International Journal of Accounting & Information Management

Development of social, environmental, and economic indicators for a small/medium

enterprise
Abigail R. Clarke-Sather Margot J. Hutchins Qiong Zhang John K. Gershenson John W. Sutherland
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International Journal of Accounting & Information Management, Vol. 19 Iss 3 pp. 247 - 266
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Development
Development of social, of indicators
environmental, and economic for a SME
indicators for a small/medium
247
enterprise
Abigail R. Clarke-Sather
Department of Mechanical Engineering-Engineering Mechanics,
Sustainable Futures Institute, Michigan Technological University,
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Houghton, Michigan, USA

Margot J. Hutchins
University of California at Berkeley, Berkeley, California, USA
Qiong Zhang
Department of Civil and Environmental Engineering, University of South Florida,
Tampa, Florida, USA
John K. Gershenson
Department of Mechanical Engineering-Engineering Mechanics,
Sustainable Futures Institute, Michigan Technological University, Houghton,
Michigan, USA, and
John W. Sutherland
Department of Environmental Engineering and Ecological Engineering,
Purdue University, West Lafayette, Indiana, USA
Abstract
Purpose – A growing number of companies are measuring the sustainability performance of their
businesses. Some companies are using pre-existing sustainability indicator systems to assess their
performance. Other companies are looking beyond measurement of impacts to create their own system
of indicators to measure sustainability. Formulating relevant indicators of sustainability performance
is a difficult task for any organization, but especially for small/medium enterprises (SMEs) that often
lack financial, knowledge, and labor resources. The purpose of this paper is to consider two different
sustainability assessment approaches undertaken by a single case study company, a start-up SME.
Design/methodology/approach – The authors developed a method for an SME, Ecologic Designs,
Inc., a self-identified green business that reclaims materials to make bags and accessories, to create its
own sustainability indicators without outside expert help. This research chronicles the struggles and
triumphs of the SME in measuring its sustainability performance using a pre-existing system and then
using the developed method.
Findings – The SME’s managers applied the developed method to create, select, and weight
sustainability indicators to help answer a strategic planning decision – where to locate operations and
facilities in an expanding supply chain.
Originality/value – The paper describes the struggles and triumphs of a start-up SME in measuring its International Journal of Accounting
sustainability performance using a pre-existing system and then using the developed method. and Information Management
Vol. 19 No. 3, 2011
Keywords Sustainability, Small to medium-sized enterprises, Strategic decision making, pp. 247-266
Facility location, Start up companies, Green business, Sustainability assessment, Indicator development q Emerald Group Publishing Limited
1834-7649
Paper type Case study DOI 10.1108/18347641111169250
 IJAIM 1. Introduction
19,3 Increasingly companies want to measure, improve, and report their sustainability
(Daub, 2007). Sustainability lacks an uncontested definition but many consider the
Bruntland Commission’s description as important: sustainability requires “meeting the
needs of the present without compromising the ability of future generations to meet their
own needs.” For businesses sustainability is often described as the triple bottom line or
248 people, planet, profits.
The pressure on companies to tackle sustainability concerns in part comes from
external sources, e.g. international organizations, governments, stakeholders, and
markets, that push for greater transparency and improvement on non-financial aspects
of business performance. This push has led to the development of many frameworks for
companies to report corporate sustainability performance. The development of
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indicators involves not only deciding what is important and relevant to track, but also
what is meaningful to quantify. Current sustainability indicators and assessment
systems can be thought of as either coming from expert (such as politicians, policy
makers, social or natural scientists (Bell and Morse, 2008)) driven processes with either a
business or nation focus or as company driven processes. The business focused expert
driven processes include but are not limited to the Global Reporting Initiative (GRI)
(2008a, b) and the Dow Jones Sustainability Index (Dow Jones Indexes, STOXX Limited,
and SAM Group, 2009); nation focused expert driven processes include but are not
limited to the United Nations Committee on Sustainable Development Indicators (2001)
and the International Labour Organization (2009) key indicators of the labour market.
Other sources review sustainability assessment systems more extensively
(Labuschagne et al., 2005; López et al., 2007). Some of the national focused indicators
are not applicable to companies, only the indicators that are relevant to companies were
considered.
Expert developed indicators, such as the ones mentioned above, tend to consist of
several categories: economics, environment, societal impacts, and sometimes
institutional or organizational concerns. Considering the indicators developed for these
systems in aggregate, the society impacts category is by far the largest considering
effects to different stakeholder groups including workers, customers, local communities,
and suppliers, as well as human rights, political involvement and corruption, and product
safety. The environment category is the second largest including various subcategories
from energy, materials, water, waste, emissions, land effects, to environmental
management and standards. Institutional or organizational concerns cover company
board and upper management functioning, risk management, and brand management.
Some of the problems associated with expert derived indicators include:
.
lack of indicators relevant to manufacturers;
.
small/medium enterprises (SMEs) cannot afford to do these sustainability
assessments; and
.
input from companies into the development of these processes mostly comes
from large corporations (Hillary, 2004; Redmond et al., 2008).

