CSB Monetization Methodology
The NYU Stern Center for Sustainable Business framework monetizes the benefits of sustainable practices. This framework can be applied to practices throughout an organization that have already been implemented, are currently in development, or for future projects.
The results speak for themselves. We recently applied our framework to the Brazilian beef industry, the world’s second largest beef producer and consumer. After investigating the financial costs and benefits of the uptake of sustainable and deforestation-free beef by ranchers, slaughterhouses and retailers in Brazil, we found that sustainable and deforestation-free practices have the potential to create significant financial benefits across the entire value chain. While sustainable agricultural practices provided the most financial benefit, deforestation-free commitments reduced risk.
Ranchers who invested most in adopting new practices, reaped the greatest benefits by increasing productivity 2.3X and profitability nearly 7X. Cattle raised under a sustainable system command a higher price, they are larger and of higher quality than animals raised using standard practices. These benefits also translate into better cost management, agricultural innovation and increased productivity and quality.
Slaughterhouses also significantly benefited. Beef labeled as premium-quality can be priced 20-30% above average quality beef in super-markets. This translates into increased revenues for slaughterhouses that can market higher quality and deforestation-free beef. Our estimates showed reduced reputational, regulatory and supply continuity risks—between $20-120 million (depending on the company) in expected net present value over ten years. For retailers, while the immediate gain was not as substantial, the long-term upside of managing reputational and operational risk through sustainable sourcing is critical for consumer-facing businesses in today’s world where customers can easily, and publicly, hold brands accountable.
BackgroundSustainability drives business and societal success. The challenge most businesses face is proving the monetary impact of sustainability (ESG). The NYU Stern Center for Sustainable Business believes successful sustainability initiatives are embedded in corporate strategy and tracked through financial metrics. Sustainability-related issues are no longer siloed as special projects or limited to efficiency-related sustainability efforts. Using this framework, companies can clearly quantify the full range of costs and benefits, including intangibles. The CSB framework enables CFOs and investors to better integrate, measure, and report on corporate financial performance resulting from embedded ESG. The use of our framework empowers managerial decision-making and investor communications.
CSB Practice Forum VideosLearn more about the CSB Methodology as presented at the CSB Practice Forum by watching the videos below:
- Opening Address by Tensie Whelan & Fireside Chat with Mars: Investing $1 Billion in Sustainability: What is the Payback?
- Business Case in Action: Discussion Regarding the Analysis of the ROI of Sustainability
- Sustainability Investing: Moving from Correlation to Causality
- Financial Benefits of Companies Managing for Total Societal Impact
- The ROI on Sustainability for DOW Chemical
- The NYU Stern Center for Sustainable Business Framework to Monetize Embedded Sustainability
- Deforestation-Free Supply Chains: Financial Impact for Brazilian Beef Production
- HBR: How to Quantify Sustainability’s Impact on Your Bottom Line
- The Sustainability Business Case for the 21st Century Corporation
- HBR: The Comprehensive Business Case for Sustainability
- Driving Sustainable Decisions On-Line Curriculum