GARP SCR: Difference between SPTs and KPIs (Chapter 5)

This interesting question is asked by Mayank Mohan. He is one of the members of the LinkedIn group for GARP SCR Exam prep

Question is : What is the difference between SPTs (Sustainability performance targets) and KPIs?

(This is the topic from Chapter 5: Green and Sustainable Finance: Markets and Instruments)

To explain the difference and help the reader remember the concept for a long time, I have answered the question through a story of my childhood. Perhaps, you may be able to relate to it. Here goes the story. Enjoy!

When I was growing up I had a very simple ambition that I should grow at least 10 centimeters taller to my father. So,I told my mother that you know I want to grow at least 10 centimeters more than my Father in another 5 years. She readily agreed me to help me reaching that ambition. So my mother made my father and me stand against a wall in my room. She marked my height with a  pencil and father's height with a blue pen. Finally,she marked 10 centimeter above my father's side with the red pen.

Every year on my birthday, she would measure my height and mark my new height in pencil on the wall.I would regularly look at that the pencil marks and ask my mother as to how soon can I reach the red mark. My mother,being a parent, she would trick me into eating all healthy food and drink milk twice a day etc.  😝 so that I can grow taller faster and reach that red mark. I could reach that red mark before. Not sure, if you find this story relatable? 😊

So, to summarize, my target was that red mark (10 centimeters above my father's height) . My progress towards that red mark were those pencil marks indicating my height.

Drawing to the above story, let me explain SPTs and KPIs with examples.

Sustainability Performance Targets (SPTs) "Red mark from my story":

1.  Sustainability Performance Targets are specific goals or objectives that organizations set to achieve desired outcomes related to sustainability and environmental, social, and governance (ESG) performance.

2. SPTs are typically outcome-oriented and represent the desired level of performance that an organization aims to reach within a defined time-frame.

3. These targets are often aligned with the organization's sustainability strategy, stakeholder expectations, and global sustainability frameworks such as the United Nations Sustainable Development Goals (SDGs)

4. SPTs help organizations demonstrate their commitment to sustainability and provide a clear direction for sustainability initiatives and actions.

Example of Sustainability Performance Targets (SPTs):

1. Achieve 100% renewable energy usage across all operations by 2030.

2. Reduce greenhouse gas (GHG) emissions by 50% by 2030 compared to the baseline year.

3. Increase the diversity of the workforce by achieving gender parity in leadership roles within five years.

4. Achieve zero waste to landfill by implementing comprehensive waste reduction and recycling programs by 2025.

5. Enhance community engagement and social impact by investing 1% of annual profits in community development projects.

Key Performance Indicators (KPIs): "Pencil marks in my story" :

1. Key Performance Indicators are specific, quantifiable metrics used to measure and evaluate the performance of an organization or its various functions, processes, and activities.

2.  KPIs are often used to track progress towards broader goals and objectives, including sustainability targets, operational efficiency, financial performance, customer satisfaction, and more.

3. These indicators provide actionable insights into performance trends, strengths, weaknesses, and areas for improvement, enabling informed decision-making and performance management.

4. KPIs are typically established based on organizational priorities, strategic objectives, and stakeholder expectations.

Example of Key Performance Indicators (KPIs):

1. Energy Consumption: Measure the total energy consumption (in kilowatt-hours or megajoules) per unit of production or square footage of facilities.

2. Carbon Emissions Intensity: Track the amount of greenhouse gas emissions (in metric tons of CO2 equivalent) per unit of output or revenue generated.

3. Employee Turnover Rate: Calculate the percentage of employees who leave the organization voluntarily or involuntarily within a given period.

4. Supplier Diversity: Monitor the percentage of procurement spend allocated to diverse suppliers (e.g., minority-owned, women-owned, veteran-owned businesses).

5. Customer Satisfaction Score: Assess customer satisfaction levels through surveys or feedback mechanisms, measuring factors such as product quality, service responsiveness, and overall experience.

In summary, Sustainability Performance Targets (SPTs) represent specific goals and objectives related to sustainability outcomes, while Key Performance Indicators (KPIs) are measurable metrics used to evaluate performance across various areas, including sustainability, operations, and stakeholder engagement. Both SPTs and KPIs are essential tools for monitoring and driving organizational performance in alignment with sustainability objectives and broader strategic priorities.

If you have any questions/feedback, please share here in the comments of this post.

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