The transition to a sustainable economy has begun and, like the process of industrialization itself, we are looking at a transformation process that will last for decades. To speed this transition, we need to create an environment where all organizations integrate sustainability principles into routine management decision-making. To accomplish that, we need to do a better job of measuring the sustainability of our organizations, cities, and nations. A clear sign of the growing importance of sustainability management is the impressive number of efforts to develop and utilize sustainability metrics to enable organizations to effectively measure their sustainability. However, there are a variety of different methods for measuring sustainability and reporting those efforts, and it seems that each company, organization, city, and country has a different method.

While the development of these indicators is critical and must be continued, it is time to begin the process of settling on sustainability indicators that everyone can use and understand. We need a generally accepted set of definitions and indicators for measuring sustainability. It should be mandatory for organizations to disclose a common and shared set of sustainability metrics and definitions to ensure that the required sustainability data is reliable, valid and comparable. Independent auditors will need to verify reported information and policy must hold organizations accountable for their performance. We should develop comparable measures for cities and states. If we are to develop a common set of metrics, we will need the U.S. federal government to take an active role to stimulate a discussion of metrics and decide on those that should be adopted. Along with agreement in the United States we will need to enter into discussions with the global community as well to ensure that all nations utilize the same benchmarks.

This chapter provides an overview of the current landscape of sustainability measurement and reporting. We begin with a discussion of sustainability metrics, followed by an introduction to the frameworks and indices that aggregate those metrics. We then explore the challenges with sustainability frameworks and reporting at the corporate level, and present an argument for the necessity of a set of standardized, generally accepted metrics. Next, we turn to the role of the public sector in sustainability measurement and metrics, beginning with an examination of mandated sustainability reporting as it exists in other countries, and how it compares to reporting in the United States. Finally, we look at the role of the U.S. federal government in measuring sustainability at the national level.

Sustainability indicators summarize a vast amount of information about complex and complicated environments into concise, policy-applicable and manageable information (Singh et al., 2012, 281). Because of the large universe of indicators, frameworks and composite indices have emerged to better organize and analyze these metrics. Sustainability indicators are either presented in a structured framework, which can be used to isolate and report on relevant indicators, or aggregated into a composite index or score. In general, sustainability frameworks provide a qualitative presentation and grouping of large numbers of indicators and can be more revealing and accurate than aggregated indices, while indices tend to be easy to use and more understandable by the general public. Frameworks, in contrast to indices, do not involve quantitative aggregation of data. Not surprisingly, the criteria for these types of frameworks and indices are as diverse as the concept of sustainability itself (Mayer, 2008, 279). We’ll outline just a few here to showcase the scope of these measures and frameworks.

Since 1999, the Global Reporting Initiative (GRI), which is home to perhaps the most popular global framework, has been working to establish a credible set of sustainability indicators using four areas of performance and impact: economic, environmental, social, and governance. It provides general indicator guidelines as well as sector-specific guidance, both of which are refined and updated over time. GRI’s reporting guidelines are now in their fourth iteration and specify 34 environmental indicators including energy, materials, impacts on biodiversity, and emissions. This reporting framework is currently used by almost 6,000 organizations across the globe and it gains more users and credibility every year (GRI, 2014). GRI aims to become the universal standard, regardless of an organization’s size, sector, or location.

The Sustainability Accounting Standards Board (SASB) is a nonprofit engaged in the creation of sustainability accounting standards for use by publicly listed corporations. Investors, the general public, and the media can find sustainability disclosure material in annual reports, sustainability reports, and on corporate websites. The Sustainability Accounting Standards Board is developing sector-specific standards for reporting key sustainability impacts on existing financial reports in hope that this will allow all stakeholders to understand environmental, social and governance metrics and ensure reliable comparison. By focusing on industry-specific standards, they expect to be able to compare apples to apples. In 2010, Harvard University’s David Wood, with Steve Lydenberg of Domini Social Investments and Jean Rogers of Arup, developed a methodology for determining industry-specific material issues and associated industry-tailored performance indicators. They applied their methodology to six industries, using indicators already in use by companies and analysts. The team focused on developing a process for determining key performance indicators, but stopped short of defining those specific metrics. They are in favor of accounting for industry-specific factors in any type of mandated sustainability reporting (Lydenberg, Rogers, and Wood, 2010). This methodology became the basis for the Sustainability Accounting Standards Board, which is currently developing standards in 10 sectors.

A recent development in the field of sustainability measurement is integrated reporting, which combines sustainability and other non-financial issues with financial information, ideally in a single report. Proponents of integrated reporting assert that such holistic thinking, which incorporates all sources of business value and risk, provides more accurate and efficient approaches to corporate reporting. In 2009, the International Integrated Reporting Council (IIRC), a coalition of regulators, investors, companies, standard setters, accounting professionals, and nongovernmental organizations (NGOs), was established to develop an international framework for integrated reporting. The framework was released in December of 2013 following a series of meetings, roundtables, and input from external stakeholders. It provides guiding principles and content elements to enable companies to develop an integrated report. The International Integrated Reporting Council (IIRC) launched a pilot program to test the framework, and includes over 100 businesses and 35 investor organizations (IIRC, 2014).