1.1 Company frameworks

Due in part to some of the problems associated with generic sustainability reporting and
assessment frameworks, specific companies have developed their own frameworks. The
 company developed sustainability assessment systems chosen for comparison’s sake Development
are all manufacturing companies, BASF (Kolsch et al., 2008; Shonnard et al., 2003), of indicators
Henkel (Krajnc and Glavic, 2005), GM (Dreher et al., 2009), Timberland (The Timberland
Company, 2010), and an anonymous Indian steel company (Singh et al., 2007). Very few for a SME
SMEs participate in any type of sustainability assessment , all companies considered are
large and well established.
The company developed indicators tend to be organized into economics, 249
environment, and societal impacts (only one company mentioned any institutional or
organization concerns (Singh et al., 2007)). In contrast to the expert driven indicator
categories, the economics category included a section devoted to manufacturing costs.
This addition resulted in the company developed economic indicators being nearly
double in number than the expert developed indicators. The environment category
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indicators spanned materials, energy, water, emissions, waste, including factory

impacts (green cover, noise, air quality) but lacked indicators on environmental
standards and management. Company developed indicators for the economic and
environment categories tended to focus on per product or per unit of production impacts
versus total impact which the expert developed indicators emphasized. The company
developed indicators point of view on societal impacts focused on workers and their
safety but concerns about suppliers, local communities, and product safety were also
included. Some of the problems with company developed sustainability assessment
systems include:
.
comparability between companies in the same industry;
.
ability to trust information presented is unbiased; and
.
in general large companies are the only ones that can afford this kind of process.

1.2 Research gaps and questions

Global companies have largely defined what corporate sustainability means (Hillary,
2004; Redmond et al., 2008) despite the greater number of SMEs worldwide than large
corporations. SMEs rarely participate in any form of sustainability assessment because
of the resources, knowledge, and time involved (Tsai and Chou, 2009). Thus, the SME
perspective is missing from debates about measuring sustainability performance. It is
not clear if and how SMEs’ perspective on sustainability and measuring sustainability
performance would differ from expert or large company developed systems. A case
study alone cannot find systematic differences between large company and SME
approaches to sustainability, but can seek greater understanding of how an SME defines
sustainability and the applicability and usability of expert and company developed
systems to that company:
.
Is a sustainability assessment for a specific decision of an aspect of company
performance more applicable to company decision making than a general set of
sustainability indicators?
.
Does a start-up SME self-identified green business have a different perspective
on sustainability than the current options available?
.
Can the performance measures created by self-identified green businesses be
trusted as providing a reasonable holistic and unbiased view of the sustainability
of their businesses?
 IJAIM .
Do self-identified green businesses possess enough sophisticated knowledge
about sustainability to be able to develop adequate sustainability performance
19,3 measures without outside expert help?

2. Research approach
Yin states that case studies are best used to describe how or why something happens
250 and to explain currently developing events. This research used a single case study
approach, which are appropriate to use when the situations studied are sufficiently
novel to provide ways to explore currently relevant ideas and theory (Yin, 2003). Both
Yin’s approach to case study research and Eisenhardt’s (1989) approach to case study
theory building and testing were utilized. The single case study approach is justified
for this research because of considering:
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.
the rare situation of an SME startup and self-identified “green” company
attempting sustainability assessment; and
.
the ability to contrast the competing ideas and theories surrounding why a
company would or should choose to employ generic or internally developed
frameworks for sustainability assessment.
Similar research has studied how a specific company develops sustainability
indicators using only a single case study (Krajnc and Glavic, 2005; Singh et al., 2007).
In addition, case study methodology has been used to study sustainability assessment
in other areas including but not limited to supply chain management (Sigala, 2008),
higher education (Corcoran et al., 2004), environmental management (Mendoza and
Prabhu, 2000), and urban community development (Yuan et al., 2003).

2.1 Case study selection

Boulder, Colorado, USA is a hotbed for startups (Wadhwa, 2010) and in addition there
is a community ethic in favour of sustainability (City of Boulder, Colorado, 2008). For
this reason, this city was chosen as the location to look for the single case selected.
A soft goods manufacturer that incorporates reclaimed materials was chosen as the
single case.

2.2 Data collection

Data collection encompassed several areas:
.
company history, mission, management structure, and business processes;
.
company strategic goals and future plans;
.
company sustainability impacts;
.
issues with employed sustainability assessment approaches; and
.
attitudes about the importance and meaning of sustainability.

Data were collected from February 2008 until July 2009 in Boulder Colorado at the
main headquarters for Ecologic Designs, Inc. (Ecologic). Data were collected through:

.
Physical artefacts. The products manufactured by the company made were used
to understand the production processing required and sustainability aims of the
company.
 .
Documents. Both internal and publicly available documents were utilized to Development
understand and assess company sustainability as well as to comprehend the of indicators
business situation of the company.
.
Interviews (open ended and survey). Informal face-to-face interviews of key players
for a SME
in the company, mainly the four managers but also additional staff who had
leadership responsibilities and more rarely manual laborers, were undertaken to
gain unwritten information about the company’s relationships with suppliers, 251
contract manufacturers, consumers, and the nearby community. Managers were
often asked similar questions in group settings with all managers present.
Two online surveys were also undertaken as requisite parts of the expert
developed and company developed sustainability assessment processes.
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.
Onsite participant observation. The first author participated in the company as a
technical expert in sustainability assessment and as a guide for the sustainability
assessment process. However, at no time did the participant observer (PO) offer
an opinion on which parts of sustainability were important to address.

