The Cost of Sustainability Capital and the Creation of Sustainable Value by Companies

We develop and apply a valuation methodology to calculate the cost of sustainability capital, and, eventually, sustainable value creation of companies. Sustainable development posits that decisions must take into account all forms of capital rather than just economic capital. We develop a methodology that allows calculation of the costs that are associated with the use of different forms of capital. Our methodology borrows the idea from financial economics that the return on capital has to cover the cost of capital. Capital costs are determined as opportunity costs, that is, the forgone returns that would have been created by alternative investments. We apply and extend the logic of opportunity costs to the valuation not only of economic capital but also of other forms of capital. This allows (a) integrated analysis of use of different forms of capital based on a value-based aggregation of different forms of capital, (b) determination of the opportunity cost of a bundle of different forms of capital used in a company, called cost of sustainability capital, (c) calculation of sustainability efficiency of companies, and (d) calculation of sustainable value creation, that is, the value above the cost of sustainability capital. By expanding the well-established logic of the valuation of economic capital in financial markets to cover other forms of capital, we provide a methodology that allows determination of the most efficient allocation of sustainability capital for sustainable value creation in companies. We demonstrate the practicability of the methodology by the valuation of the sustainability performance of British Petroleum (BP).

The Sustainability Balanced Scorecard. Linking Sustainability Management to Business Strategy.

The Balanced Scorecard of Kaplan and Norton is a management tool that supports the successful implementation of corporate strategies. It has been discussed and considered widely in both practice and research. By linking operational and non-financial corporate activities with causal chains to the firm's long-term strategy, the Balanced Scorecard supports the alignment and management of all corporate activities according to their strategic relevance. The Balanced Scorecard makes it possible to take into account non-monetary strategic success factors that significantly impact the economic success of a business. The Balanced Scorecard is thus a promising starting-point to also incorporate environmental and social aspects into the main management system of a firm. Sustainability management with the Balanced Scorecard helps to overcome the shortcomings of conventional approaches to environmental and social management systems by integrating the three pillars of sustainability into a single and overarching strategic management tool. After a brief discussion of the different possible forms of a Sustainability Balanced Scorecard the article takes a closer look at the process and steps of formulating a Sustainability Balanced Scorecard for a business unit. Before doing so, the basic conventional approach of the Balanced Scorecard and its suitability for sustainability management will be outlined in brief.

Making sustainability ‘real’: using group-enquiry to promote education

Sustainable development is now widely held as a transcendental ideal of town and country planning, yet the way in which it is taught in planning schools remains problematic. This arises from a range of factors, including the all-persuasive nature of sustainability and the lack of solid examples of success through implementation. The issue of how best to promote learning for sustainable development in planning has arguably intensified in the last two years in the case of the Royal Town Planning Institute- sponsored ‘fast track’ one-year Masters, which has reduced the opportunities for students to engage in wider (and perhaps even deeper) concepts, including that of sustainable development. This paper explores this through discussion of a specific project developed at Queen’s University Belfast, facilitated by a grant from the UK Higher Education Academy. Working with a local community, this entailed a group of students working on their Masters thesis collectively addressing issues of sustainable regeneration in a small Irish market town. The design of the project draws heavily on the concepts of enquiry based learning, experiential learning and action competence, whichare seen as being central to improving education for sustainable development (ESD). The paper explores the benefits of such an approach and discusses the ways in which this experience can help enhance student’s experience of ESD.