The twin forces of India’s 2013 Companies Act and escalating environmental and social concerns have propelled Indian companies to embrace sustainability initiatives. But, despite its growing importance, the adoption of sustainability as a business imperative often faces significant hurdles. It is frequently viewed as an optional endeavor, isolated from core business operations, and largely perceived as a cost center. Demonstrating a clear return on investment (ROI) is paramount for successfully integrating sustainability as a core business strategy.

The potential rewards of sustainability are substantial, spanning cost savings, reduced regulatory risk, improved innovation, and enhanced brand reputation. Yet, many companies struggle to quantify these benefits. The reasons are manifold: difficulties in gathering and analysing data, a short-term focus in business decision-making, and a lack of awareness of the true value of sustainability investments.

Beyond Tangibles: Measuring the Full Value of Sustainability

When assessing sustainability ROI, companies typically focus on tangible benefits like energy savings and reduced water bills. These are straightforward to measure and showcase through operational efficiency. While these metrics are critical, they only scratch the surface. To fully grasp sustainability’s potential, companies must also measure the full spectrum of benefits – including intangible benefits and “submerged value”: the hidden, less apparent advantages.

Intangible Benefits 

Intangible benefits, such as increased customer loyalty and enhanced employee engagement, may not yield immediate financial returns but can still be evaluated using indirect metrics. These include customer retention rates or employee satisfaction scores, to provide insight into their strategic importance. 

Furthermore, companies can recognise and quantify the ‘submerged value’ of sustainability – the hidden or overlooked advantages of sustainability. Research indicates that submerged value can exceed visible value by a factor of 4 to 10. For example, it is well-established that sustainable and socially responsible businesses often report stronger employee engagement and experience lower employee turnover, with lower attrition rates potentially reducing employee turnover by as much as 25-30%. 

Submerged Value 

By considering the costs associated with recruiting, onboarding, and training new employees, we can begin to calculate the submerged financial savings for sustainable businesses. This calculation underscores the business case for sustainability, and how it can be embedded as a core operational strategy. 

Tools and Frameworks to Amplify Sustainability ROI 

To harness the full spectrum of sustainability’s value, companies must leverage established frameworks and tools. Various methodologies can help bridge the gap between sustainability strategies and financial performance, by capturing all costs and benefits, including intangibles. Others can help organisations monetise their social, human and environmental impact across various forms of capital. 

Making the Case: Communicating Sustainability’s ROI 

Successfully embedding sustainability as a strategic imperative requires more than internal action – it also rests on effective communication. Companies should tailor messages to different stakeholders, including investors, employees, customers, while ensuring clear, consistent, and fact-based communication that resonates with each audience’s specific interests and priorities. 

Fostering a deeper understanding of sustainability principles within the organisation through upskilling initiatives is crucial for driving this transformation.

Sustainability as a Driver of Progress

Ultimately, embracing sustainability as a strategic imperative empowers businesses to unlock significant value. By adopting a data-driven approach and shifting the narrative from compliance to strategic opportunity, businesses can maximise sustainability’s full potential as a cornerstone of long-term growth, resilience and competitive advantage. Companies that effectively measure and communicate the ROI of sustainability initiatives will not only gain widespread recognition as leaders in creating a more equitable future, but will also reap significant financial rewards.