Thursday, February 29, 2024

The place of sustainable value creation in organizations

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In a world where businesses are dominated by bottom line i.e. people, planet and profits, sustainability brings a new perspective beyond that of profit, purpose driven for the people (stakeholders) and the planet. With increased pressure from regulations, stakeholder perspectives and changing market and competitor landscape, companies must remain agile to adopt and transform to be fit for the future. Sustainable value creation can be summed up as doing good while doing good business. There are several aspects that can be considered when identifying, quantifying, and representing the place of sustainable value creation in organizations. 

Firstly, it examines the value created, preserved, or eroded by an organization in terms of Economic, Environmental and Social aspects and goes beyond the typical financial value approach. The Sustainability Value Creation Model integrates inputs, processes, outputs, potential and actual negative and positive outcomes, and overall impact an organization has on society and the impact society has on an organization. By examining the risks and opportunities, business model, governance, strategy, purpose, mission, vision and processes through a sustainability lens, an organization can determine its true value.  

Furthermore, analyzing the key stakeholders who affect/are affected by a business through its activities, relationships and interactions, an organization can comprehensively assess the value created/preserved or eroded for each of the stakeholders determining its Sustainability DNA.  As coined by the World Economic Forum and Accenture in Shaping the Sustainable Organization report, Sustainability DNA transforms the way organizations behave. Sustainability DNA helps an organization diagnose, define and develop its sustainability initiatives in five tenets; stakeholder inclusion, emotions and intuitions that focuses on the well-being of the people, mission and purpose of the organization driven by ethics, transparency and accountability, technology and innovation in creating sustainable operations and intellect and insight through training and development and establishing sustainability metrics. 

Another consideration when determining the sustainable value created/ preserved or eroded by an organization is the six capitals as defined in the Integrated Reporting Framework. These are Financial, Human, Manufacturing, Intellectual, Social and Relational and Natural represent stocks of value for an organization. They are determined by examining the processes, input and output of an organization to determine the short-term, medium and long-term value of an organization within the six capitals. 

The sustainable value creation model enables businesses to contribute towards addressing the issues facing society by taking responsibility for their role in creating them and solving them. For example, for temperatures to not go beyond 1.5 degrees as stipulated in the Paris Agreement, organizations must do their part to reduce their Scope 1, 2 and 3 emissions. It calls for behavioral change within organizations beyond a cosmetic approach to sustainability to achieve true value. In turn, it leads to higher returns on investment, greater financial outcomes, social license to operate and primes an organization to mitigate sustainability risks and leverage opportunities. 

Sustainable value creation holds a significant place in organizations as the sustainability value creation model enables an organization to identify, define, develop and integrate sustainability addressing the challenges facing society today, revealing an organization’s Sustainability DNA and unlocking the true value. 

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