Sustainable Business Needs a Moneyball Moment. (Brad Pitt and Michael Lewis, are you listening?)

Spring training and the Oscar Awards are both right around the corner, so I’ve been thinking about the movie Moneyball.

For those who haven’t seen the movie or read Michael Lewis’ excellent book, a recap: In 2002, the Oakland A’s were in last place with one of the smallest budgets in all of major league baseball. The A’s then began a record-setting winning streak. The team’s general manager did this by first paying attention to certain metrics that no one else cared about or paid attention to.   Then they figured out how to value those metrics to get undervalued ball players at bargain basement prices, and to beat the other teams who did not see what they were seeing. Finally, they learned to tune out all the things that actually did not matter.

In the book, Michael Lewis describes ball clubs pouring millions of dollars into high-profile players with impressive batting averages, and overlooking players who scored high on the underestimated but far more valuable on-base percentage – the ability to draw walks, or get singles or doubles.  Billy Beane, the Oakland A’s general manager, was able to use this system – known as sabermetrics – to exploit a market inefficiency and catapult his team to an astonishing level of success.

Kevin Youkilis: The Greek God of Walks.

Business is in desperate need of a Moneyball moment for sustainability. Publicly traded corporations are under tremendous pressure, particularly in this economic climate, to report every single quarter on a very specific set of monetary metrics and to grow continuously. There is also a focus on metrics that don’t necessarily track well to the long-term health of a company, such as revenues per employee.  You can improve your measure on that metric easily via layoffs – but you’re not necessarily going to improve the long-term prospects of the company.  Meanwhile, reducing water use, improving energy efficiency and lowering greenhouse gas emissions often gets under-reported and undervalued at all but a handful of companies.

If a company tracks metrics around environmental impact and waste – metrics besides the ones that show up in every quarterly earnings report – a couple of things happen. They reduce waste in the system and hunt down market inefficiencies, which saves money and reduces environmental impact. This is far less glamorous than a lot of business metrics, but all of that reduced waste and energy efficiency drops straight to the bottom line.  Energy efficiency is the on-base-percentage metric for corporations – desperately unsexy, nearly invisible to the untrained eye, and never mentioned in the post-victory game highlights. Yet especially for many energy-intensive companies, it’s fundamental to the health and the staying power of the organization. It can be a winning strategy, especially for a company facing serious budget constraints. The late Ray Anderson, sustainability leader and CEO of Interface, once claimed that their sustainability programs were what allowed Interface to survive economic instability in the early 90’s, when most other textile manufacturing in the US was shipped overseas.

When you start tracking sustainability metrics, you may also start to notice in a new way where you are vulnerable to regulatory risk and other forces. It’s like gradually realizing, as Oakland A’s manager Billy Beane did, that bunting and stealing bases are rewarding in the short term but have hidden risks and maybe don’t have a very good return on investment when you do a full cost accounting. Likewise, some utility companies are starting to look down the road, measure the cost and impact of future US coal regulation, and think hard about how much their own batting lineup relies upon coal-fired power plants.

Together, the small advantages from resource savings, reduced risk, and market advantages from practicing sustainability can aggregate into a winning combination for a company that under could totally upend conventional wisdom about what a sustainable global corporation looks like.  A real Moneyball moment – one that could cause a tremendous shift – would be an underperforming company surging forward on the basis of sound, disciplined sustainability practices, leaving other companies wondering: What the heck happened? And how can we do that?

Companies are getting some help from civil society in seeing the value of some of these metrics. The Carbon Disclosure Project, which asks companies to report on their energy use, greenhouse gas emissions and water consumption now has over three thousand companies voluntarily providing this data (thanks in part to pressure from some of those companies’ more forward thinking shareholders).   The B corporation framework  requires participating companies to include the interests of employees, consumers, the community, and the environment as part of their corporate responsibilities. This means that they are on the hook to measure and focus upon metrics beyond the simple short-term monetary growth of shareholder value. That’s a game-changer for many companies that wish to do the right thing but are hamstrung by a narrow notion of fiscal responsibility.

The ending of  Moneyball  is interesting as well. Bigger, richer teams caught on and the Oakland A’s advantage vanished as the market inefficiency disappeared. The Boston Red Sox hired the creator of sabremetrics and went on to win their first World Series since 1918. Like Unilever buying Ben & Jerry’s ice cream and Danone’s partnership and eventual takeover of  Stonyfield Farm, eventually the big players tend to move in on a good thing, and an oddball idea championed by one or two renegade underdogs becomes the way that almost everyone does things.

The sustainable business community is in need of a Moneyball moment. Worst case scenario, by caring about metrics like tons of garbage and gallons of wastewater and kilowatt-hours of electricity, we can save a little money and do right by the planet. Best case scenario, you may uncover the chance to dramatically change the way that the game is played and what a sustainable business can look like.


1 Response to “Sustainable Business Needs a Moneyball Moment. (Brad Pitt and Michael Lewis, are you listening?)”

  1. 1 Sustainability Metrics as Secret Weapon | Scope 5 Trackback on February 28, 2012 at 2:11 pm

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