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14

chapter 2

efficiency according to the ISO classification is the Operational Performance Indicator (OPI).

The selection of value indicators depends upon the ways in which the eco-efficiency indicators will be used for decision making. For example, process

engineers may want to evaluate eco- efficiency in terms of the number or mass of products being manufactured. Financial analysts or business managers may want to analyze eco-efficiency in terms of a company’s total turnover or earnings to assess economic risks/benefits. For a specific product, decision makers may want to consider eco-efficiency in terms of the function or service that the product provides (e.g. expressing value relative to passenger-km of travel for an automobile, or hectares of land treated in the case of an agricultural pr oduct).

pilot learning: financial issue versus mass or volume

Companies’ experience in selecting and applying value indicators during the pilot program showed that some value indicators are more useful for tracking performance at the corporate level, e.g. Net Sales, while others are more useful for developing actions to improve performance, e.g. Quantity of Production at a site level. On a site level sometimes Net Sales figures are even not available and alternative financial figures, e.g. Cost of Goods Sold, must be found instead to express value in monetary terms.

Product or market mix is a key issue with the use of value indicators. Diverse groups which manufacture many different products, would want to present eco-efficiency as an aggregated average figure across different product lines. If the relative contribution of different products to the business changes, the

Volume and mass indicators such as number of product units and quantity of product, are relatively

straightforward. However, the aggregation of different products may create issues. For example, 1000 passenger automobiles is clearly not equivalent to 1000 commercial transport vehicles. Care should be taken if volume indicators for different p r o d u c t s a r e a g g r e g a t e d , o r i f t h e e c o -

efficiency of different kinds of products is compared.

Financial performance indicators, in general, are well established. WBCSD recommends that companies use recognized accounting terms and methods for selecting such indicators.

Functional value indicators provide a measure of the task that a pr oduct or service performs for its end-user. In

eco-efficiency value may change without any genuine change in eco-efficiency. Thus, for example, if the company sells more of its material-intensive products (due to increased customer demand), then its average material use eco- efficiency will decrease, even though the actual eco-efficiency of the individual products has not altered.

Some companies use an indicator known as the “Statistical Unit.” This is a hybrid of financial and volume indicators and is defined as the number of pr oducts equivalent to a fixed value of sales. The advantage of the “Stat Unit” is that it normalizes different kinds of products within a company’s business to a fixed unit of financial value and avoids problems caused by changes in product mix.

many respects this is the purest expression of eco-efficiency because it specifically relates the environmental attributes of a product to the value that it provides, and it maximizes the ability

to examine the influence of innovations that either reduce environmental burdens or improve product performance.

But this approach has several limitations:

  • It is often difficult to quantify clearly the “function” that a product performs. For example, how does one quantify the functional value of cosmetic products or of a television set?

  • Individual products often perform multiple functions. For example, paper towels are used throughout the home for a variety of tasks.

  • Secondary value parameters that are often very important to the user such as aesthetics and comfort, cannot be easily integrated in a quantification.

  • It is also important to recognize that eco-efficiency estimates cannot be aggregated across products that perform different functions.

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