Perspectives from the Financial Community
In the world of financial analytics, there is no better measure than impact to the bottom line. Our industry has spent years developing, testing, and re-testing any number of theories, formulas, and ideas with one goal in mind: achieving the most accurate way to determine a company’s true value. Every so often, a new concept enters into this arena, and as financial analysts it is our job to consider these new, or sometimes old, notions and establish if they can become part of our financial research tool kit.
Corporate Sustainable Development is a concept that has been around for some time, shifting between being a subject of passing note and that of in-depth study. The challenge is how to translate the concept of sustainable development to the bottom line performance of a company.
The following study lays out a pilot framework for establishing a link between corporate sustainable development performance and financial performance. The report provides the first steps in using financial language to measure the impact of sustainable development on the bottom line.
This report, and its pilot framework, may be able to help lay the foundation in linking sustainable development to company performance and provide another tool for financial professionals to use in their on-going analysis.
Donald F. Reed, CFA
President and CEO
Franklin Templeton Investments Corp.
Today, many companies are investing financial as well as human ‘capital’ on corporate sustainability programs. Some do it because it seems like the right thing to do, and others because it is the right thing to do for all stakeholders, including shareholders. The challenge to date has been to demonstrate to the financial community and, indeed, even internal sceptics, that corporate sustainability is an imperative and measurable factor for increasing business value and ensuring a company’s future.
At Alcan, we see real potential to develop our value as a business by embedding sustainability-based considerations in our approach to business – the basic principle of which we have followed for decades, but one where our thinking has truly crystallized in the past five years with the development of a sustainability framework tied to our governing objective of Maximizing Value. Sustainability is increasingly becoming an integral and formal part of decision-making and managing-for-value strategies at Alcan – from our capital investment decisions to our everyday operations and relationships with external stakeholders.
As with any new concept, developing the proof points for the sustainability value link requires a nurturing period where many different points-of-view are raised and tested. In addition to efforts within the company to develop an operational approach to sustainability that explicitly recognizes the related business value, Alcan is active in a number of industry and other stakeholder efforts that are exploring this topic. By focusing on key financial metrics that are both applicable to sustainability concepts and considered important by the financial community, this report goes a long way to furthering the business case. The examples show how even the simplest community engagement effort can have a direct impact on total shareholder value and how initiatives such as greenhouse gas emission reductions can create incremental economic value.
Following through on these concepts to “speak the language of the financial community” and establish quantitative sustainability performance indicators will represent a major leap forward in linking investor confidence with a company’s sustainability commitment. We view the Pilot Analytical Framework presented in this report as an important step in the evolution of the acceptance of sustainability as a necessary factor in assessing a company’s profitability and value-creation potential.
Michael Hanley
Executive Vice President and Chief Financial Officer
Alcan Inc.