2.3 Research validity and reliability

A single case study may be difficult to evaluate for validity and reliability. This case
study focuses on exploring and describing events undertaken by one company and thus
is internally valid. To ensure construct validity of this research multiple data sources
were used and a case study database was created to catalog gathered data. This case
considers a rare situation that is not likely to be often repeated and therefore may lack
some external validity, i.e. comparability with other research findings. However, public
reports of the case study company’s sustainability (Bogatin and Clarke, 2008;
Bogatin et al., 2009) allow comparison across methods and companies. For a single case
study, more perspectives on findings aids the reliability of the research conclusions (Yin,
2003). Therefore, all findings were reviewed by all authors in addition to the PO.

3. Case study data

The case study selected was with Ecologic a self-identified green manufacturer with a
stated commitment to both sustainability and local production that started operations in
July 2006. Ecologic reclaims hard to recycle materials (e.g. billboard vinyl, tire inner
tubes, wetsuits, and climbing rope) and uses these materials to make bags and
accessories. Ecologic relies upon individuals and community partners (e.g. governmental
agencies, non-profits, and other businesses) to help collect the reclaimed material stream.
For Ecologic to achieve its goals, it must have buy in from a variety of different groups,
those that supply reclaimed materials, promote reclamation services, buy products, and
promote the outdoor activities and lifestyle of its customers. Ecologic sells products to
several types of clients; retail, wholesale, and business-to-business (B2B), through several
mediums; events, stores, online, and catalogs. The company sells most of its products
within the USA, but has an increasing international market presence. This small start-up
manufacturer reported net sales of US $200,000 in 2008.
Ecologic is an S Corporation with five owners, three of whom work directly for the
company full time. The business has a fairly simple organizational structure (Figure 1);
four managers oversee all aspects of the business including: managing employees that
perform general labor tasks such as processing of reclaimed materials; design and
prototype construction; sewing; product assembly; marketing; and sales. Managers also
 IJAIM B2B Reclamation
Partners
19,3
Managers
Mtls Collection Mtls Processing Production
Labor Vehicle Labor Equipment In house Contract
252 Labor Equipment Manufacturers
General Sewing
Figure 1.
Overall structure of
Ecologic’s business
Wholesale Online Events
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and operations
Sales

oversee relationships with contracted facilities, contract employees (i.e. pay per piece
garment workers) and retail, wholesale, and B2B clients. During the reporting period,
the number of employees that worked at Ecologic headquarters fluctuated between
eight and 12 employees with a turnover rate of 25 percent (four employees left). In
addition to these employees, Ecologic employed 20 people to sew its products during
the data collection period.
An integral part of Ecologic’s understanding of sustainability involves local
production, defined as sourcing labor and materials in the same place the product is
designed and sold:
Ecologic Designs currently manufactures products within 18 miles of our main facility in
Boulder, Colorado. Within 25 miles we’re able to collect over 60 percent of our raw materials
from individuals, businesses and venues (Ecologic Designs, Inc., 2009).
Ecologic is committed to staying in the USA for additional business growth and to do
this sustainably: “[a]s we grow, our goal is to invest in sustainable technologies and
efficient processes to increase the overall positive impact we have on local and global
communities” (Bogatin and Clarke, 2008).
Dissatisfaction with the sustainability impacts of manufacturing conventional
materials commonly used by the outdoor industry pushed Ecologic to focus on finding
uses for waste. Ecologic managers often collected new information about
environmental and social concerns about conventional materials’ environmental and
human health impacts. However, the managers lacked knowledge to fairly compare
materials using a life cycle perspective. Many assertions Ecologic made about
environmentally friendliness of its own designs and processes lacked evidence.

3.1 GRI process

In February 2008, Ecologic accepted the offer from a small firm entering the
sustainability report assurance business to complete a GRI report and receive
assurance at reduced cost. At that time, the first author started working with Ecologic
as a PO. In general, GRI indicators of performance cover:
.
environmental;
.
economic; and
 .
social sustainability (divided into labor practices, human rights, societal impact, Development
and product responsibility). of indicators
GRI has three reporting levels corresponding to the amount of information disclosed, for a SME
in essence how many core indicators are included (optional indicators are called
additional). “A” represents the greatest disclosure (all core indicators) followed by
“B” then “C.” A þ rating, e.g. A þ , denotes the report has been assured by GRI or a 253
third party (GRI, 2008a, b). Many indicators do not apply to specific businesses but
GRI’s grading system implies that companies that submit sustainability reports
graded at C withheld information.
The GRI reporting process starts with determining “materiality” or what
sustainability topics and indicators are relevant. Defining materiality depends on
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what stakeholders, competitors, regulators, and experts consider as relevant business

