Kurt Kuehn and Lynette McIntire wrote an article called “Sustainability a CFO Can Love” in the April 2014 issue of Harvard Business Review. The article addresses the long standing problems of acceptance by financial professionals of sustainability as producing acceptable returns on investment. I normally find that many of the articles on sustainability that I read in HBR are somewhat highbrow and philosophical but this one I found very practical and full of ideas and valid suggestions.
The authors of the article were part of the logistics company, UPS, which meant that some of the examples used had a logistics/transportation flavour but this did not detract from the generic ideas and thinking that was presented.
The article benefitted from some very interesting and insightful case studies which illustrated bridging points between business and corporate responsibility which have spin-offs benefits. They demonstrate that if return on investment is viewed from not a financial perspective but from an additional dimension which encompasses enhanced brand and reputational credibility,
An important factor in influencing decision making and resource allocation in sustainability investment is how it is seen and affects stakeholders. I found the UPS materiality matrix most interesting. Materiality often only arises in discussion when it comes to reporting and performance testing. However, the table has some surprising judgement calls from stakeholders which suggest that in many areas, there is a real need to “educate” stakeholders on how various initiatives fit into the business model and why they are important.
The side bar discussion on “Why ROI analysis falls short” puts into plain language some of the conflicts that often occur between financial professionals and sustainability professionals. To my mind, it provides some common areas for discussion which could help improving the dialogue between the professionals and achieving some consensus.
Overall, a stimulating article with plenty of ideas that could be applied in other business sectors.
AJH