The Financial Value of Sustainability
In running a business, it is the financial and operational metrics of results and accountability that carry weight. And, with sustainability, what began as a niche approach, today is flourishing into a strategic imperative, and must too have a result-focused orientation.
Yet, within the mainstream of the sustainability movement it is common for organizations, and many of their advisors, to focus on how to execute process rather than how to deliver results. This creates the disconnection of sustainability to effectively uncover the largely hidden cost and risk that shackles a firm’s primary objective of increasingly being able to capture, create and deliver more value and serve its customers better.
Indeed, the hallmark of an authentic sustainability policy remains with a firm’s ability to apply systems thinking for sustainable viability across its value chain. Such data can then be analyzed and synthesized effectively to achieve more with less – to make efficiency effective - to be more innovative, and give insight how to leverage the newfound information: to communicate in a manner that is integrated, material and in context, to engage individual stakeholder groups who have a material interest in the success of the business. Sustainable Viability allows firms to break free of me-too competitors with a value-advantaged position – to serve their customers better by capturing, creating and delivering more value.
"Poor performance on ESG (Environmental Social Governance) factors are used as a lever to reduce the value of a business by as much as ten percent”.
In a recent PwC survey for the Principles of Responsible Investment (PRI), entitled integration of ESG & Governance issues in M&A (Mergers & Acquisitions) Transaction, Trade Buyers Survey Results, it is shown how poor performance on ESG Sustainability factors are used as a lever to reduce the value of a business by as much as ten percent. Moreover, once the demand for ten percent is exceeded, the willingness to continue with the deal may well be removed altogether. I suggest ten percent is a great cost not to have taken sustainability seriously. Furthermore, this does not demonstrate the missed opportunities to capture, create and deliver more value, which would have raised the net value of the business further.
Therefore timely, accurate, sustainable viability data not only gives further insight into operational and financial metrics to make better more informed decisions, it is increasingly affecting a CEOs ability to drive financial value inside their organizations, secure cost effective funds and sees the removal of a price reduction lever.
So, using systems thinking for sustainable viability:
1) Understand how and where your products and services create impact
2) Uncover your true extent of risk
3) Leverage new found information to capture, create and deliver more value
4) Create authentic communications and reports for competitive advantage
Ultimately, for sustainable viability, Sustainability must be integrated with discipline and authentically reported. As such, it becomes inextricably linked to due diligence, financial value and growth.
Copyright © Christopher Gleadle 2014. All rights reserved