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August 17, 2011
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Home » Valuing Sustainability: Quantification. Evaluation. Recognition.

A corporate responsibility consultant recently pointed out to me, "There are two types of people in Corporate America:  those that start at the back of the annual report and those that start at the front.  Too many sustainability start at the front."

She was pointing out that a lot of us -- me included -- scored better on the verbal part of the SATs than the math.  When we're in the business, though, of demonstrating ROI to the math-heads that run Corporate America -- CEOs, COOs, CFOs, CIOs -- we need to channel our inner math-geek and get better at the hard quant.

So how do we do that?  I don't have all the answers (as usual), but here are some thoughts and some resources for future learning:

  • Move to Missouri.  You don't have to live in the "show me" state but start thinking like you do.  Insist on seeing the data.  In his book SupercruchersWhy Thinking by Numbers is the New Way to Be Smart, Ian Ayres points out that experienced professionals often over value judgment and under value hard data. Simple quantitative tools like regression analysis can provide powerful aids in making the business case for sustainability.  Emotions, experiential errors, and over-reliance on professional judgment can undo the professional practitioner, especially when facing off against more quantitative colleagues.  Having the ability to be "unemotional is very important in the financial world," according to Greg Forsyth, a senior VP at Schwab Equity Ratings.  Quantitative models don't have emotions and knowing that you've set yours aside will put your quant-loving colleagues in a better frame of mind to listen. 
  • Buy an HP 12c.  My finance prof once told me that even if I never became a finance exec I should buy this gold standard of finance calculators.  Just setting it out on the table when the CFO was in the room would make him or her sit closer to the edge of their seat.  Jokes aside, getting comfortable with numbers does require some mastery of the tools.  You don't have to go back to school, but just mastering a few of the advanced functions in Excel and putting them to good use with things like randomized trials, statistical regressions, and net value calculations can go a long way.  And remember, not all numbers are dollars.  It's possible to measure a lot of things that currently go unmeasured and using that hard data to demonstrate hard outcomes is the holy grail of demonstrating efficacy.
  • Go get a gavel.  Welcome and encourage debate.  Invite in the finance and ops guys early and often... but chair the debate.  Don't go on the offense or the defense.  Enlist one of your teammates to be the advocate for "your side" and serve as the moderator.  Gather all perspectives.  Then feed them into your quantiative models.

And speaking of encouraging debate, join the debate at CRO Summit Chicago Nov 3-4 where we'll gather some real math-heads to take on the questions of valuing sustainability, including Yale's Dan Esty (author of Green to Gold), NYSE CEO Duncan Niederauer, NorthernTrust CEO Rick Waddell, and many more.


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