“What gets measured gets done.”  NFR is particularly challenging;  reporting metrics track activity, but stakeholders clamor for impact.

NFR frameworks provide many suggestions for organizational performance.

DHC helps organizations with systems and controls to improve the rigor of NFR data and information.  DHC also helps organizations with performance evaluation and improvement of the NFR/ Sustainability programs themselves.

DHC has developed and reviewed strategies for ESG performance measurement and reporting.  DHC understands that performance metrics should be tailored to those who need them; Senior Management may need a few things, but department managers may need more information for their areas.

Mr. Hileman authored thought leadership for the Institute of Internal Auditors on measuring performance of Environmental, Health & Safety (EHS) auditing programs themselves.

DHC has helped companies identify and implement performance measures to reduce incidents, improve operations, and reduce costs.  DHC includes focus on leading indicators in these efforts, rather than solely relying on lagging indicators.  If compliance violations or incidents have already happened, it’s too late to do much about them.

SASB is a good place to start for ESG performance indicators.  SASB’s mission was to develop a framework to encourage reporting in ESG parameters that would be material to investors.  Michael Bloomberg, former SEC chairs, FASB directors and others with relevant leadership positions have all supported this effort.  SASB used existing securities law and precedents.  With the bar set this high, companies would do well to begin here.  Companies should ensure that systems and internal controls are rigorous, and the data and information can be supported.

Benchmarking – useful or a red herring?   Without fail, as DHC has worked with Clients on ESG performance management and reporting, the first question is “what is everyone else doing?”  This is valid – to a point.  Benchmarking provides a view of what other companies are doing.  Companies should select who they benchmark against with care.  Benchmarking information has two inherent limitations.  First, information is dated.  Companies report on what they have done; whereas the Client is using information to plan for the future.  Second, companies may paint an overly rosy picture when they respond to benchmarking requests.  Nobody wants to show their dirty laundry.  Benchmarking data will not provide real problems, or the challenges that companies are likely to face.  Experience in developing or auditing ESG programs (such as DHC’s) can help interpret benchmarking information.

Stakeholders could do more – much more – to reward top ESG performers.  DHC has seen Clients overwhelmed with information requests, and answer to multiple auditors.  DHC has seen companies consider many demands for improved performance and reporting, on topics including those of universal concern (climate change, greenhouse gas emissions), and pet issues from a stakeholder group.  Companies can be targeted for boycotts or investment divestitures for ESG performance some stakeholders regard as insufficient.  The opposite rarely holds true.  If companies heard more comments like “Our fund bought 10,000 shares of your stock because of your actions on climate change”, this would provide a carrot for further performance.  Similarly, if companies heard “We are removing these 10 products from our future orders because if the packaging is not yet sustainably sourced and entirely biodegradable”, this would be a tangible stick to motivate companies to take ESG more seriously.

IT solutions are essential for environmental management.  Few – if any – can be used directly off the shelf to achieve compliance or efficient operations.  All must be tailored for purpose.  IT, Operations, and Environmental don’t talk the same language.  DHC has identified this as a root cause of problems in several audits.