concerns. One manager and the PO started by selecting indicators relevant to Ecologic’s
business. The manager later decided that Ecologic should report on all indicators
required for A þ rating. Some indicators required were not selected as relevant to
Ecologic and some indicators not required for that level had been selected previously.
The manager and PO created a stakeholder survey which asked respondents to rate the
importance of Ecologic reporting on A level sustainability indicators. The stakeholder
survey was created as an online survey but only a small response was received
(22 responses total). The small response clearly affected how much weight one could put
on the survey results. In general, the stakeholders agreed that all of the environmental,
all but one societal impact, and a few human rights and product responsibility indicators
were important. Ecologic’s managers thought economic indicators were more important
than the survey respondents stated. After considering the results, the manager most
involved in this process still decided to report on all indicators needed for the
A level rating.
The manager most involved in the process assessed the social and economic
sustainability sections of the GRI sustainability report, whereas the PO assessed the
environmental sustainability section spending over 100 hours each, starting in early
February and ending 10 April. Other managers and employees helped with input,
formatting, and design for the report. The division of labor chosen between the
manager and PO in part reflected the ease of attaining different sustainability
information. Many of the social indicators’ sections focused on whether or not policies
or training were in place for various issues, answers that did not involve data
collection. The economic section followed naturally from general accounting practices
and thus Ecologic had already gathered this information. In contrast, most of the
environmental information was not already being collected. Three main types of
problems with gathering this information existed:
(1) data needed to be re-aggregated for reporting;
(2) data were collected unsystematically; and
(3) no data collection system was in place.

Ecologic won an award for the first sustainability report it ever created, the 2008 Best
SME Sustainability Report from Corporate Registere. Ecologic’s external recognition
for excellence in sustainability reporting, may lend more credence and provide a better
context to the problems that this SME faced with this way of assessing sustainability.
 IJAIM 3.1.1 GRI process problems. The manager most involved complained that the GRI
19,3 protocol’s highest reporting level required gathering more information than was
relevant to Ecologic. Also, the protocol was missing indicators relevant to
manufacturers and material reclamation. GRI is working on this problem by creating
sector specific indicators. GRI (2008a, b) released a series of suggested indicators for
apparel and footwear manufacturers – the closest sector relevant to Ecologic.
254 Other managers considered the ways indicators were reported, in order to fit with
GRI’s recommendations for reporting, as confusing at best and meaningless at worst to
the people who actually buy Ecologic’s products or supply its materials. The managers
thought that the report length would prevent even an interested party from reading.
All managers identified the need for better information presentation. After the time
spent in simply gathering the information required, there was not much available time
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for refining the presentation of information.

For Ecologic, no obvious sustainability performance improvement goals arose from
measuring the GRI indicators. The GRI guidelines mentioned sustainability goals often
but did not offer guidance on how companies should set targets and goals. In addition
managers, were confused about how to achieve goals for sustainability performance if
they did sometime manage to set goals. GRI guidelines did not provide guidance for
achieving sustainability performance improvements either.
From the PO’s perspective, the company management lacked the expertise needed
for environmental indicators evaluation. Without the PO, it would not have been
possible for Ecologic to finish the report. The second year Ecologic was able to report
on its past year (2008) of environmental impact. Once the environmental indicator tools
and data collection methods had been established, the report could be recreated.
In general, the cost of the expertise needed to set up a environmental assessment and
auditing would be outside an SME’s budget, especially for a startup. This is evidenced
by Ecologic’s decision the second year that assurance was not affordable.
Another weakness to Ecologic’s approach was the main involvement of only one
manager. This manager emerged with a great understanding of the benefits and
drawbacks of reporting. Sustainability projects often need a champion in the
management (Schaefer, 2004). However, without the time, resources, expertise,
or interest on the part of all managers it is likely that the knowledge of how to report
resides only with the manager directly involved. This manager has since left the
company, as of yet no 2009 sustainability report has been published.

3.2 Company developed sustainability assessment process

For the company developed sustainability assessment process instead of focusing on
finding ways to measure all aspects of company sustainability, the process sought to
tackle one strategic decision – where to locate operations and facilities as Ecologic
grew. For specific types of decision making, such as strategic planning for facility
locations, sustainability impacts vary dramatically among different geographic
locations. Ecologic has a strong commitment to local-based manufacturing and wanted
to expand with satellite facilities. Currently, all of Ecologic’s materials processing and
production and nearly all of its reclaimed material acquisition occurs in the Denver
metropolitan area. Ecologic’s commitment to localized production and sustainability
resulted in the company wanting to make the most sustainable decision for expanding
operations within the USA. As demand for certain Ecologic products increases
 in particular markets, Ecologic wanted to compare various locations for expanding Development
operations through either contracting, renting, or purchasing facilities. However, of indicators
where to locate new facilities, how many to locate, and what operations to perform at
those facilities in order to best promote sustainability did not have a clear answer. for a SME
The PO developed the process for answering a specific company strategic decision
through developing company specific indicators and weightings for these indicators.
Ecologic managers tested this developed process. In developing this process, the 255
PO sought to alleviate several of the other problems identified while working on the GRI
sustainability assessment process. Ecologic developed all of the indicators on its own in
order to maintain direct relevance to the company and its specific line of business,
manufacturing. The PO designed the sustainability assessment process to avoid the
need for expert input to keep costs attainable for SMEs. Finally, the amount of time taken
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by the managers in the development process was minimized. The entire process of
indicator development and weighting for Ecologic was spread out over a six-month
period from September 2008 through February 2009, with only intermittent activity by
managers involving four meetings and a survey, for no more than 40 hours total spent by
all managers.
3.2.1 Indicator development. Developing indicators is a fluid process involving much
reviewing and improving upon past work (Figure 2). The indicator development process
at Ecologic started with many informal conversations between the analyst and
managers about their business, concerns, and goals. The outcome of these conversations
was a list of potential indicators in adapted from indicators in use for the GRI.

