Indices Versus Meters

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A reader asked me about Google’s PowerMeter and how does this compare to Wal-Mart’s Sustainability Index, which I have criticized on several occasions. First, I would be comparing apples and oranges. These two proposals represent very different kinds of ways to inform people.

The Google PowerMeter and other similar processes are ways to evaluate energy consumption. The Google system links to a smart meter installed by the power company at a home or office, collects detailed data on energy consumption, organizes the data, and presents it to the consumer via a personal Google webpage. By observing patterns versus some separate record of what electrical services one uses during the day, the consumer can begin to understand where the power is being used. Here’s what Google says about the project.

At Google we’re helping enable a future where access to personal electricity information helps everyone make smarter energy choices. Google PowerMeter shows consumers their electricity consumption in a secure Google gadget. Today we are testing the product with utility partners in the US, India, Germany, and Canada.

Armed with such information the user can change usage habits or replace devices with more efficient upgrades. The key here is that the consumer gets data that connects behavior directly to something of concern, in this case, electric power consumption. The process makes no attempt to make a jump to how individual contributions will affect global warming except in very general terms. The name is clear—a power meter, something that most homeowners understand.

The Wal-Mart case is different. Wal-Mart has proposed to develop a “Sustainability Index,” based on answers collected from suppliers of goods to 15 questions in four categories:

  • Energy and Climate
  • Natural resources
  • Material efficiency
  • People and Community

Their answers will be quantified and combined into a single summary index with values between 0 and 10. The first difference between this system and the PowerMeter is that the number has no connection to physical reality as do the data on power consumption. Nor does the Index have any direct connection to the object it is supposed to stand for, sustainability. The purpose of the Index, according to Wal-Mart’s CEO is

“The index will bring about a more transparent supply chain, drive product innovation and, ultimately, provide consumers the information they need to assess the sustainability of products. If we work together, we can create a new retail standard for the 21st century.” Mike Duke, President and Chief Executive Officer, Wal-Mart Stores, Inc. Walmart Sustainability Milestone Meeting, July 16, 2009

The use of this Index may indeed increase transparency, and drive innovation in the same way that benchmarking works to improve product quality in the general sense. With one big caveat, however, what this benchmark means will never be clear. To be useful, benchmarks have to be tied to some measurable quantity, even if it is subjective, for example, a customer satisfaction survey. Even if every product eventually scored 10 in every category, we would still not know how their products interact with the real world. Anyway, the critical concern about consumption is not at the margin—how much better is an 8.2 than a 6.5—but is related to the total amount of stuff we consume. And of course Wal-Mart would have us consume more and more.

The third promise of Mike Duke to—“provide consumers the information they need to assess the sustainability of products”—is badly misleading and full of errors. First of all, sustainability is not a property of the products or, more generally, of any object. Sustainability is a property of the whole system we live within. Secondly, combined indices (and for the wonks that read this blog, multi-objective functions in general) are always arbitrary. Their numerical results always depend on the weights that must be used to determine the relative contribution of any one value to the whole. Such indices are useful seeing the results of trading off one of the categories against others. Such indices can never be directly related to any real physical object or state. The name itself, “Sustainability Index” is misleading as it has no direct relation to sustainability in that real world. Wal-Mart has joined a myriad of other firms in making the same erroneous claim about how their business activities relate to sustainability.

Wal-Mart risks promising much more than they can deliver and also raising the expectations of both their suppliers and, more critically, their customers. For this reason, what they are doing, even assuming the intentions are genuine, is to engage in a subtle form of greenwashing, that is, making claims that cannot be substantiated in reality. This is not the case with Google. Their proposal is based on sound principles and will generate meaningful data that can be used to induce consumer behavioral change. Wal-Mart’s Index may also affect consumer behavior, but not in any direct relation to the effects their consumption has on the sustainability potential of the system out there where it matters.

(Cartoon courtesy of Google)

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