PricewaterhouseCoopers (PwC) has released a report that examines ways in which companies can measure its contribution to sustainability initiatives.
In the report, Sustainability Valuation: An Oxymoron?, PwC recognises that sustainability is just one of many areas of business in need of financial tools.
“Sustainability is by no means the first area of business to face these measurement challenges”, it says.
“Marketing, research and development, and new market entry are all tough to put an exact return on investment on.”
Worldwide acceptance that sustainability in business can produce shareholder value and environmental efficiency is essential in today’s climate. Sustainable initiatives not only reduce companies’ environmental footprint, but PwC insists that a green public image can multiply trading platforms.
“Your customers take notice; NGOs praise you, your workforce is proud to be part of a company that is not only financially successful but also “doing the right thing”.”
Although measuring effective results in sustainability presents itself as a challenging process to businesses, PwC has developed a set of applicable tools, addressing the necessity to employ long and short-term projections in the field. In Sustainability Valuation, the company proposes two useful methods:
The direct method
“In the direct method, we force the question of the profit and loss impact of these initiatives“, the report says.
The emphasis here is being placed upon likelihood: companies would, in this method, base projections on highly probable gains and potential downfalls. The direct method sees companies handling sustainability measures in the same numerical fashion as every other area of the business.
The indirect method
This method provides answers not in profit and loss format but in “rigorous, well-documented, academically-sound, and custom proved” models called Multi-attribute Utility Analysis (MUA).
Companies are beginning to provide long-term capital and resources to support sustainable initiatives. PwC’s deployment of quantifying tools may prove to be the kick-start needed to see truly sustainable results and analysis in a once neglected field.
In proposing a better definition in financial terms with relation to sustainability, businesses may be able to build a bridge between sustainable solutions and financial projections.
PwC’s tool is similar to that of global responsible investment research firm, EIRIS, which in March launched a tool to measure sustainability performance within organisations.
“It also enables companies to communicate the value of their efforts to all stakeholders, including Wall Street customers”, said Don Reed, a director in PwC’s sustainable business solutions practice.
Sustainable business is one of the most important aspects of a future low-carbon economy, but making sure your company’s investments are held in sustainable places is even more effective. Read our recent Guide to Sustainable Investment to find out how to get started.
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