CSB ROSI™ Methodology

The NYU Stern Center for Sustainable Business uses its Return on Sustainability Investment (ROSI™) methodology to monetize the benefits of sustainable practices. ROSI™ can be applied to practices throughout an organization that have already been implemented, are currently in development, or for future projects.  

CSB Methodology Graphic

CSB ROSI™ Background

Sustainability 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 the ROSI™ methodology, companies can clearly quantify the full range of costs and benefits, including intangibles. ROSI™ enables CFOs and investors to better integrate, measure, and report on corporate financial performance resulting from embedded ESG. The use of our methodology empowers managerial decision-making and investor communications.


How CSB ROSI™ Works

CSB ROSI™ is designed to be a simple yet comprehensive process that identifies material sustainability strategies and the changed practices resulting from those strategies, then quantifies and monetizes the benefits through the lens of the ROSI™ mediating factors.
 
Step 1: Identify the material sustainability strategies for the sector and the company, using SASB or GRI as guides. For example, a specific sustainability strategy for an auto manufacturer may be to improve waste management.

Step 2: For each sustainability strategy, identify the material changes in business practice. For example, a practice to improve waste management for automakers is to recycle paint and solvents.

Step 3: Determine the potential and realized financial and societal benefits of these practices, through the lens of the mediating factors of financial performance (innovation, operational efficiency, supplier loyalty, etc.). For example, recycling paint and solvents (A) reduces purchase of the product, (B) reduces waste disposal costs, and (C) brings in revenue through selling excess recycled material.

Step 4: Quantify each benefit. For example, idenfity the % of manufacturing waste that is recovered and reused.

Step 5: Apply a monetization process to calculate monetary values for the intangible and tangible benefits. For example, weighted average unit cost of recovered materials versus the cost of reused materials and upfront investment, with the net being the return on investment.
 

CSB ROSI™ Tools and Workshop Materials

Learn more about the CSB ROSI™ Methodology as presented at the 2019 CSB Practice Forum by exploring the resources below:
 

CSB ROSI™ at the Annual Practice Forum

CSB ROSI™ and Deforestation-Free Supply Chain Commitments

The results speak for themselves. We recently applied our ROSI™ methodology 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.

CSB ROSI™ and the Automotive Industry

CSB ROSI™ and Commodity Supply Chains

Additional Resources