Beth Beloff

BRIDGES to Sustainability

A critical aspect of integrating sustainability into business is in the area of valuation. How do we know the financial impacts of our decisions? How can performing more sustainability help to reduce costs, avoid future costs, increase the company's value proposition, support growth, and so on? What are the links between intangibles related to social and environmental performance and a firm's overall performance? What contributes to value creation in the chemical industry? How can we reconcile the fact that we may incur costs for performing more sustainably in the short term while the benefits may not be captured until the long term; similarly, how do we justify costs associated with our business decisions when the benefits might accrue to others in the value chain? We know the value of ecosystem services is both invaluable - that is, our life depends on them - and of no real market value; how then should we value ecosystem services in order to protect them for our survival and that of our business institutions? This section attempts to offer points of view on these topics.

Section 6.2.2 is titled "Intangibles and Sustainability." There is a growing body of evidence suggesting that the drivers of wealth creation for business and the economy are less about physical and financial assets and more about intangibles. While conventional accounting and financial metrics yield some insight into a firm's market value, forward-looking sustainability indicators - anything from confidence in a company's management to research leadership, to the management of environmental liabilities - are becoming more relevant to a business's overall value proposition. The link between intangibles related to sustainability and company performance is explored in this section.

Section 6.2.3 is called "Total Cost Assessment: Looking at All the Costs Involved with a Decision." Traditional decision-making typically focuses on direct and indirect costs that appear on the balance sheet. The TCA model defines three additional cost types, contingent liabilities and internal and external intangibles. A methodology for developing total costs related to environmental impacts is discussed.

In Section 6.2.4, "Societal Costs", we learn that societal costs constitute an important element of the costs of environmental impacts from industrial activities, although they often fall outside the private calculation of costs and benefits to a company. This entry gives a perspective on the importance to a company of considering these externalities as a sustainability indicator in both management decision-making and facility design and optimization.

Section 6.2.5, "Valuing Ecosystem Services", describes how development of an economic valuation framework for ecosystem services remains a critical challenge in sustainable development, particularly in balancing the needs of social and economic development, and ecosystem conservation. Without it, ecosystems will remain undervalued and under threat. Ecosystems are capital assets that are being liquidated at humanity's peril, and this should, in turn, create impacts for business, which depend on the health of natural capital for survival. This piece provides an understanding of how to consider the value of ecosystem services.

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