Critical Environmental Indicators Used to Assess Environmental Performance of Business

Introduction During the last decade, there has been an increasingly intensive interest in assessing, measuring and documenting the environmental performance of industry. Pressure is increasing on companies to report on the environmental impact of their activities. While in the previous two or three decades the behavior of firms in this respect was mainly dictated by government, some companies have begun to recognize the potential 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. 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. History of Indicators Companies are facing constantly competitive challenges: low cost was the most competitive priority of the 1960s, flexibility became the strategic weapon of 1970s, whilst the implementation of the total quality management (TQM) based programs represented the most effective perceived managerial solution for achieving good performance in the 1980s (Azzone et. al 1996). At the beginning of the nineties, corporations considered their environmental performance and, in particular, the reduction of their impact on the 'state of the environment' by the implementation of environmental efficiency programs (Bloom & Morton, 1991). An extensive literature search and evaluation about performance evaluation was done and many different approaches addressing the subject were found such as balanced scorecards (Kaplan and Norton, 1996), the Baldrige Award, intellectual capital, the triple bottom line (Elkington, 1999), executive dashboards (GRI, 2000), systems thinking, GEMI--measuring environmental performance and ISO 14031 were among others. Examples of several initiatives on environmental indicators are from Association of Chartered Certified Accountants (ACCA) Report on Environment--Related Performance Measurement (Bennett & James, 1998), Global Reporting Initiative (CERES, 1996), EU Eco--Management and Audit Scheme, ISO 14031-Environmental Performance Evaluation, Guide to Corporate Environmental Indicators by the German Federal Environmental Agency, WBCSD Report on Eco-efficiency Metrics, National Round Table on the Environment and the Economy (NRTEE, 1997), EEA Working Paper on Eco-efficiency Indicators (Gee & Moll, 1998), World Resources Institute (WRI) Report ([D.sub.it]z & Ranganathan, 1997). What are Indicators? Decision making and management of complex issues requires methods for representing these issues by simple units of measure known as indicators. Indicators are "specific measurement of an individual aspect that can be used to track and demonstrate performance. Ideally, environmental indicators present scientifically based, scientifically defensible, and credible information on the status of, and trends in, environmental conditions or situations. They are powerful tools that serve for performance evaluation and public information. These are usually, but not always quantitative" (GRI 2000). Indicators are used to depict the vast quantity of environmental data of a firm in a comprehensive and concise manner. They are mostly applied to set absolute material and energy data in relation to other variables in order to increase the informational value of quantitative data. Environmental indicators are also concerned with the measurement and tracking of firm's output to the physical environment. For example, energy consumption is a physical indicator, the sum of Greenhouse Gas emissions expressed in Carbon equivalent is an environmental indicator. They go beyond simple data to show trends or cause and effect relationships. Indicators should be objective, understandable, significant (reflect all relevant aspects), responsive to stakeholder expectations, allow for meaningful comparisons and value judgments, workable, based on explicit value system, relatively small in number, sensitive to the conditions they are designed to measure, and readily measurable to minimize the lag time between information gathering and interpretation. …