Are Your Sustainability Goals SMART? Part 2
Specific sustainability goals focus on business objectives, use quantitative targets, identify opportunities, and account for uncertainties.
SMART (specific, measurable, attainable, relevant, and time-based) goals can help companies focus their sustainability targets and take action towards meeting them. This is the second in a series of six short discourses on selecting scientifically defensible and technologically feasible sustainability goals (see the first here). Using each letter of the SMART acronym, we show how science and engineering expertise can help focus and implement sustainability actions to create corporate capital value and reduce risk, including physical risk to facilities and infrastructure, transitional risk related to changes in processes and formulations, and liability risk.
Specific sustainability goals provide an outline for actions to achieve corporate targets, meet business priorities, realize capital (natural, human, social, manufactured, financial), and reduce risk. The development of specific sustainability goals requires scientific and engineering understanding of the natural, technological, and regulatory environments in which actions will be taken. Whether the objective is to reduce greenhouse gas (GHG) emissions, preserve water resources, transition to the circular economy, or protect biodiversity, specific sustainability goals should identify a quantitative target for measuring success, specify the technologies or operational changes necessary to reach the target, designate metrics to quantify interim progress, and incorporate the inherent uncertainty in achieving the target in light of a changing climate and emerging technologies. Companies without specific goals may struggle to reach their goals if they have allocated insufficient resources, projected overly optimistic technological advances, or made insufficient arrangements to measure progress scientifically.
Goals based solely on providing data to satisfy industry-specific sustainability metrics or disclosure topics (e.g., Sustainability Accounting Standards Board, Global Reporting Initiative, Task Force on Climate-related Financial Disclosures, etc.) may miss opportunities to create more capital value for an organization. Such metrics have utility but have been crafted to identify a common set of information to best inform financial markets and risk analysts, and therefore are not specific to any one company’s needs. Developing a sustainability program to simply meet these metrics without scientifically supported, specific goals that integrate business objectives and operational needs with an understanding of available and developing technologies both misses an opportunity to maximize benefits from sustainability program investments and could create transitional and legal risks.
Developing specific sustainability goals benefits from an interdisciplinary team that, together, can address the following questions:
- Why should we set this sustainability goal (Business Objective)?
- What is the Quantitative Target for the sustainability goal?
- Where are Opportunities to make changes towards the goal?
- How could Uncertainties create transitional or legal risk?
To explore how these questions can be incorporated into setting specific sustainability goals, consider the broad hypothetical sustainability goal posed below.
Hypothetical Sustainability Goal: Reduce GHG emissions
Over the last two decades, the global community has acknowledged the looming threat to nature and human civilization posed by the accumulation of GHGs in the atmosphere. The Paris Agreement, which took effect in 2016, created a legally binding international treaty on climate change, with a goal to limit global warming to below 2ºC, preferably to 1.5ºC, compared to pre-industrial levels. Consequently, governments, financial institutions, insurers, investors, businesses, and the public have made reducing GHG emissions a top priority for a sustainable future.
Why? Business Objective:
Create financial, manufactured, natural, and social capital for the organization.
Investors and public stakeholders expect businesses to reduce GHG emissions to help reach the goals of the Paris Agreement and stabilize risks from climate change. At the individual business level, however, redesigning operations to use less energy or more sustainable forms of energy can both reduce GHG emissions and provide a financial benefit to the company from reduced operational costs (i.e., financial and manufactured capital). Incorporating nature-based solutions into projects may also sequester CO2 locally and provide increased resilience to physical risks from extreme weather events and benefits for the local environment and community (i.e., natural and social capital). By applying a scientific understanding of the needs of a process or product, the current and future technology landscape, and the local environment, companies can create specific sustainability goals that meets multiple business objectives to create multiple kinds of capital.
What? Quantitative Target:
Achieve 75% reduction in Scope 1 and 2 GHG emissions.
