Diverging maturity levels on valuing corporate sustainability initiatives
NEW YORK, Sept. 6 , 2012 – Measuring the value of sustainability can pose a systematic and universal challenge. Results of a new poll of 1,400 corporate executives during PwC US’s August 16th webcast Sustainability Valuation: Putting a Dollar Value on Your Initiatives concluded that nearly half of respondents are using sustainability valuation methods to compare and prioritize their sustainability initiatives.
“Corporate sustainability is driven by market forces and puts material business value at stake. That's why companies need a valuation framework to effectively quantify and demonstrate its benefits. The fact that our webcast drew a large number of C-level attendees, including hundreds charged with sustainability, confirms the drive to continue pushing the valuation envelope for sustainability initiatives and give them a voice at the CFO table to make the business case,” said Don Reed, a director in PwC’s Sustainable Business Solutions practice.
The sustainability experience level of respondents spanned a wide range. On one side of the spectrum, 36 percent described their biggest challenge as prioritizing among initiatives. Added to that, about 10 percent saw beyond prioritization and are now in the stage of asking the question of how much capital to allocate to sustainability, demonstrating their desire to take the valuation proposition premise to the next level.
On the other end, many respondents indicated their struggle with putting a dollar value on sustainability initiatives:
“There’s a growing interest among a number of executives on prioritizing sustainability initiatives. This is really the second act of the valuation play with act one focused on determining the value that any one initiative creates,” added Hervé Kieffel, a principal in PwC's Sustainability Valuation practice. “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. We’ve seen this discrepancy with our clients and in our view, 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.”
The impact on the environment remains the number one indirect benefit that survey respondents were concerned about, drawing almost a fourth of the response. However, it is noteworthy that talent, corporate know-how and retention came in as a close second, being cited as a paramount concern for about 25 percent of the respondents as well. “This result is consistent with what we are hearing from our clients, and experiencing first-hand at PwC; to attract and retain the best talent, companies need to demonstrate their green efforts and environmental responsibility,” said Kieffel.
Earlier this year, PwC released a report titled Sustainability valuation: An oxymoron?, explaining approaches companies can take to value the difficult-to-quantify benefits of sustainability initiatives. The report describes approaches that can be used to understand and quantify shareholder value created by sustainable business practices and other corporate social responsibility initiatives.
PwC's Sustainable Business Solutions practice provides practical strategies to help businesses address strategic, compliance, operational, reputational and financial sustainability-related issues. Our global network of firms has more than 700 assurance, advisory, and tax professionals who are dedicated to providing sustainability business advice. Leveraging our deep industry knowledge, we help clients achieve sustainability goals, grow revenue, reduce costs, mitigate risks, and find solutions that can lead to long-term profitability. For more information about Sustainable Business Solutions, please visit: www.pwc.com/us/sustainability.
PwC's Valuation Services practice brings together professionals with extensive valuation, technical accounting (US GAAP and IFRS), financial reporting, tax, deal structuring, analytical and industry expertise to offer an integrated valuation, accounting, and tax and business advisory model. Services include Project Portfolio Optimization, which helps clients value and prioritize their initiatives, including sustainability. For more information, visit us online at www.pwc.com/us/valuation.
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