Using Context-Based Sustainability with Center for Sustainable Organizations’ Mark W. McElroy

November 13, 2013

JOHN SHEGERIAN: Welcome back to Green is Good, and we’re so excited and honored to have on with us today Mark McElroy. He’s the founder and Executive Director of the Center for Sustainability Organizations. Welcome to Green is Good, Mark. MARK MCELROY: Thank you. Happy to be here. JOHN SHEGERIAN: You know, Mark, this is your first time on so before we get into talking about your great organization, the Center for Sustainability Organizations, can you share a little bit about your story? I want our listeners to learn about you. How’d you even get here? MARK MCELROY: I have a long career as having worked as a consultant, management consultant for large companies around the world and after a couple of decades of that, had an opportunity to meet a woman here in Vermont by the name of Donella Meadows, who’s very well known and unfortunately, deceased, thought leader in sustainability and she helped me to understand that most of what passes for sustainability these days, particularly in business, amounts to nothing of the kind and so I was inspired to try to work on that problem. JOHN SHEGERIAN: Interesting, and so when did you create and found the Center for Sustainability Organizations? MARK MCELROY: 2004. JOHN SHEGERIAN: Wow, so 2004 is a lot different from 2013. It’s nine years removed now. Where were we then as a country at that point with regards to sustainability and where are we today? How has it evolved and how has your organization evolved with it? MARK MCELROY: Well, I say most would agree that the U.S. is kind of lagging other parts of the world, particularly parts of Europe, in terms of bringing rigor and discipline to sustainability management in business. We’re a little better off today than we were in 2004 but not much and so not a lot has changed in those years but certainly, more companies themselves are volunteering to actively manage their sustainability performance than was the case in 2004. JOHN SHEGERIAN: And, for our listeners out there, I’m on your website. It is really a fascinating website full of important information that our listeners should be looking at some point. If you’ve got a laptop or tablet and you want to follow along while we have this conversation with Mark, I would highly recommend it. It’s www.sustainableorganizations.org. Let’s talk about what’s on this website here, context-based sustainability or the short for it, CBS. What does that really mean and what should our listeners understand about CBS? MARK MCELROY: This is the point that my friend, Dana Meadows, was making in the late ’90s and early 2000s, the point being that most of what passes for mainstream management of sustainability in business and in society in general, for that matter, suffers from a problem, which is the absence of what we loosely refer to as context and I’ll give you an example. If you’re a company and you’re trying to manage your use of water resources so that your use is sustainable, it would be a good idea to first get a handle on what the availability of water resources is in the places where you do business and surprising as it may seem, even today, most companies don’t do that. They simply measure their use of water resources, cycles, perhaps for lowering them, but almost never compare their use of water resources or set goals relative to the amount of water that’s available so this is all about bringing contextually relevant norms or ecological thresholds into the business of managing sustainability. JOHN SHEGERIAN: Gotcha, and when it says CBS should focus, and again, CBS, Context Based Sustainability, should focus on vital capitals, explain that because it’s so important that our listeners understand where you’re coming from and why that message is so important. MARK MCELROY: Yeah, this really is important. It’s really fundamental to the issue of sustainability and to the business of managing sustainability and it simply stems from the understanding that sustainability is a function of what human impacts on vital resources are in the world and in the sterile language of academia, sometimes those resources are referred to as capitals and so the sustainability literature is full of references to natural capital, human capital, social capital, and so forth, the point being that these are really critical resources and what makes human activity unsustainable is instances where we’re putting the sufficiency of those capitals at risk. JOHN SHEGERIAN: Gotcha. Now on your website here, and again, for our listeners that are just joining, we’ve got Mark McElroy on with us from the Center for Sustainability Organizations and his website is SustainableOrganizations.org. On the header, I see the word context is used a lot. It says context-based carbon, context-based water metrics, context-based waste metrics, context-based social metrics. How does this tie the word context back into sustainability? What about sustainability context? What does that mean with regards to each of the sub sectors you’ve created? MARK MCELROY: Context, again, is a reference to social or ecological thresholds that need to be taken explicitly into account when attempting to measure, manage, or report sustainability performance instead of leaving those threshold out of the equation, if you will, which again, is what tends to pass for mainstream practice these days, and so part of our mission is to continually stress the importance of making sure that actual social or ecological limits are in fact taken explicitly into account when managing, measuring, or reporting sustainability performance so we use that word a lot and our mantra, if you will, is that we really need to get context back into the business of managing sustainability where it belongs. JOHN SHEGERIAN: We’ve had other guests on the