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CSR Research Digest – June 2012

Summary

The report outlines a direct and indirect approach companies can use to put a value on sustainability, including long term, difficult-to-quantify benefits. Considering both direct and indirect valuation methods helps analyze, prioritize and measure the contribution sustainability initiatives make to shareholder value.

Key Findings

• The cost of sustainability programs is readily apparent.
• And companies are typically able to determine the short-term value from cost savings, risk reduction or product and service innovations.
• Putting a dollar value on intangible benefits, especially those over a long period of time, is where companies struggle.
• Companies can measure the value of sustainability and how their environmental efforts directly contribute to profits, using two evaluation methods.
• The direct approach looks at the profit and loss impact of sustainability initiatives.
• The indirect method does recognize that sustainability initiatives create shareholder value.
• But it’s not directly connected to profits and losses.
• Instead, it uses a methodology called multi-attribute utility analysis, which has been widely adopted by government agencies for public policy decisions.
• The indirect method might be used, for instance, when a company pushes to create a more diverse workforce.
• The company might recognize that the move is good for business, increases employee satisfaction and boosts productivity.
• Still, it might be reluctant to use the direct method, which focuses on profits and losses, to put a value on a diversity initiative.

Author(s)

PwC

Source

PDF report

Tags: PwC, sustainability, sustainability valuation, value