Individual conversations among

participant observer and managers

Participant observer presents

potential indicators to managers

Managers collectively brainstorm,

revise, reject, and categorize indicators

Managers individually select

essential indicators

Managers collectively brainstorm,

revise, reject and recategorize indicators

Managers confirm or reject

indicators and indicator categories

Figure 2.
Flow chart of steps to
Output finalized indicators
develop indicators
 IJAIM This list was used as a starting point for discussion of what indicators might be
19,3 important for establishing a growth strategy for facility location decisions. The PO was
present at all meetings between managers to serve as a guide for the development
process, but did not offer any opinion on what to decide only on how to proceed. The
finalized indicators differed greatly from the initial indicator suggestions. At each level
of indicator development, the managers thought about the necessity of the indicators for
256 making the decision at hand: expanding to new locations as part of a growth strategy.
The potential list of indicators was used as a basis for modifying indicators at a
group discussion between all managers facilitated by the analyst. During this
discussion, two main criteria for adding and rejecting indicators were informally
developed; does this indicator measure an activity essential for day-to-day business
operation? And does this indicator vary by location?
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Next these indicators were compiled into a simple e-mail survey to obtain the
managers’ personal view as to which indicators had merit with regards to the criteria
developed. Each manager put a check for all of the indicators to retain and added any
missing indicators. The average number of checks was calculated for each indicator
and new indicators were added to a list of indicators to consider. The average number
of checks and new list was used to start a second group dialogue the analyst facilitated
selecting indicators to create a revised list. Finally, this list of revised indicators and
indicator categories was sent to each manager individually for approval or further
changes. All managers approved the indicators and categories thereby creating a final
list of indicators (Tables I and II).
In order to expand Ecologic’s operations to new locations, the Ecologic management
team wanted to ensure that business done in new locations would have the least
possible negative effect to sustainability and no more adverse local impacts than their
existing Denver metro-based operations. All of the indicators are measured in such a
way that minimizing indicator values minimizes negative effects to sustainability.
3.2.2 Weighting process. The four managers weighted the importance of each
indicator in each category using a single level analytical hierarchy process (Figure 3)
which can also can be called pairwise comparison analysis (PCA) using the Saaty scale
where 9 denotes the absolute importance of one indicator over another, 1 states equal
importance of indicators, and 1/9 denotes absolute unimportance of one indicator relative
to another (Saaty, 1980). A PC matrix with an acceptable level of inconsistency will
produce usable results. The method to revise inconsistent PC matrices created by Cao et al.
(2008) was used because of its ability to maintain the greatest measure of similarity to the
original inconsistent PC matrix after revising matrix entries. After all decision-makers’
PC matrices were found or revised to be consistent, some way of grouping multiple
decision-makers’ judgments must be made. There are two main approaches used to group
multiple PC matrices the geometric mean method (Barzilai and Golany, 1994) and the
weighted arithmetic mean method (AMM) (Ramanathan and Ganesh, 1994). There are
differing views on which method is best (Mikhailov, 2004). The geometric mean method
for group aggregation was used because of cited concerns with AMM for preserving the
reciprocal nature of comparisons which is important for consistency (Aczèl and Saaty,
1983; Barzilai and Golany, 1994; Forman and Peniwati, 1998).
3.2.3 Calculation and use of developed indicators. Values for the indicators were
calculated on an annual and per product basis. Indicator values were calculated for every
combination of demand and possible location to satisfy that demand (11 locations total
 Development
Weights
Original Revised of indicators
Original Selected (%) (%) for a SME
Group indicators Group indicators
Economic indicators Economic indicators 43 35
Environmental indicators Environmental indicators 39 25 257
Social indicators Social indicators 19 40
Social indicators Social indicators (units)
Business functioning
Availability of managers Availability of manufacturing facilities 26 45
Availability of skilled labor (area/no. of facilities)
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Availability of warehouse Public health (SustainLainTM City Ranking 12 20

