Host: Arlan, Novozymes

Metrics/incentives are not always properly aligned with sustainability goals.

A) What do you measure?
B) How do you make sure that you metric results in a behavior change? How do you use metrics as incentives?

- What are natural analogous systems we could look to for guidance?

- If your green product carries a price premium, how do you reposition or brand (making use of metrics to signal value) in order to sell your product?

- Transparency: there's a lot of greenwashing; perhaps metrics are part of the solution to all the greenwashing?

- Right now every metric is relative (A is less bad than B); how do you get an "absolute" metric that relates to a sustainable condition. In other words, how do you know you're doing enough? You could look at carrying capacity or absorptive capacity and limit with respect to that threshold? What metrics/tools would you use? Perhaps a permitting system or cap and trade is the answer, but only after you have the right metrics.

- How do you compare metrics from different companies, industries, products? How do you show that you're just as sustainable as someone else?

- Businesses respond to clear metrics or standards (e.g. gov't or industry standards); there's no real broad-based sustainability creditential; Wal-Mart's sustainability index is getting there, but it's not there yet.

- How do you think about metrics that relate to your supply chain; in other words, how do you use metrics to incentivize your suppliers because their behavior affects your performance metric? What are the boundaries of your analysis? There is a dialogue needed along the full value chain.

- At the end of the day, Wal-Mart's sustainability index is responding to the market (the market place is demanding greener products)....and, importantly, leaning their business. They're behaving to preserve their entire business model. Because of their size, they have the power to do it. How do you empower small companies to be able to do the same thing? Through consortiums?

- B Corporation (www.bcorporation.net/) is a certification program for companies that use the power of business to affect social and environmental change. B Corp is seeking to unify this space (e.g. provide community and standardization). When thinking about incentives, there are policy incentives (e.g. B Corp companies can get a tax break if certified in Philadelphia) and PR/marketing incentives (e.g. capital markets look to B Corp as a standard). B Corp focuses on small, private companies, which differentiates it from GRI (www.globalreporting.org), Dow Jones Sustainability Index (www.sustainability-index.com), etc.

- There are a lot of green standards out there, but there is no one standard; each one values different aspects of "sustainability" differently; some value transparency over specific, rigorous performance goals; some place more on emphasis on social vs. environmental benefits/damages; it's sort of like a language under development (in the same way that there wasn't a standard accounting language 100 years ago).

- Could we think of it in terms of environmental currency?

- Think about carbon legislation: the only parties who are incentivized are those who are "regulated" (ie. emitters); in reality, everyone is impacted (in the form of higher energy prices), but the price of carbon is hidden from the end consumer (so the incentive is less effective).

- Speaking of incentives, take a look at renewable energy incentives: they drive the game. How do you have a sustainable business when the incentives are so uncertain and when the industry is entirely dependent on them?

- Who is green? It's so easy to get lost in the numbers: How do decide what you want to measure to ensure that someone is behaving in an "environmentally responsible" way? How granular do you get? And, once you decide on what to measure (carbon footprint, number and size of toxic releases, etc.), how do you decide how to weight the metrics? Is there ever a way to standardize it so that you can compare companies or products in a meaningful way?

- What is communicated is what is imp to society at a specific time and a specific place (e.g. right now we're very focused on CO2 emissions); what do you communicate to incentivize the behavior change that we want?

- How do you avoid overloading/overwhelming the consumer?

- What puts my business at risk? Perhaps that's what you measure? Or, what do my consumers desire? Is that even sustainability?

Conclusions/solutions/suggestions:

1. Transparency: What do you measure? How do you measure and assign weights? How do you communicate your metrics?
2. Types of incentives: procurement (buyer-power incentive), regulation, consumer-driven (marketing/PR benefits), lean or cost-savings-benefits
3. Align metrics/incentives with business model (get it out of the PR dept)
4. Create currency out of what you measure in your LCA: Pick a currency that's important to a lot of different stakeholders
5. Communication: we need to talk in the same language; you need a connection between things that you care about to more traditional business metrics so sustainability isn't silo-ed
6. Certification harmonization: Is it possible? Is it useful?
7. Everyone needs to know what the currency (e.g. energy and/or water) is, how much you have of it, how much your competitors have, and how much there is available in the world