Industrial Environmental Performance Metrics: Challenges and Opportunities (1999)

Recent years have seen a proliferation in both the amount and type of environmental reporting done by industry. A 1997 report by KPMG summarizes reporting practices by over 900 firms from 13 OECD (Organization for Economic Cooperation and Development) countries (Figures A-1, A-2). Seventy-one percent of companies surveyed made some mention of the environment in their annual report, up from 58 percent in 1993. The proportion of companies producing separate environmental reports rose from 15 percent in 1993 to 24 percent (220) in 1997 (Figure A-3). Forty-one percent of U.S. companies surveyed reported releasing a separate environmental report (Figure A-4).

The topics covered by industry environmental reports were generally weighted toward the traditional concerns of emissions and compliance (Figure A-5). However, some movement toward ecoefficiency was evident in terms of the emphasis some firms gave to natural resource conservation. In a further indication of more visionary behavior, the concept of sustainable development was mentioned in some reports. Increased attention given to such issues as waste management, energy conservation, supplier performance, and product design when discussing future goals indicates that a number of companies have begun to move beyond compliance as the sole motivation for improving environmental performance (Figure A-6). While all of these topics were mentioned in company reports, quantifiable measures of performance in these areas are still somewhat sparse.

Of those companies producing separate environmental reports, 87 percent (192) disclosed quantitative environmental performance data. Disclosures of most such data were weighted primarily toward emissions, but attention was also

given to assessing environmental costs and conservation efforts (Figure A-7). The disclosure of quantitative information by international respondents in the KPMG survey can be compared with that of U.S. firms in a smaller study (Figure A-8). The attention given to environmental expenditures in both surveys demonstrates a growing awareness of these costs and a move away from the common practice of simply lumping them in with overhead expenses. Such awareness may indicate the first steps toward more comprehensive assessment of both the costs and benefits associated with environmental programs and capital investments. It is also interesting to note that almost half (42 percent) of U.S. companies surveyed by KPMG produced environmental reports that included quantitative

Figure A-7

Percent of annual reports that disclose quantitative environmental data, by type. SOURCE: KPMG (1997).

Figure A-8

Percent of U.S. firms that disclose environmental performance data, by type of data. SOURCE: White and Zinkl (1996).

targets and deadlines with regard to improving environmental performance (Figure A-9). It is apparent that some companies are approaching the use of environmental metrics with vigor, particularly in areas important to tracking internal performance. However, relatively few measures of ecosystem impacts or the sustainability of industrial activities were noted in either survey.

Environmental management issues were mentioned in a significant percentage of environmental reports (Figure A-10). Although often lacking quantifiable data, many of the reports contained information on such matters as management responsibility for the environment and corporate environmental management systems. It is perhaps a sign of progress that a significant fraction (43 percent) of those companies producing environmental reports included details of internal and third-party environmental audits. While those doing so represented only about 10 percent of total survey respondents, the release of such information in years past would have been unlikely.

The number of issues and the amount of quantifiable data being reported are increasing, and while a number of different approaches to standardizing environmental metrics and reporting have been proposed, little consensus has emerged.

Figure A-9

Percent of company environmental reports that include quantitative targets, deadlines, and reporting on targets, by country. SOURCE: KPMG (1997).

Figure A-10

Percent of environmental reports that contain environmental management system (EMS) information, by type. SOURCE: KPMG (1997).

There are many complexities associated with establishing a code of internal metrics for corporate use, and they vary greatly by industry. A review of present practices reveals that industry has broad opportunities to improve on the current slate of environmental performance metrics.

KPMG. 1997. International Survey of Environmental Reporting. Lund, Sweden: KPMG.

White, A., and D. Zinkl. 1996. Corporate Environmental Performance Indicators: A Benchmark Survey of Business Decision Makers. Boston: Tellus Institute.