Bridging the Sustainability Gap
- Once revenue categorizations are in place, investors can gauge how much of a company’s total revenue mix comes from these sustainability-related products and how quickly such product revenues are growing in comparison to the company’s overall revenue growth rate. Understanding the scope of sustainability-driven growth may offer investors critical insight into a company’s ability to meet its future revenue forecasts.
- While current reporting provides ample anecdotal evidence about how a specific facility or process reduces costs while improving sustainability-related outcomes, few companies report what most analysts would really want — that is, the total dollar value of savings from all sustainability-related initiatives for a given reporting period. In most cases, calculating productivity gains from sustainability requires aggregating data from disparate groups and functions across the enterprise for the amounts to reach material value. Understanding which cost savings to include, how to monetize resource efficiencies and how to calculate sustainability-driven productivity gains in a timely and consistent fashion to be relevant to investors is the key challenge.
- With modern enterprise resource planning (ERP) technologies and software, it’s a solvable problem if management has the will.Finally, while the current data provide literally hundreds of risk metrics on thousands of companies, it’s often difficult for mainstream investors to know how to assess these indicators. Measuring sustainability-related risk for mainstream investors is about focusing on those factors critical to meeting strategic and financial objectives. Spotlighting and tracking those risks is specific to each business and requires analytic judgment. However, showing investors that the key risks have been identified and are being effectively mitigated is necessary to get their attention.
- DuPont’s Sustainability Performance
- DuPont is an example of a company that has taken some steps to enable investors and other interested parties to track its progress in transforming into a next-generation provider of sustainable business solutions through reporting about the business. In addition to absolute reductions in greenhouse gas emissions and total water use from the company’s 2004 baseline, DuPont has reported two key sustainability-driven revenue growth metrics for the 2007-2012 period:
- Revenue from products that reduce greenhouse gas emissions rose from $100 million in 2007 to $2 billion in 2012.
- Revenue from products based on nondepletable resources doubled, from $5.9 billion on a 2007 revenue base of $29.4 billion to $11.8 billion on a 2012 revenue base of $35 billion.