In the United States and across the globe, stock exchanges and financial firms have developed methodologies to track and score sustainability performance for their own sustainability indices. For example, many top-performing sustainability companies identified the S&P Dow Jones Sustainability Indices as one of the most important sustainability rating systems that they report to annually. This collection of indices, launched in 1999, measures global and regional market indices, and was the first global collection to track financial performance of sustainability-driven companies (S&P Dow Jones and RobecoSAM, 2013, 1). Companies are selected for inclusion in one of these indices based on an assessment of economic, environmental, and social criteria. The indices are maintained by S&P Dow Jones Indices and RobecoSAM, an asset manager focused on sustainability investing. Their assessment methodology is based on media and stakeholder analyses, questionnaires completed by companies, other public documentation and reports, and direct communication with an organization. RobecoSAM invites over 3,000 public companies to report annually and includes only the top 10 percent in the indices. As of June 2013, the indices had approximately $8.8 billion in assets under management across a variety of products (S&P Dow Jones and RobecoSAM, 2013, 1, 3).

Ultimately, as is probably evident, sustainability officers spend a considerable amount of time and effort reporting to these many indices and rating and ranking organizations. A recent Ernst & Young/Green Biz Group survey sought to gauge the relative importance of these various reporting programs. They found that the Dow Jones Sustainability Index and CDP (formerly the Carbon Disclosure Project) are frequently cited as the most important, and Newsweek‘s Green Rankings, though not included in the actual survey, was frequently a write-in by respondents. Newsweek‘s Green Rankings was the only system from a mainstream media organization (Ernst & Young, 2012). Much of the data that companies report to these organizations is the same and there is considerable overlap in how it is used by reporting programs. Until a clear leader emerges from this pack of reporting agencies, or until a specific framework is mandated, companies must continue to engage with most of these rating organizations to compete with their peers.

While some of these reporting groups are rigorous and seek to provide comprehensive information about sustainability and ESG issues, most lack universal comparability, reliability, and materiality. Indeed, many of these efforts were not intended to achieve consistency, or to facilitate intra- or inter-industry comparability. Some groups, like the Global Reporting Initiative and CDP, are synergizing efforts, but there is still a long way to go before a universally accepted standard exists that replicates the applicability and universality of traditional financial indicators and generally accepted accounting principles (GAAP).

Organizations and individuals must wade through the array of ever-changing sustainability reporting and measurement standards, scorecards, and platforms to decide what to measure, how to assess information, how to differentiate between important and irrelevant information, what organization(s) to report to, and what reporting or benchmarking organizations they can depend on for reliable analyses. It has been widely argued that in many cases more is less, and abundant options may only serve to decrease productivity and confuse decision makers. The problem is more acute in sustainability measurement and reporting, when myriad choices and lack of consensus create confusion. Furthermore, these standards change over time, sometimes significantly in just a few years. When these benchmarking systems change, reporting can become a symbolic exercise rather than a tool for year-to-year analysis designed to influence decision making.

One of the most visible manifestations of the interest in sustainability measurement is the increase in corporate reporting. Going beyond simply reporting data to ranking or rating agencies, companies across the globe now voluntarily (or in some countries, by mandate) publish thousands of sustainability and corporate responsibility reports each year. However, activities and reporting efforts vary considerably across companies, industries, sectors, location, and time. Typically, these reports are not readily comparable. A reader of two sustainability reports can find completely different indicators reported in each, though both would claim to report on the sustainability performance of that given company. Because sustainability management is still a new field, reliable, consistently applied metrics for sustainability have not yet emerged. Even when organizations select the same indicators for their reports, they often use different units of measurement, different time frames, or different methodologies to calculate those metrics, which further complicates analysis and comparison.

The information gap also increases the difficulty of comparing metrics across different categories of effect; for example, it can be impossible to tell whether a product, process, or company that consumes less energy can be considered better or worse than one that uses more energy but produces fewer toxic by-products. Similar confusion arises when attempting to parse the effects of sustainability programs on a company’s financial performance because different metrics of performance are used in different studies, increasing the difficulty of direct comparison. Comparing two sustainability reports can be like comparing apples to oranges. Consensus has not even been reached regarding the terminology for such reporting. Reports utilize terms such as “environmental, social, and governance goals,” “corporate social responsibility,” “sustainability development and practices,” “socially responsible investing,” “environmental governance,” “green operations,” “corporate sustainability performance,” “corporate environmental strategy,” and so on, to describe programs implemented to enhance sustainability.

Sustainability reports vary widely in scope and scale because sustainability means different things depending on whom you ask and what you want. This lack of consistency leaves public and private decision makers at a distinct disadvantage. While these reports may look comprehensive, they can be overwhelming, or at worst misleading, to those unfamiliar with the details of the measurement and reporting methodology for that specific company. It is difficult for the average reader of these reports to make sense of the information, and to know whether a given organization is reporting on the organization’s most important sustainability issues or whether the report is simply green washing for public relations purposes.

Are companies cherry-picking data to report what makes them look better while excluding information that might call into question some of their practices or business value? Are organizations only reporting information that is easily accessible or inexpensive to collect? How were the indicators selected, and did decision makers have a sophisticated understanding of the materiality of those sustainability issues? Do the individuals developing these reports, and the people making decisions based upon this performance, understand the issues that are most relevant to the organization and to the health of the environment? Reading a typical sustainability report often provides few answers to these and similar questions.