What is the business case for sustainability and the commercial reasons for making companies more sustainable? How do you explain to your investors how this will benefit them financially?
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A toolkit to find the business case for sustainability
Sustainability professionals need to be able to make the business case for a range of activities: more sustainable products and services; better information systems; carbon management plans; putting sustainability into business strategy; and more. But they face a number of obstacles which can make this very difficult.
The Better Decisions, Real Value project has created a toolkit to help professionals find and understand the different business cases for sustainability and communicate them to two key audiences: internal leaders, so the company can make better decisions; and investors, so they understand how this generates real value.
How sustainability creates shareholder value
Long-term value creation requires both satisfying business owners in the short-term and laying the foundations for future success. Sustainability challenges – including climate change, resource shortages and meeting the demands of the world’s rapidly growing population – are already driving the business context in which companies will have to create value. In many cases, sustainability challenges are already affecting short-term financial performance.
Our experience is that once companies understand that sustainability is inextricably linked with long-term value creation, they start to recognise the ‘standard’ business case – capture known ‘win-wins’ which advance sustainability and benefit the bottom line.
But the best companies can see beyond this to the ‘leadership’ case, where they actively set out to lay the foundations for a sustainable business context by aligning the drivers of business success with the needs of society. In this way they can create more ‘win-wins’ where sustainability and profitability go hand in hand.
Helping companies find their business case
Forum for the Future’s Foundation Corporate Partners have funded us to research and test a range of methods to build the business case for actions which advance sustainability.
We have found that there are many ways in which sustainability can create financial value, from product differentiation, to staff motivation and risk reduction. A number may be relevant to any given project. The toolkit helps companies understand these different pathways to value and assess which are the most important.
We have also seen that in practice the complexity and uncertainty of sustainability can create major barriers to making a business case. The numbers are much ‘softer’ than decision-makers are used to. Companies get stuck in a vicious cycle: they want a business case before giving permission to go ahead with a project, but the information to build a business case can only be generated from the experience of going ahead. And many financial tools designed to deal with certainties are ill-equipped to deal with the issues around how business succeeds in the face of sustainability challenges.
The toolkit helps to overcome these obstacles by providing ways to handle the complexity and uncertainty of sustainability, for instance by providing numbers which are ‘good enough’ to step out of the vicious cycle.
The toolkit
This toolkit is designed so it can be used by sustainability practitioners and financial professionals in any company or organisation to determine how sustainability can add financial value to their business. We plan to add to it in months to come. You can download each element of the toolkit in the toolbar to the left.
This is version 1.1 of the toolkit. We intend to keep improving it with experience. Please share your feedback by contacting bdrv@forumforthefuture.org.
Foundations sets out the general business case for sustainability, equipping you with the arguments you need to start making your case.
Entry points is a step-by-step guide to winning permission to go ahead with a sustainability project.
Pathways summarises different ways sustainability creates financial value, and gives guidance on collecting evidence to make your business case.
Ready Reckoner helps you assess the most important pathways for your project and calculate numbers good enough to get the go-ahead.
The project is part of our Rethinking Capital work, which explores why the capital markets have failed, and identifies action needed to make them more sustainable. This project focuses on 'rethinking risk assessment and asset valuation techniques' by giving companies the financial information they need to engage investors.
Better Decisions, Real Value is sponsored by the Leader Business Group of Foundation Corporate Partners, which is made up of:
BT
Royal Mail Group
Unilever
Sainsbury's Supermarkets
TUI Travel
RWE npower
Vodafone Group
AkzoNobel
Bupa
Related Links:
- GreenBiz.com 20th October 2009, Six Key Lessons on Mapping Out a Business Case for Sustainability Initiatives
- GreenBiz.com 13th August 2010, A Toolkit to help companies make millions from sustainability
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