'Green-Ness' Can Be Measured: Among the Surprising Conclusions of a New European Research Project Comes Evidence That Firms with Environmental Management Systems May Not Be Better Environmental Performers Than Their Rivals
Berkhout, Frans, Hertin, Julia, Carlens, Jerome, Tyteca, Daniel, Olsthoorn, Xander, Wagner, Marcus, Wehrmeyer, Walter, European Business Forum
Among the human activities imposing a heavy burden on our environment, industrial activities are in the foreground. While in the previous two or three decades the behaviour of industries was mainly dictated by government, some companies have begun to recognise the potential competition and other benefits of behaving more consciously and proactively in this area. In parallel to this, there is an increasing need for tools that allow for a proper and objective measurement and benchmarking of the performance of firms with respect to the environment.
Stakeholders use environmental performance indicators in different ways:
* Business managers use them as an internal management tool and for external communication.
* Banks and insurers examine the environmental performance of firms to help assess longer-term economic risks.
* Fund managers use environmental criteria to respond to the demand for environmental and ethical concerns to be taken into account in investment decisions.
* Policy makers may evaluate the effectiveness of different policy instruments in improving a firm's overall environmental performance.
* Environmental groups compare the environmental profile of firms in order to put political pressure on poor performers.
* Neighbours observe to what extent companies damage their local environment.
* Researchers analyse patterns and trends to improve their understanding of the causes of good and poor environmental performance.
In all cases, indicators can provide only partial information that may need to be qualified with information from other sources. Indicators are deliberately simple measures that stand as proxies for complex and often diffuse phenomena. Indicators indicate: awareness of their specific limitations and biases is an important aspect of their interpretation.
The MEPI project (Measuring Environmental Performance of Industry) was conducted by a network of research teams in six European countries and was funded by the European Commission. This article deals briefly with the findings of the project. More details can be found at http://www.environmental-performance.org.
Measuring 'green' performance
Measuring the environmental performance of a company presents many challenges:
* Environmental issues are complex and often difficult to quantify.
* Comparing the environmental impacts of firms with different economic activities is problematic.
* There is no universally accepted approach to weighing different environmental impacts against each other, and any overall assessment will produce highly contested results.
* There is no standard approach to environmental reporting and measurement, although a range of guidelines has now been developed.
* The availability and quality of environmental data is often poor.
It is often argued that environmental performance cannot be compared because companies are different. However, the same could be said of company finances, yet the reporting of financial performance is routine. Distinctiveness should not stand in the way of comparison between competitors, be it in terms of profitability, market value or environmental performance.
Faced with these challenges, some researchers have decided to assess the 'green-ness' of a company on the basis of qualitative criteria, such as whether they have adopted certified environmental management systems and environmental targets. These 'effort indicators' assume that management effort translates in a predictable way into environmental outcomes. There is little evidence as yet to support this assumption. In fact, the MEPI project has found that in some cases the reverse may be true.
Other 'guideline-driven' initiatives, such as the Global Reporting Initiative (White 1999; Mullins 2000) or the eco-efficiency initiative led by the World Business Council for Sustainable Development (Verfaillie & Bidwell 2000), have concluded that quantitative assessment requires detailed environmental and technical data. …