Techniques for finding your business case

What is the business case for sustainability? How do you get senior decision-makers and investors to understand when there is a commercial case to pursuing sustainability – perhaps through launching a new product, buying in new energy-saving equipment, or because the shareholder value at risk is material? How do you communicate how sustainability is good financially to your investors?

Companies need to make the business case for sustainability to two key audiences: to internal leaders, so the company can make better decisions; and to investors, so they understand how this generates real value. The Better Decisions, Real Value project will create the toolkit companies need to do this.

We are working with our leader business group partners to test a range of financial techniques. In 2010, we will publish a tried-and-tested toolkit, together with case studies. The stages of the project are explained in more depth below.

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.

How sustainability creates shareholder value

All of our experience tells us there is no 'generic' business case for sustainability - it is different for each sector and company.

In recent years a number of organisations have worked on identifying the types of business case that can be developed for sustainability. The project aims to take this one step further and create practical tools to support the valuation of each business case type.

We believe that initiatives, activities or decisions create value for an organisation by contributing to traditional drivers of shareholder value (e.g. turnover growth – see diagram). So we focus on how you determine the material contribution of sustainability to these drivers, within the context of your organisation or sector.

Develop toolkit: We have developed a toolkit of more than 20 techniques to determine and articulate the financial case for a decision, strategy or initiative. We have identified at least 17 types of business case, for more sustainable behaviour from launching new products to operational efficiencies and advantageously shaping the market. We have created financial techniques for almost every type.

Pilot toolkit: The project will pilot this toolkit with a number of partners from the leader business group, considering the value of sustainability from different perspectives. This will include:

• specific initiatives or projects, which may be entirely driven by the aim of operating more sustainably, or which may consider how greater sustainability would add value to an existing business approach or product;
• specific strategic decisions, assessing how putting a financial value on sustainable operations can improve decision-making, leading to better outcomes and financial performance.

Companies will test the toolkit by applying the different techniques to their live business issues. Successful pilots will involve key areas of the organisation, including senior decision makers, Investor Relations and the Finance Department. It is critical that we engage key internal stakeholders to ensure that we make the right assumptions, and that the pilots yield meaningful and credible data.

During the pilot phase we will provide frequent blogs on early insights and initial outcomes – please check back on this page for updates as the project progresses.

Review pilots: We will use feedback from the pilots to improve the toolkit and to create case studies. Where appropriate we will test project approaches and outcomes on mainstream investors.

Develop public guide: We intend to influence and inspire the wider business community, by publicising the findings of the project and providing a practical toolkit which can assess the financial value of more sustainable behaviour.

Project timeline:

Contact: Shannon Carr-Shand

Better Decisions, Real Value is sponsored by the Leader Business Group, which is made up of: 

BT plc
Royal Mail Group
Unilever plc
Sainsbury's Supermarkets Ltd
TUI Travel plc
RWE npower
Vodafone Group
BP plc
AkzoNobel NV
Firmenich SA