New Model for KPIs Unveiled
21/7/2010
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A model system for developing key performance indicators (KPIs) relevant to mandatory sustainability reporting has been put forward in a new research report which can be downloaded from http://ethicalperformance.com/reports/links/harvard-press-release   

The document, published by the Initiative for Responsible Investment (IRI) in conjunction with Arup, presents a system to identify KPIs by industry sector, and applies this to six industries (airlines, automobiles, diversified REITS, conventional electricity, paper and banks) to demonstrate how such a system might be implemented within a US reporting context. The KPIs are based on three core principles — simplicity, materiality, and transparency.  They are derived by scanning the landscape of potentially relevant sustainability issues and prioritizing them with respect to their materiality in each sector.

Co-author Steve Lydenberg, chief investment officer of Domini Social Investments LLC, said the report had been compiled to help companies respond to the ‘increasing number of governments and stock exchanges that encourage or require sustainability reporting’.

From Transparency to Performance: Industry-Based Sustainability Reporting on Key Issues, has been written in conjunction with Arup. The IRI is a project of the Hauser Center for Nonprofit Organizations at Harvard University.

‘Clear, concise guidance regarding what should be disclosed at a minimum, has the potential to drive companies to compete on sustainability performance, and help entire sectors to move in a more sustainable direction’ says Jean Rogers, a Principal with Arup and co-author of the report.

The report concludes that defining a limited number of KPIs that relate to core business activities ‘can help contribute to a balanced reporting regime that serves the dual demands of comprehensiveness and practicability’ - a necessity for significant uptake of sustainability reporting in the US. The report suggests that the Securities and Exchange commission, which oversees financial reporting in the US and has already ruled on the materiality of climate change, needs to provide sector-based guidance regarding what is potentially reportable with respect to sustainability.