The Sustainable Value Approach

Historically, companies existed to produce goods and services in a profitable way. Nowadays, companies additionally need to answer the requests to contribute to sustainable development and reduce the burdens they impose on their stakeholders. Both of these views are merged in a recently developed management approach. Professor Frank Figge of Queen’s University Belfast (UK) and Dr Tobias Hahn of IZT – Institute for Futures Studies and Technology Assessment (GER) developed a value-oriented methodology to assess the sustainability performance of companies, called Sustainable Value. Instead of focussing on how much burden a company (or other organisational entity) creates with its actions, the Sustainable Value Approach assesses whether a company is using its financial, environmental and social resources in a value-creating way.


In financial markets value is created whenever an investment creates more return than the benchmark. If an investment, for example, yields a return of 7 percent and the market only yields a return of 4 percent then the invest-ment has earned its opportunity costs and outperforms the benchmark by 3 percent. In this case, an investment of 1,000 would have generated a value of 30. Following this logic, the Sustainable Value Approach assesses the use of environmental and social resources in the same way in which financial resources have been assessed for decades – according to their opportunity costs. From an opportunity cost perspective the price of an environmental or social resource is identical to the foregone benefit of an alternative use of that resource (benchmark).

For the first time now, capital use and the use of environmental and social resources can be assessed in an analogous way. This assessment has another advantage: the various resources are not only assessed in an identical way, but their performance is also measured in the same unit, for example € or $. In other words, the Sustainable Value approach allows for an integrated monetary triple-bottom-line assessment of corporate sustainability performance that is in-line with managerial thinking.

To calculate the Sustainable Value of a company (or other organisational entity), we have to calculate who creates more return with a given set of financial, environmental and social resources of a company: the company or the benchmark. As a result Sustainable Value shows how much more or less return a company has created with its set of economic, environmental and social resources compared to a benchmark. In the following example, the assessment logic of Sustainable Value will be explained by using the example of the German consumer goods company Henkel in the year 2004.

Henkel emitted 806,173 tons of CO2 in 2004. At the same time, it generated a gross value added of 3.2 billion. Thus, Henkel created a return of 3,993 per ton of CO2. The German economy, however, generated 2,471 gross domestic product per ton of CO2. Consequently, Henkel created 1,522 more gross value added per ton of CO2 than the German economy on average. Multiplying these 1,522 with the total amount of CO2 emitted by Henkel, we now know that with its use of CO2 emissions, Henkel created 1.2 billion more of gross value added in 2004 than the Germany economy on average would have created with those emissions. In other words, in 2004 Henkel used its CO2 emissions in a value creating way.

To find out whether a company creates Sustainable Value the methodology described above is applied to all relevant economic, environmental and social resources. It is consequently possible to determine which companies are most successful in managing the conflicting goals of successful economic activity on the one hand and the sustainable use of financial, environmental and social resources on the other hand.

New Tool Online

On, it is now possible to calculate Sustainable Value online, using different benchmarks. The website is part of a research project financed by the German Ministry for Education and Research and guides its users through all steps of a Sustainable Value assessment. Visitors will also find online tutorials that give detailed information on the background of Sustainable Value and the use of the Sustainable Value Calculator.

Recent Applications of a New Approach

The Sustainable Value approach has been further developed and tested in various research projects commissioned by both, public bodies and companies. Beyond the external assessment of corporate sustainability performance, the approach is used to implement sustainability strategy within companies through internal benchmarking and investment appraisal. The main advantage of the approach is that it is now possible to analyse, monitor and manage the sustainability performance of companies similar to the way capital is managed in companies today.

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