facilities (SustainLane, 2009)
Economic redevelopment
incentives per region
Proximity to industry partners Availability of skilled labor (area/no. of 18 10
Proximity to other manufacturers skilled laborers)
Proximity to venues and events Proximity to transportation hubs (distance) 17 10
Proximity to potential clients
Proximity to transportation hubs Average employee commuting distance 8 6.50
(distance)
Customer perception
Local money multiplier Availability of alternative transportation 7 6.50
Value of the story of economic systems (area/no. of systems)
redevelopment
Employee satisfaction
Availability of alternative Availability of alternative transportation 7 6.50
transportation systems systems (area/no. of systems) Table I.
Average commuting distance Developed indicators and
Environmentally socially Availability of warehouse facilities (area/ 12 2 calculated and revised
conscious community no. of facilities) weights: group, social
Public health categories

including the existing location in Denver). These individual indicator values were
normalized, weighted and combined into the three category indices: economic,
environmental, and social. Each category index was normalized by its highest indicator
value and weighted. Calculation of several of these indicators required involved
calculation procedures. The developed indicators were used to solve a facility location
analysis problem for Ecologic, described in further detail elsewhere (Clarke-Sather,
2009). Specifically, the analysis found the optimal number of facilities to site, where to
site those facilities, and which operations to perform at those facilities.
3.2.4 Developed process problems. The indicators were feasible for the managers to
create on their own. The weighting process was slightly more complicated, but with
the aid of software the managers likely would be able to also weight the indicators
without outside help. However, Ecologic lacked the expertise, time, and sufficient
interest in developing the needed skills to perform the calculations needed to measure
the developed and weighted indicators on their own. Choosing units for the indicators
was also difficult for the managers and this is the only time that the PO actively made
 IJAIM
Weights
19,3 Original Revised
Original Selected (%) (%)

Economic indicators Economic indicators (units)

Availability of biodiesel Proximity to reclaimed materials (distance) 25 25
258 Density of material reclaimers by Transportation costsc ($/product) 20 14
region
Facility set-up costsa Labor costs ($/product) 17 14
Operating costsb Operating costsb ($/product) 13 14
Proximity to biodiesel Warehouse/factory rental costs ($/product) 12 20
Proximity to purchased material Land and construction costs ($/product) 8 5
supplies
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Proximity to reclaimed materials Facility set-up costsa ($/product) 5 8

Transportation costsc
Environmental indicators Environmental indicators (units)
Acidification Number of reclamation partners by location 42 38
Amount of reclaimed materials in (area/partner)
an area
Availability of recycled material Amount of reclaimed materials in an area 41 37
inputs by location (area/material)
Availability of renewable energy
resources by location
Avoided new materials production 17 25
Global warming potential – Density of competitors for reclaimed
includes commuting materials (no. of competitors/area)
Landfill space congestion by
region
Nitrification
Photo-chemical oxidation
Solid waste
Toxicity potential (human and
Table II. environmental impact)
Developed indicators and
calculated and revised Notes: aCapital costs, land and construction costs, job creation tax credits, and warehouse/factory
weights: economic and rental costs; bincludes materials, labor, energy, and management/administrative costs; cincludes labor
environmental categories for waste vegetable oil processing, fuel costs, and vehicle fleet maintenance costs

suggestions by commenting on how to measure the chosen indicators. Thus, the PO

ended up gathering all of the information needed to calculate the indicators. The details
of this particular strategic decision, where to locate facilities as Ecologic’s business
grew, changed rapidly. New large prospects for clients would emerge in a different
location and suddenly a new place would be under consideration. Since the managers
were not able to calculate the indicators on their own, these developed indicators could
not be used by the managers to adapt to changing circumstances of the strategic
decision in question as needed without outside help. Therefore, this assessment process
was not updateable. The largest problem with the developed process was an inability
to continue using the developed indicators without outside help rendering the analysis
from these indicators as static instead of dynamic. The managers’ largest complaint
was that they wanted a dynamic tool from the sustainability assessment so that they
 Development
Decision-makers
compare indictors of indicators
for a SME
Output
PC matrices 259

Is PC Revise
NO
matrix consistent? PC matrix
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YES

Group
PC matrices

Calculate
weights

Output Figure 3.
indicator weights Flow chart of PCA steps

could change parameters such as product demand by market region or potential

locations and see how this affected different outcomes.

4. Analysis
4.1 Research question 1
The sustainability assessment process developed for Ecologic was created to answer a
specific question. However, it is not entirely certain that this process was an
improvement over the GRI in terms of applicability to company decision making.
Companies are constantly making decisions and the circumstances surrounding these
decisions, especially in start-up companies, are constantly changing. The uniform
nature of the GRI process, allowed it to be easily updateable. Even though outside
expertise was required to set up the data collection and measurement systems to
measure the GRI indicators, Ecologic could then put in new information into those
systems. The company developed process did not take into account the company’s
ability to update the information over time. The indicators developed were of a too
complicated nature for Ecologic management to understand how to measure the
indicators a second time. In the end, the GRI sustainability assessment was repeated
the following year, but the company developed assessment was not repeated.
 IJAIM So in terms of ability to update information the GRI process was much better
19,3 established.
The nature of the company developed sustainability assessment process makes it
applicable and usable to other company decisions and processes. Ecologic developed
indicators for a facility location decision but just as easily they could use the same
process to develop and weight indicators for another question, say for example how to
260 operate facilities. The problem does not seem to be creating or selecting the indicators
for either the GRI or company developed process. The problem lies with being able to
measure and collect data for the indicators selected. Ecologic had difficulty setting up
data collection systems even for data that was already being collected in different
forms. Thus, Ecologic’s ability to assess its own capabilities at data gathering,
sophistication of sustainability knowledge, and time to work on such projects was poor
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for either process. Ecologic had no trouble answering any essay questions in the GRI,
but did have trouble collecting and analyzing data.

