How to create a value chain index in your sector

Develop an index with partners
How to create a value chain index in your sector
Publ. date 16 Nov 2011
Companies with extensive annual reports on CSR, organizations on the move for charity projects and people with personal sustainable initiatives. All good examples to implement sustainability. However, if you really want to make a difference, the key is to develop an index together with partners and competitors. Benchmarking helps to create awareness and companies with better ratings than others, receive more business from downstream customers. An initiative such as the Value Chain Index (VCI) is innovative and provides a powerful tool to communicate sustainability to the market.

Patagonia and Walmart provide the key steps to create a Value Chain Index in the latest Harvard Business Review. Both organizations developed the Sustainable Apparel Coalition, to compare the sustainability performance of brands. The steps to create this coalition are described below.

1. Start with a committed core
Together with a sector leader that is active on sustainability you can get the ball rolling. This generates power and credibility to increase the attention for the index.

2. Invite founding members
Bring frontrunners on sustainability together to create a coalition of stakeholders.

3. Prototype quickly; then refine
In order to speed-up the market it is important to act fast. Therefore a version 1.0 that builds on existing models, can serve as a prototype and can be refined later.

4. Designate a driver
Third party interventions are a tool to manage governance and drive task completion.

5. Focus on who will use the index and how
Set the target group for the index and define a brand view, a factory view and a product view. For instance, the Sustainable Apparel Coalition focuses on comparison of brands for the retailers and provides insight for manufacturers into the products and processes least harmful to the planet.

6. Define the dimensions of measurement
A sustainability index entails many different aspects, such as water, energy, waste, biodiversity and various social aspects. A broad set of indicators improves the comparability across the sector. For instance, the Sustainable Golf Index consists of 21 main indicators and 52 sub indicators.

7. Make measurement as accurate as possible
First, ask yourself the question: what is important to measure? Then evaluate and adapt changes. The Sustainable Apparel Coalition is now working on a version 2.0 that uses quantitative life-cycle assessment data to create its weighted ratings.

These suggested steps help to create a Value Chain Index in your sector. Finch & Beak has been active on benchmarking and indices for many years now. Besides the Web monitor for social housing corporations in the Netherlands, Finch & Beak also published the Sustainable Golf Index, a benchmark on sustainability at all European golf events. The article in Harvard Business Review discusses sustainability 4.0 where sustainability is central to all aspects of business decisions. This is why Finch & Beak is already for 15 years now communicating the motto: ‘creating better business’.

Source: Harvard Business Review, October 2011

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