Last week, Lawrence wrote about the new (or old, depending on your perspective) emphasis on the sustainability business case. Over the past month, we’ve seen seismic shifts in the ESG world, largely driven by political developments in the US and the EU. Many practitioners are on the defensive. We’ve written on several occasions about the criticality of having a good ESG business case. A recent article from The Conference Board posted to the Harvard Law School Forum on Corporate Governance gives great practical tips on building that business case:
“Unlike traditional ROI, which mostly emphasizes investments’ short-term financial returns, sustainability ROI adopts a longer-term view, measuring financial, environmental, and social value. Its complexity lies in the multidimensional nature of sustainability and in factoring in intangible benefits, among other factors. To assess it accurately, companies should first unpack the concept, ensuring that all relevant elements are considered for a comprehensive evaluation.”
Those building an ESG business case are familiar with language like this, but the article goes on to give examples and practical considerations:
“Sustainability ROI definitions and approaches can vary depending on the company, initiative, and sector. For example, a manufacturing company might reduce costs by improving energy efficiency and waste reduction, while a retail business could enhance its brand reputation by prioritizing ethical sourcing and reducing carbon emissions. Both approaches contribute to sustainability ROI, but the value created may vary. Some factors, like energy costs, can be easily quantified, whereas others, such as positive brand association, might be more challenging to calculate and attribute.”
In many ways, sustainability is about “thinking outside the box” – with sustainability professionals sometimes being too creative and innovative in their sustainability ROI. Those “outside the box” benefits need to be translated into the language of finance for sustainability programs to be seen as valuable by boards and executives. The article aligns with what we’ve been writing about since Day 1: sustainability professionals must work closely with corporate finance to understand your company’s financial priorities and frame sustainability ROI within the context of the core business.
For those looking to build and communicate their sustainability business case, check out our Guidebooks Practical Methodology for Sustainability ROI Using Company-Specific Business Fundamentals and Simplifying ESG/Sustainability Business Value available to all PracticalESG.com members. To learn more about ESG/sustainability impacts on corporate brands, check out this podcast with FTI Consulting’s Jon Priestley. Furthermore, keep an eye out for a series of guidebooks coming later this month on the top real examples of sustainability business value for revenue generation, new market development, cost reductions and profit margin improvements.
Our members can learn more about ESG business value here.
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