show and they talk about GRI, Global Reporting Initiative. How does your program, CBS, Context Based Sustainability, differ from GRI and if you can give an example so we can understand it better, I think that would be really great for our listeners. MARK MCELROY: Okay, so, GRI, to its credit, GRI is the Global Reporting Initiative. It’s the source of the leading international standard for corporate sustainability reporting and has been around since the year 2000 and from the beginning, GRI has explicitly advocated for the consideration and inclusion of sustainability context in corporate reporting and they, in fact, refer to it in those terms, sustainability context. The bad news is that over the years, in our view, GRI has done a relatively poor job of explaining how to do it and much less any job at all in terms of enforcing it and so consequently, it is quite likely the case that no GRI compliant sustainability report ever produced has actually described the sustainability performance of an organization so that failing, if you will, on GRI’s part is something that we’ve taken up as a mission of our own to try to fill in the blanks, if you will, so that organizations interested in doing a genuine job of reporting their sustainability performance have some guidance for how to do so. JOHN SHEGERIAN: And, let’s talk about that then. Let’s then toggle back to context-based sustainability. Talk about some companies or organizations that have actually implemented it and use them as an example so our listeners can understand the success that you’re having. MARK MCELROY: Okay, so there are a lot of companies right now that are using what we would describe as a context-based metric, a way of measuring their sustainability performance in the area of greenhouse gas emissions. We have a context-based metric that makes that possible that we developed, actually, with Ben & Jerry’s originally and there were other sources of similar metrics. These are metrics that don’t just measure an organization’s greenhouse gas emissions. Rather, they first establish a threshold for what those emissions would have to be over an extended period of time in order to be sustainable and then actual emissions are measured and compared to that threshold and so impacts like greenhouse gas emissions, water use, solid waste, and a whole series of social dimensions of performance are not just measured in absolute terms. They’re measured in a way that are constantly being compared to sustainability thresholds. JOHN SHEGERIAN: You know, Mark, we’re down to the last three-and-a-half minutes or so. We all like to look at our favorite stocks, whether it’s Facebook or Google or Walmart or as you say, Ben & Jerry’s and a lot of great publicly traded companies do now reporting, reporting on sustainability. Would your context-based sustainability be an important tool for just the general public at large and other institutional investors looking at the potential financial health and the overall health of a company that’s publicly traded? MARK MCELROY: Yeah, absolutely, and that, in fact, is one of the areas of intense activity in our current work. There is a new standard being developed designed for application in the capital markets, in fact, that will make it possible for investors to understand the sustainability performance of publicly traded companies using context-based criteria and this will be the first application of context-based sustainability to rating and ranking publicly traded companies in the capital markets and we’re working with the developer of that standard, which is called the Global Initiative for Sustainability Ratings, or GISR, actually out of Boston to bring context-based sustainability to the investment community. JOHN SHEGERIAN: How far away is that and how would that be seen? If I’m an investor and we have lots of listeners out there that buy their 10 shares a year in a stock or a lot more than that actually. When would that be available and how would that be actually tangible and visible to them? MARK MCELROY: The first version of that standard is going to roll out later this year and it will become progressively more specific in terms of how context-based sustainability is actually being applied to public companies over a period of three years starting with this year but the application of it will show up in the form of third party ratings so if you’re an investor, you really want to understand the sustainability performance of companies that you’re considering investing in. You will be able to turn to a third party rating agency who will provide context-based ratings and rankings of public companies using this new standard. JOHN SHEGERIAN: You know, Mark, shameless plug here for you though, because you deserve it. If I’m a company out there, big or small, publicly traded, privately held or even a nonprofit or a governmental entity, these organizations, all these types of organizations come to your website and they typically hire you to help get sustainable? MARK MCELROY: Yeah. First, we’re a nonprofit, so our mission, if you will, is to improve the quality of sustainability management in development and commerce and a lot of what we do we simply give away. Quite a bit of our work is freely downloadable from our site but we also offer assistance to help companies who are interested in taking their own practices to the next level. JOHN SHEGERIAN: Got it. Well, thank you again for being on today, Mark McElroy. MARK MCELROY: It’s my pleasure. JOHN SHEGERIAN: We’re so thankful you exist and the great work you’re doing is so important at the Center for Sustainability Organizations. To learn more about Mark and his great work and to download some of this information or connect with him, it’s www.sustainableorganizations.org. Mark McElroy, you are a sustainability leader and truly living proof that green is good.