Peter Drucker is quoted to have said, ‘Being at least as good as the leader is a prerequisite to being competitive’. His statement strikes at one of the foundational principles of performance management.
The lowest quality aspect of being competitive is employing benchmarking. It remains a time-tested strategy for organisations and investors when assessing and managing performance.
As organisations implement their sustainability strategy-to-reporting, they must apply this same principle.
While the sustainability journey will differ and requires tailoring to suit the context of each organisation, there are many opportunities for benchmarking that they must leverage to assess the reasonableness of their outcomes and hold themselves accountable.
Benchmarking is also being embraced by sustainability reporting standards, such as the International Sustainability Standards Board, which is responsible for issuing the IFRS Sustainability Disclosure Standards.
Therefore, organisations need to extend the use of benchmarking, a fairly familiar concept, to their sustainability universe.
Some of the areas where benchmarking can provide insights to organisations on their sustainability journey include the following.
The materiality process is a building block for sustainability and sustainability reporting. Organisations should apply benchmarking to this process to enrich their analysis of material sustainability risks and opportunities that affect their industry and competitors.
They can also use it to assess the reasonableness of their materiality process outcomes relative to peers in the market. This process will provide management with valuable insights for continuous improvement. Another important aspect often overlooked when benchmarking is sustainability reporting. The reporting maturity journey for organisations requires the use of benchmarking to not only set ambition but also drive performance.
The benchmarking exercise does not require a report that is better overall, but rather one that incorporates best-in-class practices in specific sections.
Therefore, the goal is to seek out peers who have demonstrated a maturity in specific reporting aspects and use that to enrich and drive improvements in an organisation’s own reporting or process.
Other opportunities for applying benchmarking along the sustainability journey include technology, governance, and risk management. Organisations should encourage the use of benchmarking across their sustainability work streams where relevant.
Benchmarking is a valuable external perspective that organisations can apply when validating and monitoring performance and outcomes.