Corporate Sustainability is a business approach
to create long-term shareholder value by seizing
opportunities and managing risks that stem from
global and industry specific trends and challenges.
Sustainability Leaders seize the opportunities and
manage the risk better than their peers. Sustainability
of companies needs to be measured in relative terms.
Companies that are relatively more sustainable than
their peers may display some or all of the following
characteristics, and continually and consistently,
- strengthen quality of corporate
strategy and corporate governance through respected,
strong and well informed leadership
- strengthen the capability to
access financial resources by ensuring a sound
business model
- generate trust amongst the communities
in which they operate by fostering genuine,
mutually advantageous relationships with stakeholders
- build up strong customer relationships
fostering loyalty via brands, services and products
that deliver solutions for sustainability
- strengthen employee alignment,
motivation, education and retention and organizational
learning enabling a group of committed, healthy,
educated employees
- shift towards lower environmental
impact and improving operational and product
efficiency
Sustainability leaders recognize their role and
responsibility in creating the future, and act
accordingly.
SAM Sustainable Asset Management is convinced
that companies embracing sustainability will generate
more long-term shareholder value than those ignoring
the risks and opportunities. Companies seizing
the opportunities will find more and better investment
opportunities than their peers. They will thus
achieve higher returns on invested capital (ROIC),
will maintain a higher reinvestment rate (RIR)
and return a higher dividend yield. Companies
managing the risks better than their peers will
be rewarded with lower risk premia for the capital
they raise. They will thus enjoy lower required
rates of return and lower financing costs (WACC)
than their peers. Higher ROIC and RIR and/or lower
WACC impact the fair value and the fair value
path of all the company's securities.
Linking sustainability performance to the drivers
of financial value within a company allows quantification
of the value added by sustainability. These possible
links between sustainability and a company's ROIC,
RIR, and WACC include:
Operational efficiency & risk reduction
Improving operational efficiencies by applying
eco-efficiency concepts such as industrial ecology,
costs can be reduced and efficiency increased.
Risk can be reduced by improving understanding
of a wider scope of issues traditionally considered
purely as a risk to the business. Risk does pose
threats, but also offers opportunity. Leading
management recognizes both, seeking to reduce
risk and capitalize on opportunities.
Aligning & attracting employees
Talented employees are attracted, motivated and
retained if personal values are aligned with company
values and where opportunities for development
exist and performance is rewarded.
New markets
Business opportunities in developed and developing
markets could wield significant future revenue
sources for companies. By addressing emerging
market challenges, companies can grow market share
and solve particular sustainability challenges
as well. New product lines and services emerge
from social and environmental challenges.
Innovation
Enduring competitiveness is dependent on innovation
potential. By pro-actively addressing new challenges
and developing innovative solutions companies
can secure new market share, new product/service
lines and attract motivated and creative employees.
Stakeholders' license to operate
Gaining acceptance and building trust with a wide
group of relevant stakeholders is paramount in
securing current business and future growth.
Reputation & brands
Consumers recognise their values reflected in
brands. Brand management strengthens customer
loyalty, which in turn may lead to increased revenue/margins
and lower cost of customer acquisition and lower
customer turnover.
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