Valuation Tools Help Boards and C Suite Strike Balance in Short and Long Term Management
NEW YORK, May 30, 2011 – As sustainability becomes an imperative of corporate business strategy and investment, the value derived from those programs must be translated into recognizable financial terms for the full benefit of all stakeholders, according to a new report by PwC US’s valuation services team. The report, Sustainability valuation: An oxymoron?, explains approaches companies can take to value the difficult-to-quantify benefits of sustainability initiatives.
Measuring the value of sustainability to a company is challenging because it encompasses both direct benefits a company recognizes immediately, as well as many longer-term, intangible benefits for which it can be harder to assign a dollar value, according to PwC. At the same time, applying both direct and indirect valuation methods helps evaluate and prioritize the contribution sustainability initiatives make to shareholder value.
PwC’s report notes how combining established finance and decision analysis tools with a specialized valuation approach can successfully put a numerical value on the intangible benefits of sustainability. It also highlights the multiple benefits companies will be able to generate once they place a monetary value on their sustainability initiatives, including:
“Companies are finding real value in their sustainability efforts, but face a challenge showing -- in quantifiable terms -- how their efforts directly contribute to the bottom line,” said Hervé Kieffel, a Principal in PwC’s Transaction Services practice who specializes in Sustainability Valuation. “From investors, to consumers, to nongovernmental organizations, there is continued interest in corporate sustainability, and being able to communicate a defensible value provides a real competitive advantage.”
Earlier this year, PwC issued a report entitled, “Do investors care about sustainability?,” which identified seven trends that demonstrate sustainability’s growing focus for the investment community. Among the key points cited were the growing number of resources that provide investors and financial institutions with tools to compare corporate financial and sustainability data.
“Companies are putting significant resources and capital behind sustainable initiatives, and they need to quantify the tangible and intangible value of these efforts. Having detailed, deep analysis helps guide internal decisions around where to focus sustainability efforts, how much to spend and what the returns are," said Don Reed, a director in PwC's Sustainable Business Solutions practice. “It also enables companies to communicate the value of their efforts to all stakeholders, including Wall Street and customers.”
PwC’s Transaction Services professionals help companies make informed and empowered investment, divestment, capital market and reorganization decisions. We assist clients with due diligence, M&A strategy, integration, valuation, accounting, financial reporting, and capital raising on both the buy and sell side of a deal. Our deal professionals help clients understand the risks in transactions, so they can be confident they are making informed strategic decisions. From their deal negotiations, to capturing synergies during integration, we help clients gain value; and ultimately, deliver this value to stakeholders. For companies in distressed situations, we advise on crisis avoidance, financial and operational restructuring and bankruptcy. With approximately 1,200 deal professionals in 16 cities in the U.S. and over 9,500 deal professionals in over 90 countries, experienced teams are deployed with deep industry and local market knowledge, and technical experience tailored to each client's situation. Our field-proven, globally consistent, controlled deal process helps clients minimize their risks, progress with the right deals, and capture value both at the deal table and after the deal closes.
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.
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