4.2 Research question 2

The indicators developed and categorized by Ecologic follow a similar structure to the
expert developed and company developed indicators including economic,
environmental, and societal categories. The emphasis of Ecologic’s economic
indicators are on costs to the company whereas the focus of the expert drive
processes are on revenue, wages, and spending. The company developed indicators had
a similar focus which included manufacturing and operating costs and represented
indicators on a per product basis. However, some of the indicators Ecologic considered
were not found in the other companies’ developed indicators because Ecologic was
considering a facility location question and its business involves reclaiming materials.
Several of the costs Ecologic considers pertain directly to where to set up a facility, such
as facility setup costs, land and construction costs, and warehouse/factory rental costs.
Established companies are likely to already know which factories they will use and less
frequently need to revisit strategic facility location decisions. However, a start-up
company in a lot of flux with its operations may be expanding rapidly or changing
locations to find the best deal. Part of Ecologic’s green image is to reclaims materials.
Product take back has much greater transportation costs than forward distribution
(Krikke et al., 2003). Location affects transportation costs.
Regarding the environment indicators, all three of Ecologic’s indicators have to do
with safeguarding its reclaimed material supply. Reclaiming materials is an
environmental concern in general, but for Ecologic in particular it is more of an
economic or material supply concern. To Ecologic’s credit many of the environmental
indicators considered in the expert or company developed processes would not differ
between places. However, transport environmental impacts, energy use and its
associated emissions (e.g. GHGs, SOx) would differ between places because of
geographic differences (distances and climate variation in particular). Ecologic ignored
some legitimate environmental concerns, such as the toxicity potential, that the
managers had included in the original brainstorming of indicators (Tables I and II).
From considering the original environmental indicators and their categorization, only
one of the selected indicators came from the list of originally brainstormed indicators.
Furthermore, the other two selected environmental indicators were originally
brainstormed as part of the economic and social categories. All in all, Ecologic has
 a much different perspective on environmental sustainability than the experts and Development
companies that developed the other sustainability assessment processes. However, this of indicators
difference seems to be largely due to a greater focus of Ecologic on its business concerns
with material supply and competition than on actual environmental concerns. for a SME
Ecologic brainstormed social indicators for three categories: business functioning,
customer perception, and employee satisfaction. All but one of the employee
satisfaction indicators was selected for the final indicators, all the rest of the indicators 261
chosen came from the business functioning category. When Ecologic was categorizing
indicators, the managers were not entirely clear where the business functioning
indicators belonged. On some level, the business functioning indicators are comparable
to institutional or organizational governance indicators. Although the company
developed indicators for the most part did not have any institutional or organizational
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indicators, the expert driven processes covered board and upper management
functioning and risk and brand management. Ecologic’s take on business functions
generally included the availability of labor, transport hubs, and facilities. All of these
availabilities would change by geographic location, whereas the company board and
upper management practices would not. Brand and risk management might change in
different locations but are much more sophisticated concerns than Ecologic was
considering. The difference in the institutional governance like indicators that Ecologic
included in its social indicators category seem to be entirely due to its status as a
startup versus the assumptions of expert driven processes that companies assessing
sustainability are well established.
Regarding employee satisfaction, Ecologic included two indicators related to how
employees get to work with a focus on travel distance and public or alternative transit
options available. GM’s indicators were the only other system to mentioned public
transit options (Dreher et al., 2009). No other indicators mentioned public health.
Ecologic managers were especially concerned about expanding into areas where they
personally would not want to live because of pollution problems or community lack of
support for outdoor activities. These concerns reflect Ecologic’s status as a
self-identified green SME with few employees. Ecologic’s concerns for employees as
a self identified green company go beyond simply workplace accidents and health
problems but look at the safety and enjoyment possible from the place its employees
would have to live.
All in all, Ecologic has a different perspective on sustainability than expert or
company developed sustainability assessment systems. Some of the shortcomings
from Ecologic’s indicators, particularly in the environmental indicators category, can
be attributed to its own lack of knowledge or perspective as a start-up SME. For the
social indicators category Ecologic shows concerns for employees that neither of the
other types of sustainability assessments considered. Despite Ecologic’s
imperfect understanding and application of sustainability assessment, it
demonstrates that a start-up self-identified green SME has things to teach the
existing establishment of protocols and assessment systems about what is relevant
and important.

