There’s growing interest among finance executives in getting a handle on the value of sustainability initiatives, instead of just using those efforts to meet regulatory requirements or generate good public relations. And some are taking the next steps—prioritizing initiatives and allocating capital based on those decisions.
“They’re moving away from looking at this as just a requirement, but rather as something that brings value to the table,” says Hervé Kieffel, a principal in PwC’s sustainability valuation practice.
According to Kieffel, the ability to allocate resources to sustainability initiatives involves three steps. First, companies need to understand the value of their efforts, using a framework that allows them to identify value drivers and then measure and monetize the results. Once businesses have that framework in place, they then can move to the next phase, prioritizing those initiatives. The last stage involves making real budgeting decisions, based on the list of priorities already established.
For a significant number of companies (36%) surveyed, the prioritization process presents a particular challenge. According to Kieffel, that’s largely because they’re wrestling with how to consider not just direct cost savings of initiatives—say, efforts to reduce water usage—but also indirect results, such as creating better relations with the surrounding community. “You have to figure out a way to compare these areas, so it’s not apples and oranges—initiatives with clear cost savings vs. those with no direct financial benefits,” he says.