CSB ROSI™ Methodology

The Return on Sustainability Investment (ROSI) methodology is used by both corporate leaders and investors to bridge the gap between sustainability and ESG initiatives and financial performance.

CSB Methodology Graphic
 

Sustainable Business is Good Business

Sustainability drives business and societal success, yet the challenge most businesses face is proving the monetary impact of sustainability initiatives as they relate to environmental, social, or governance (ESG) related issues.

The NYU Stern Center for Sustainable Business (CSB) 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.
 

ROSI for Corporate Management and Investors

CSB's Return on Sustainability Investment (ROSI) methodology can be used by both corporate management and investors to bridge the gap between sustainability and ESG initiatives and financial performance.

For corporate management, using ROSI drives better performing business - socially, environmentally, and financially - by embedding sustainability into core business strategy, decision-making, and accounting and clearly quantifying the full range of costs and benefits, including intangibles.

For investors, using ROSI improves decision-making, valuation, and communications - by better understanding ESG data, assessing where relative value exists in corporate strategies and investments, and better integrating, measuring, and reporting on corporate financial performance driven by embedded ESG strategies.
 

ROSI Resources and Tools

CSB offers in-depth resources on ROSI, including a step-by-step overview, research publications, industry case studies, and Excel tools for download.

How 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. To learn more about ROSI and each of the steps, click here.
 
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.
 

Research Papers and Articles

 
Publication Description Date
Journal of Applied Corporate Finance Using the Return on Sustainability Investment (ROSI) Framework to Value Accelerated Decarbonization
The study presented here describes the outcomes of a recent analysis in which CSB in collaboration with ALO Advisors worked with Capital Power Corporation, a North American power producer, to estimate the value likely to be created by accelerating its transition to clean energy. Through their work with the Chief Sustainability Officer, Chief Financial Officer, and senior managers from several key business functions, the authors identified seven major sources of benefits, and quantified the expected effects on value of four of them, to produce an estimated contribution to the value of the company of about $30 million.
June 2020
EcoVadis and NYU Stern CSB Sustainable Procurement Barometer 2019: From Compliance to Performance
The EcoVadis Sustainable Procurement Barometer offers insight into how sustainability is evolving in procurement priorities, and the tools and processes being used to drive tangible improvements and business results. Conducted in partnership with NYU Stern CSB and featuring the CSB ROSI Methodology, the analysis suggests organizations are placing greater emphasis on business ethics and labor and human rights practices compared to three years ago.
July 2019
St John's University: Review of Business Journal The Return on Sustainability Investment (ROSI): Monetizing Financial Benefits of Sustainability Actions in Companies
CSB is proud to announce that the Review of Business editorial board and Munich Re awarded this article with "Best Paper" for its demonstration of how a publicly-traded firm can quantify the relative value of integrating sustainability-related initiatives in its core operations. In the article, we introduce ROSI and emphasize nine mediating factors when monetizing tangible and intangible benefits of sustainability actions such as innovative sustainable agricultural techniques or innovation in electric vehicles. We showed empirically which factors likely drove corporate financial performance in cases in the beef and auto industries.
June 2019
Harvard Business Review How to Quantify Sustainability’s Impact on Your Bottom Line
In this article, we review the findings from our case study on beef production in the Amazon (read the full report below). ROSI and its application in this case study demonstrate that these financial improvements can be quantified and monetized in a credible and cost-effective manner, and have the potential to serve as a powerful tool with business decision makers.
September 2017
NYU Stern CSB Deforestation-Free Supply Chains: Financial Impact for Brazilian Beef Production
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.
August 2017
Harvard Business Review The Comprehensive Business Case for Sustainability (Full PDF Here)
In this review of business and academic literature, NYU Stern CSB found positive financial and strategic benefits for companies taking a comprehensive approach to managing for sustainability and embedding it in their core business strategy.
October 2016

 

Excel Tools for Testing ROSI

Below you'll find five Excel tools that CSB has developed to apply ROSI to the specified mediating factors or through collaboration with industry partners.

ROSI at the CSB Practice Forum

The Annual Practice Forum focuses on how to identify, track, and monetize sustainability returns driven by innovation, operational efficiency, employee engagement, brand enhancement, and risk mitigation, for better decision-making by the C-suite and investors. Learn more about ROSI through the following materials from recent Practice Forums, including presentations, panel discussions and workshops.

2020 Practice Forum
2019 Practice Forum
2018 Practice Forum

ROSI in the News

Other Resources

  • Driving Sustainable Decisions (Online Course): These free, self-directed online learning modules walk you through the "Building a Better Business Case for Investments in Sustainability" curriculum developed by the NYU Stern Center for Sustainable Business.
  • JUST Capital Report Builds on CSB ROSI Methodology: In June 2019, JUST Capital published a new report supporting "what we have long suspected, and what our empirical analysis corroborates: that just business is simply better business." The report builds on the NYU Stern CSB ROSI Methodology that demonstrates how companies that embed sustainability in their strategy and practice drive greater profitability, higher valuation, and a lower cost of capital.


ROSI and Business Engagement


CSB has collaborated with over 20 corporate and research partners to date on building and testing ROSI, including Arcor, Aston Martin, Capital Power, Cargill, Carrefour, Eileen Fisher, GM, Investindustrial, HSBC, Mars, McDonald's, Merck, Pfizer, Reformation, REI, and VW.

To learn more about piloting, testing, and/or helping to develop tools for ROSI at your organization, please reach out to us at sustainablebusiness@stern.nyu.edu.


CSB ROSI Past Partner Logos