PwC Tries to Quantify Sustainability Value

PricewaterhouseCoopers’ valuation services team has released a report explaining the approaches that companies can take to value the benefits of their sustainability initiatives.

The report, Sustainability Valuation: An Oxymoron?, notes that measuring the value of sustainability to a company is challenging because it encompasses both the direct benefits that a company recognizes immediately, along with 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.

The PwC report notes that 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 that companies will be able to generate once they place a monetary value on their sustainability initiatives.

For example, executives can compare sustainability versus other initiatives and prioritize appropriately, as well as prioritize among sustainability initiatives. Another benefit is that Wall Street analysts, shareholders and other interested stakeholders will be able to better understand how sustainability is enhancing the value of a company and may lead to increased market share as well as a more complete valuation to reflect in the share price. Valuations can also give sustainability executives the information they need to present to get more funding for their initiatives.

“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 another report, “Do Investors Care about Sustainability?” which identified seven trends that demonstrate sustainability’s growing focus for the investment community. One of the key points was 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,” said Don Reed, a director in PwC's Sustainable Business Solutions practice.  “Having detailed, deep analysis helps guide internal decisions around where to focus sustainability efforts, how much to spend and what the returns are. It also enables companies to communicate the value of their efforts to all stakeholders, including Wall Street and customers.”