The Impact of Management Practices Supporting Sustainable Development
Kennedy, Sarah, CMA - the Management Accounting Magazine
Wouldn't it be great if you could actually demonstrate that sustainable development has a real bottom-line payback for the organization? So often today, it is simply being thought of as a cost of doing business.
Sustainable development means many things to many people. For Trevor Eyton, chairman of EdperBrascan, the holding company which oversees the Noranda group of resource-based companies, his take on sustainable development within business is reflected in this commentary:
"At Noranda, no major business derision is being made without first considering its environmental implications. And likewise, no major environmental expenditure is approved without first considering its economic impact. It's this balance that Noranda is learning to maintain. And it's this balance that's essential to sustainable development."
Sustainable development can also be likened to a three-legged stool, with each of the legs - environment, economy and society - being equally important to ensuring the well-being of current and future generations. But the question that may still needle at the back of the financial-management mind is, "Yes, but does it pay for itself - can it improve shareholder value?" In today's world, if the answer is no, its practice within business will be questioned and jeopardized.
Blair Feltmate, of Sustainable Systems Associates Ltd. (author of a CMA article in March 1997, as well as the CMA Canada Issues Paper, Accounting for Sustainable Development), and Brian Schofield, formerly of Yorkton Securities, are helping to address this problem. They have developed a technique which demonstrates a link between a high level of sustainable development measures and share price. This in itself is worthy of investigation, but they have gone a stage further, by overlaying another financial value measurement tool called their shareholder value created[TM] (SVC) method. This tool, which is similar to the economic value added[TM] (EVA) measurement process, has allowed them to select sustainable development companies demonstrating superior stock appreciation for a new sustainable development investment fund. By setting up this fund, they are recognizing the positive value that comes from an organization's commitment to sustainable development, and encouraging other companies to get on board.
At the root of their analysis is a sustainable development index[TM] (SDI). Here's how it works. Within a given industry sector, approximately 100 quantifiable measures are identified, coveting some general considerations as well as each of the areas of sustainable development: environment, economy and society. In the environment section of the index, many of the measures are what you might expect: waste production, energy conservation, land remediation, etc. …