How can a company create value sustainably?
What is sustainable value creation?
The world has shifted to a more sustainable, environmentally conscious mindset. The shift is not only in the mindsets of the people, but also in the way companies are making decisions to create value.
The term 'sustainable value creation' is not new. It has been used by scholars and practitioners in the sustainability field for a long time. The idea of sustainable value creation is the process of integrating three aspects - environmental, social, and economic - into a business mindset. Furthermore, it is a way of thinking about business and sustainable development that considers the interests of all stakeholders (such as customers, employees, investors, suppliers and communities) and considers environmental impacts in its operations and its products. Moreover, it recognises the existence of many capitals (e.g., natural, social and economic) and it focuses on long-term growth rather than short-term gains.
However, there exist many opinions about sustainable value creation and how it can be achieved. Thus, this article introduces two value creation guidelines, which have been made in cooperation with international corporations. Lastly, a circular economy should be mentioned. It is an alternative sustainable economic system to a linear economy.
Growing into Your Sustainability Commitments: A Roadmap for Impact and Value Creation
The United Nations Global Compact (UNGC) and AccountAbility published this document in 2013. The guide introduces Sustainability Commitment Growth Curve (SCGC) framework as a path for sustainable value creation. The framework is based on the UNGC ten principles (human rights, labour, environment and anti-corruption) and it has three stages and maturity levels:
Each stage has defined characteristics (kind of requirements) and value creation outcomes. The guide has been made with the UNGC member companies, and thus, the document contains plenty of company comments and examples.
The guide is availablehere.
Measuring Stakeholder Capitalism - Towards Common Metrics and Consistent Reporting of Sustainable Value Creation
This document was created by The World Economic Forum’s International Business Council (IBC) in cooperation with the big four accounting corporations. It was published in 2020 and it is availablehere.
The document recognises changes in the reporting landscape and many existing voluntary standards. Consequently, it guides for reporting and monitoring long-term value creation. It introduces an approach that has four pillars (Principles of Governance, People, Planet, and Prosperity), which have together 21 core and 34 expanded metrics and disclosures. The metrics are based on existing standards and guidance such as the Global Reporting Initiative (GRI) disclosures.
(Note, that the GRI has updated its standards after the publication of this document and the International Sustainability Standards Board (ISSB) is in progress to update its accounting standards.)
Circular economy
I have written about the circular economy before, which is a sustainable economic system that strives to keep resources in use for as long as possible. The aim is to utilise the maximum value from resources while in use, and then recover and regenerate products and materials at the end of each service life. This is opposite to the traditional linear economic model where materials are extracted from nature, processed into products, and then thrown away when they're no longer usable.
The Ellen MacArthur Foundation promotes the circular economy. The foundation has developed a well-known butterfly diagram to describe the circular economy and its flows. One can see the diagramhere.
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Disclaimer: I do not work in any of the organisations mentioned in this article and do not have any other connection to them either. I have worked as an enterprise risk management consultant, I am GRI certified professional and I hold a postgraduate diploma in development management. Thus, I am interested in sharing best practices and sources.
