Sustainability in business presents itself in many ways. Whether a company develops wide-reaching environmental, social, and governance (ESG) goals, adopts more environmentally conscious practices, or participates actively in the surrounding community, it’s far more common now to see efforts to balance a business’s bottom line with its impact on the world. To understand how successful those efforts are, it’s vital for business leaders to know how to measure the impact their company has on the environment. Environmental impact data can enable businesses to comply with regulations, foster transparency, and contribute to a more sustainable business space.

Once businesses have an understanding of their environmental impact, they can better develop strategies to mitigate the potential ecological harm. Opportunities to be more sustainable exist at every step of a company’s operations, from the supply chain to energy usage. Businesses can reduce their negative environmental impact by minimizing waste, switching to renewable energy sources, and upgrading equipment to more effectively utilize resources. They can also evaluate their supply chain for potential sustainability weaknesses, such as high transportation emissions or unethical employment practices. Some businesses also practice carbon offsetting, meaning they measure their carbon emissions and compensate for them by investing in projects such as reforestation or renewable energy infrastructure to balance their carbon output. Since carbon emissions cause environmental damage regardless of efforts to offset them, it’s generally best to reduce them. However, offsetting practices still provide funding to various sustainable projects, including energy efficiency efforts and renewable energy initiatives.

To promote more sustainable practices, several companies participate in what is known as the circular economy. The circular economy aims to reduce how much waste is produced by promoting recycling and reuse efforts with company products. Patagonia, IKEA, and Apple all offer programs to encourage customers to return used products to them rather than throwing them out. From there, they recycle the used products for materials that they can use in new products, reducing how much waste they produce. A circular economy system is both sustainable and profitable, with consumers often receiving credits for returning used products and businesses relying less on external sources for materials.

A business's environmental impact is measured using different metrics and tools. Companies can use software and sensors to track their greenhouse gas emissions, energy and water usage, and waste generation. Standards organizations such as the Global Reporting Initiative and ISO 14001 provide frameworks for measuring climate impact, and many businesses utilize these frameworks to ensure that the data they collect is accurate and easily compared to other benchmarks.

Nicole Darnall, management professor and Arlene R. and Robert P. Kogod Eminent Scholar Chair in Sustainability at the Kogod School of Business, says: “Current processes to measure a business’s environmental impact include sustainability standards and frameworks like the GHG Protocol Corporate Standard for assessing greenhouse gas emissions, CDP reporting for climate disclosures, and ISO 14001 for environmental management systems, alongside tools like life cycle assessments and ESG metrics aligned with GRI or SASB standards.”