4.3 Research question 3

Conventional wisdom implies companies cannot be trusted to provide a reasonable
critique of their own businesses. This seems to agree with what was found in this research.
 IJAIM However, the reason behind why self-identified green businesses cannot critique
19,3 themselves may have more to do with lack of knowledge about sustainability than a desire
to hide information. Ecologic managers consistently said they wanted to be extremely
transparent yet the indicators were developed and categorized in a slightly naı̈ve manner.
Many of the social indicators chosen would fit better under institutional or economic
concerns. The environmental indicators in particular are biased to put Ecologic in a good
262 light failing to probe any potential problems or challenge their current modus operandi.
During the process of selecting indicators, many of the other environmental and social
indicators were cut, which covered a more varied perspective, because they did not help
Ecologic managers choose between suitable facility locations (Tables I and II).
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4.4 Research questions 4

Concluding that Ecologic was not capable of producing unbiased indicators says
things about its knowledge and ability to assess sustainability. As previously noted,
the PO found that during the filling out of the GRI sustainability report Ecologic
managers lacked a full understanding and ability to establish a measurement system
for some of the quantitative metrics, in particular environmental impacts.
When creating their own indicators, Ecologic managers did not spend much time
considering how to measure indicators or what that measurement meant. How to
measure indicators was decided after selection of indicators. Thus, some fatigue from
discussing which indicators were relevant may have pushed the managers to
rush measurement decisions. However, in both the GRI and company developed
process, Ecologic lacked knowledge and skills necessary for setting up quantitative
indicator measurement and data collection without outside expert help.

5. Conclusions
This research considered two different sustainability assessment approaches
undertaken by a single case study company, Ecologic, a start-up SME self-identified
green business that reclaims materials to make bags and accessories. Ecologic
assessed sustainability using GRI guidelines, then created its own sustainability
indicators to answer a specific strategic question: where and how to locate and setup
new facilities as their business expands? Both processes had pitfalls due to inability to
measure quantitative indicators or knowing how to improve sustainability after
measuring it.
Part of knowing what to improve involves setting goals and targets. Unfortunately
neither sustainability assessment started with goal or target setting. Outside experts
are needed to provide a reality check to a company’s view on sustainability in terms of
what’s important (which indicators), how important (indicators’ relative impact from
the company and to society), and what to attain (targets). Ecologic defined the topics
of sustainability with success, but expertise was needed to refine its sustainability
approach to become more evidence-based and attainable.
Several research questions were posited and analyzed. The authors concluded:
.
a start-up SME self-identified green business has a different perspective on
sustainability than the expert or large company developed sustainability
assessment systems;
 .
a self-identified green business cannot be expected to possess enough knowledge Development
to create unbiased sustainability indicators or set up sustainability measurement of indicators
systems;
.
considering a specific decision does not necessarily make a sustainability
for a SME
assessment method more applicable to a company, without the ability to measure
progress sustainability assessment is not relevant; and
.
outside expertise is needed to set up workable sustainability measurement
263
systems that a company can use on an ongoing basis;

5.1 Practical implications of this research

The focus of this case study was a single company, thus the results presented in the
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discussion and analysis do not necessarily relate to other companies. Since startups and
SMEs rarely attempt sustainability assessment and thus there is not much research
about their perspectives on sustainability some speculation about the practical
implications of this research follow. The advantage that startups and SMEs have to
assessing sustainability is greater flexibility in how to manage their businesses because
of their small size – fewer employees and less management hierarchy. This flexibility
helps start ups and SMEs address problems quickly but can turn away their focus from
long-term planning. Thus, before operations start companies must set aside time and
resources to tackle sustainability. Unfortunately, startups and SMEs are least likely to
have the resources – financial, time, labor, and knowledge – to be able to pursue
concerns beyond the bottom line. Thus, outside sustainability expertise must become
more affordable for more startups and SMEs to start attempting sustainability
assessment. For self-identified green businesses, despite owners, managers,
or employees having an above average knowledge of sustainability, many crucial
sustainability impacts (both positive and negative) of their business activities are likely
to be overlooked. Companies must seek outside expertise to obtain an objective view of
the sustainability impacts of their own operations.

5.2 Future research

This case study follows an SME start-up company through the difficulties it has
developing indicators. After a company has developed relevant indicators to its
operations, how will the company choose to utilize the indicators in its decision-making
processes? Furthermore, what sustainability improvements are possible from
utilization of indicators? Ultimately the success of any set of sustainability
indicators is how well they allow a company to both measure, manage, and improve
its operations. Therefore, the real test of a set of indicators is the ultimate sustainability
improvement that can be achieved from their application. Thus, future research is
needed to assess how sustainability indicators are utilized in company
decision-making processes and to find out the achievements (or lack there of) that
result from this utilization.

Acknowledgements
The authors gratefully acknowledge the Ecologic Designs staff and support from the
American Association of University Women through the Selected Professions Fellowship,
the National Science Foundation through the Sustainable Futures IGERT project
 IJAIM (DGE 0333401), and the Chinese Academy of Sciences through the Visiting Young
19,3 Scientist Program.

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Corresponding author
Abigail R. Clarke-Sather can be contacted at: arclarke@mtu.edu

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