Sustainability Brand Valuation Measures Up

By Marc de Sousa Shields

Everyone who knows even a modest amount about corporate sustainability understands that only a fraction of what contributes to company value is adequately measured.

While sustainability proponents intuitively know that the contribution is great, we have generally failed to convince legions of sustainability skeptics that estimating sustainability ROI is hard at best, impossible at worse.

I have found over many years of business performance measurement, that all things are measurable, including sustainability’s contribution to corporate value. Indeed, many ways to assess various aspects of sustainability’s contribution already exist.

Measuring the Big Four – water, carbon, energy and waste –with respect to ROI, for example, is done often and well. Attempts to assess social and economic elements of sustainability abound -- from human resources and stakeholder dialogue to donations programs, among others -- some with good but mostly with mixed results.

But even if these indicators were as precise as we need them to be, as a group they would still fail to capture the full extent of sustainability’s value contribution.

Why? Simply put: The sum of all sustainability indicators is always less than the whole of its impact.

An example: Does an energy reduction investment capture the value of a correlated increase in job satisfaction and the value that brings to a company?

Thirty years of brand valuation teaches us that the monetary contribution of sustainability is equal to the aggregate tangible and intangible effect on a company, a brand or a product.

Emerging in the late 1970s, brand valuation techniques were developed to estimate the contribution of brand to corporate value/earnings (e.g., Nescafe), or to a company’s overall brand (e.g., Nestles).

Initially received with great resistance, early methodologies have evolved from fairly simple tools to highly complex models providing monetary values exact enough to put a smile on even the toughest of CFOs.

The most precise of these are now used for corporate sales/mergers and legal disputes, while simpler and less costly models are employed for strategic management purposes.

Sustainability brand value is now at a place where early brand valuation once was, both in terms of precision and being viewed as a little bit nutty!

Some pretty rigorous research by ES Global (available on request), Interbrand and CSR Hub, however, agree that sustainability contributes between 3 and 15 percent of a company’s brand value depending on the sector.

According to a CSR Brand Value estimate (by ES Global), sustainability contributes about USD$900 million to Coca Cola’s USD$70 billion-plus in corporate value; for the Kenyan Brewing Co. it's $40 million, and for FEMSA, the largest bottling and convenience store firm in Mexico, it's $60 million.

Not small numbers, and substantial enough to spur more management attention, investment and value protection than sustainability typically gets.

Did Walmart know, for example, that bribery allegations against its Mexican operations in 2012 caused an estimated $3 billion loss of corporate sustainability-driven value, or that it would reinvigorate hundreds of anti-Walmart groups, which were somewhat mollified by the company’s growing sustainability reputation?

Even the best companies fly mostly in the dark when it comes to measuring sustainability’s financial impacts.

And that’s a shame, because breakaway sustainability strategies at Nike, Cemex, EcoPetro, Natura, H&M and HP, among others, have resulted in exciting sustainability value contribution.

And who doesn’t want to see more competition for that?

Image credit: Flickr - Denis Skley

Marc de Sousa Shields is Managing Director at ES Global, a corporate sustainability advisory based in Mexico. Marc has worked in over 40 developed and developing countries focusing on corporate sustainability strategy, brand, and returns. He is author of the soon to be released "Sustainable Century by Design or Disaster."