Stakeholders’ understanding of the science behind sustainability initiatives is progressing rapidly, and informed stakeholders will be sensitive to sustainability targets that appear to be “greenwashing.” A target that considers only carbon but ignores other GHGs may be seen unfavorably in some industries but acceptable in others. Similarly, some targets consider only direct emissions at an operation (Scope 1 emissions) and its utility providers (Scope 2) but do not consider supply chain or downstream emissions (Scope 3). Such targets may also be subject to scrutiny depending on the feedstocks and life cycles of the particular products. Scope 3 emissions can be especially challenging for companies to address because they typically require a scientific understanding outside of their primary operations. For example, to address Scope 3 emissions, an electronics manufacturer that uses lithium-ion batteries may need to understand the emissions resulting from lithium extraction or how lithium may be disposed of or recycled. The appropriate target that will best meet business objectives and the expectations of stakeholders should be based on a scientific understanding of the company’s industry, the emission profiles of their supply chain, and their product life cycles.
Convert boilers to co-fire 50% renewable fuels and develop nature-based projects that improve resilience to climate change and sequester carbon equivalent to 25% of GHG emissions.
Understanding where there are opportunities to redesign, reimagine, and realign operations to reach a quantitative target requires a scientific assessment of the technologies being used in production, the upstream supply chain, and the life cycle of the product. For example, the most cost-effective ways to improve the sustainability of a product may not be in the process that generates the product within a factory. Instead, such opportunities may lie in a change of feedstock, an upgrade of a supplier’s system, or development of a recycling program. Additionally, investments in nature-based solutions on-site or adjacent to operations may offer carbon sequestration benefits while improving resilience to climate change. Explicit identification of opportunities and scientific assessment of feasibility are key elements for reducing transitional and legal risks and creating a scientifically defensible roadmap for achieving specific sustainability goals.
How could this fail? Uncertainties:
Unavailability of “drop-in” renewable fuels could lead to untenable operating costs and require alteration of boilers to accept high concentrations of fuels like hydrogen or ammonia. Climate change could cause nature-based projects to fail and prevent sequestration of carbon.
Understanding how a sustainability goal could create transitional or legal risk is an essential step for developing a plan that may extend 5, 10, 20, or 30 years into the future, when the technological, regulatory, and natural environments are expected to have changed significantly. A specific sustainability goal should consider what happens if promising technologies fail to mature, extreme weather intensifies, or new regulations are passed. Understanding the underlying science and engineering of the key technologies, the regulatory trends that impact the industry, supply chain vulnerabilities, product life-cycle emissions, and the resilience of existing and planned infrastructure are all part of understanding the potential transitional, physical, and legal risk of implementing a SMART sustainability goal. Uncertainties can take the form of “known unknowns” and “unknown unknowns”; development of a specific goal should outline the possible “known unknowns” while creating a scientific and engineering support base to address the “unknown unknowns” if and when they arise. For example, choosing a new feedstock or process may reduce emissions but could also potentially create undesirable effects if it increases water consumption or relies on an industry facing new regulatory scrutiny.
How Exponent Can Help
Exponent is a recognized and trusted engineering and scientific consulting firm that has, for more than 50 years, advised and assisted clients in addressing their most challenging, interdisciplinary, and technologically complex business goals and problems. Today, as companies rapidly pivot operations and corporate culture to meet sustainability goals in response to changing climate conditions, changing stakeholder expectations, and evolving technology, Exponent applies its scientific and engineering expertise to help our clients transition operations for the future. SMART sustainability goals informed by Exponent’s rigorous analysis and reporting can help businesses reduce physical, transitional, and liability risk while building an organization’s capital and creating stakeholder value.
Exponent’s interdisciplinary sustainability team is composed of industry experts in environmental science, polymer science, data sciences, and chemical, electrochemical, mechanical, and civil engineering who regularly support the research, development, and assessment of breakthrough technologies that are enabling the current and future sustainability transformations of companies.