Sustainability models mature

10 September 2012
NEW YORK: Many brand owners are now attempting to prove the return on investment of their sustainability programmes, suggesting strategies in this area are starting to mature.

PricewaterhouseCoopers, the advisory group, polled 1,400 senior executives, and found that half were applying similar scrutiny to their expenditure on eco-friendly schemes as to other business functions.

"There's a growing interest among a number of executives on prioritising sustainability initiatives," Herve Kieffel, a principal in PwC's sustainability valuation practice, said.

"This is really the second act of the valuation play with act one focused on determining the value that any one initiative creates."

Monitoring overall cost savings – such as those derived from consuming less energy or raw materials – remained the most common approach in this field at present, and was mentioned by 24.2% of interviewees.

Elsewhere, 22.3% of participants employed a simple cost–benefit analysis to implement these initiatives, the study added.

A further 16.3% of organisations measured the total value generated, including indirect benefits. The main indirect benefit of these efforts were said to be helping the environment, referenced by 40% of the sample, ahead of securing and keeping talent, on around 25%.

"To attract and retain the best talent, companies need to demonstrate their green efforts and environmental responsibility," said Kieffel.

Other popular tactics included determining aggregate value, such as by using a scorecard encompassing all of these areas, on 12.3%, and conducing value analysis to establish a sustainability budget, on 9.8%

"The value proposition - being able to measure and quantify the intangible benefits of sustainability in dollar terms - should really precede setting and publishing sustainability goals, so that the latter might truly be commensurate with value created," Kieffel said.

When discussing the obstacles they faced, 36% of contributors cited prioritising between green projects. Approximately 10% argued that deciding how much capital to allocate to these schemes was the key issue.

More broadly, 39% of organisations had not attempted to put a value on their sustainability activity. Another 31% sought to demonstrate it in terms of shareholder value, and 17% believed cost savings "matter most".

"We know a lot of companies are faced with an external pressure to report their efforts and set goals around sustainability, as well as the need to be able to justify them internally with a value created analysis," said Kieffel.

Data sourced from PricewaterhouseCoopers; additional content by Warc staff
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