market analysts are calling today’s $306 billion “green” products market. One could argue that success of corporate sustainability can tie to the core of most ongoing commercial activities today.

Corporate sustainability describes “business practices built around social and environmental considerations.” With increased interest in sustainability in today’s corporations, it is worth noting that although there may be an altruistic “feel good” component associated with these programs, there are also significant financial considerations that are funding these activities. Similar to corporate quality officers residing in the C-suite in the 1980s and 1990s, Chief Sustainability Officers are now very much in vogue and driving significant attention to this area. Further background on how some select corporations have seen positive return from this focus can be found in an article by Alyssa Farrell of SAS featured on BeyeNETWORK.com.

So what does this very important shift in corporate responsibility have to do with performance management and business intelligence? For organizations that are taking these initiatives seriously, the very same systems that support financial forecasts, operational analytics and balanced scorecards are the perfect residence for a corporate sustainability reporting effort. As a matter of fact, if you consider some of the core considerations of sustainability programs, the similarity with drivers of other performance management activities can be quite revealing:

• Requires executive involvement – Many of these initiatives are driven from the top, where executives thirst for interactive graphical dashboards to demonstrate program progress.
  
  
• Accurate corporate reporting – These initiatives align one or more corporate strategy goals and link them to programs that can be measured for impact. Often, near real-time alerts are required if performance is not meeting expectations so that appropriate proactive corrective measures can be taken.
  
  
• Importance of detailed forecasting and modeling – Reporting on these initiatives requires a combination of past performance along with accurate forecasts and predictions for the future based upon various modeling scenarios. Usage of these modeling systems by non-IT staff is an important system design requirement.
  
  
• Large volume of data – Necessary data resides in numerous disparate systems distributed across the enterprise. In addition, these programs often require a granular activity-based management system to summarize how a large range of existing operational events can roll up to an aggregated view for corporate-wide assessment.
  
  
• Bottom line impact – With rising energy costs, increasing resource consumption and potential carbon credit trading in the future, the financial exposure to corporations is important. Companies that are ahead of the curve in adopting corporate sustainability activities are recognizing significant bottom line impact, and such results are also generating more positive brand equity versus historic “cost cutting” activities.

In the short term, we can expect to see numerous product offerings from vendors targeting these efforts – mostly because budgets are being allocated to corporate sustainability efforts. The good news is that this is an opportunity for corporations to impact a result for the “greater good,” providing a framework of success for future generations while still improving bottom line performance. And isn’t that what business performance management should be about?

Helpful Links:

• NY Times Article
  
  
• Cognos website
  
  
• Infor website
  
  
• Oracle website
  
  
• SAP website
  
  
• SAS website
  
  
  

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