Sustainable value added A new approach to measuring corporate sustainable performance

Only companies that contribute positively to all three pillars of sustainability at the same time contribute to sustainability. Companies will, however, only exceptionally contribute simultaneously to all three dimensions. There is usually some kind of trade-off and contributions to sustainability are thus quite difficult to assess in practice. There is a quasi-unlimited number of environmental and social impacts. In practice, companies will always have a better performance with respect to some impacts and a worse performance with respect to others. Drawing on the technique developed by Modigliani and Modigliani (1997) for the financial markets, this chapter shows how different environmental and social impacts and economic performance can be aggregated. Unlike existing assessments, it does not fall back on external costs that are impossible to determine in practice. It determines, in a similar way to the pricing of risk in the financial markets, the cost of environmental and social impacts via opportunity costs. Sustainable Value Added takes into account both eco-and social-efficiency and effectiveness, and expresses in monetary terms by how much a company contributed to more sustainability. Sustainable Value Added thus provides a shift in focus from a cost-based to a value-based assessment of corporate contributions to sustainability.