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Sustainability Return On Investment (S-ROI)

Sustainability Consulting:  S-ROI Through Triple Bottom Line Assessment


Governments have long been the “clean up crew” for environmental and societal impacts of corporate and institutional decisions. Increasingly, however, corporations and institutions are being asked to pay for their environmental and societal impacts.

So how do organizations rigorously quantify their environmental, social and economic impacts, ensuring that the company remains profitable and the community remains viable? And how do you ensure that you are making decisions that optimize sustainability performance without simply shifting the burden to someone else?

Working with the Sustainability Return on Investment (S-ROI) methodology, EarthShift can help you uncover potential costs hidden by traditional accounting procedures. 

S-ROI is designed to examine a decision-making process from the viewpoint of multiple expert stakeholders, while maximizing returns for as many of them as possible.The methodology brings Life Cycle Assessment results together with social and economic impacts to create a unified assessment of the decision.

Our team of sustainability consultants has been practicing S-ROI (formerly known as Total Cost Assessment or TCA methodology) since 2001. We will help you identify and engage with key expert stakeholders either in-person or online, to assess your risks and opportunities. 

The 3Pillars software simplifies the S-ROI engagement where possible, enabling the traditional workshop brainstorming through a social networking environment. The tool calculates Net Present Value for very complex scenarios so that brainstorming isn’t hindered by calculation capability. Learn more about 3Pillars Software.

The S-ROI process offers a picture of the future, including best-case, most-probable and worst-case scenarios. Results are delivered in Net Present Value terms, which are readily understood and accepted by financial experts in your organization. We then help you make sense of the S-ROI output and create a simple, accessible presentation for decision-makers within your firm.

A recent EarthShift project for a Japanese government agency illustrates the concept. The agency was considering whether to invest in a gasification plant to convert forest residue into energy. EarthShift Global engaged with woodcutters, livestock farmers, community stakeholders, and government representatives. The S-ROI process resulted in project approval, with stakeholder input enabling maximum ROI for all of the key stakeholders, ensuring long-term success of the project.

A few other key projects have included the evaluation of increased HIV/AIDS education, the business case for an improved pollution prevention device, whether or not to invest in a new product, and assessment of sustainability goals for companies such as Dow, taking a leadership role in the global transition to sustainability.

The next time you have a tough decision to make, or a project feasibility study to conduct, let EarthShift help you account for the full costs and benefits ahead of time, so that you get the most out of your efforts and chart your course with a triple bottom line in mind.

How and When to Start an S-ROI Engagement

Today’s corporations and institutions are increasingly responsible for the environmental and societal impacts of their decisions – and customers and other stakeholders are taking notice. That’s why many organizations need a decision-making methodology that incorporates broad social, economic and environmental forecasting, and helps minimize cost and maximize return on investment (ROI).

Sustainability Return on Investment (S-ROI) integrates the ability to measure the social, economic and environmental returns on sustainability initiatives. The methodology is designed to examine a decision-making process from the viewpoint of multiple expert stakeholders, and maximize return for as many of them as possible.

The methodology allows for the enumeration of uncertain events with their concurrent costs and benefits. The decision-maker obtains a forward-looking financial picture of how a decision will play out - including best-case, worst-case, and most-probable scenarios of return on investment. This methodology deals with both internal costs (those borne by the company) and external costs (those borne by society), allowing decision-makers to take into account both aspects as appropriate.

The output gives key managers across all functions the actionable information they need to justify various forms of investment in socially and environmentally responsible activity, while avoiding “burden shifting,” where one harmful impact is simply traded for another.

Corporations, government and non-government organizations use S-ROI to identify social risks, or a social risk assessment to understand the economic implications of environmental risks. S-ROI helps industry look at sustainability investments that don’t meet the traditional criteria for ROI. View the video and find out what could make a difference in your organization between success and failure. Video Script (.txt)
  

The S-ROI Methodology

By enabling expert stakeholders to engage in a mutual decision-making process, the S-ROI methodology is designed to avoid the bias that comes from completing decision analysis in a vacuum or optimizing a decision around one type of cost or benefit.

The EarthShift Global staff is comprised of experts who excel at helping clients to identify the true benefits of a change, as well as the risks of maintaining the status quo. Using both training and in-person workshops, our S-ROI methodology is designed to reduce the complexity inherent in assessing the business case for sustainability investments.

Our 3Pillars software facilitates and simplifies the S-ROI engagement process, enabling the traditional workshop brainstorming to be conducted via a social networking environment so participants don’t need to be in the same room together. The tool calculates Net Present Value (NPV) for very complex scenarios so that brainstorming isn’t hindered by calculation capability.  

When Should Your Company Use S-ROI?

In many cases, decision-makers use the S-ROI methodology to determine whether there is a business justification for initiatives that don’t show a positive ROI based on traditional cost-accounting methods.

Here are a few examples:

  • Dow Chemical has been using S-ROI to understand the return to the company of their 10-year sustainability goals for the last three cycles
  • The S-ROI methodology showed positive ROI for the Japanese government to support construction of a biogas factory.
  • The S-ROI methodology showed positive ROI for a mining company in South Africa, where investing in HIV/AIDS education didn’t make sense from a traditional accounting perspective. When costs to society were included in the ROI calculation, the project was clearly net positive in its result, both for the company and for the surrounding communities.


S-ROI is also helpful when decisions are affected by uncertainty:  fluctuation in fuel prices, potential new regulations, changes in consumer preferences, etc. Other example decisions where S-ROI analysis can help ensure maximum benefits include whether to invest in pollution prevention devices, whether to make an acquisition, or even whether or not to expand a facility.

The next time you face a tough decision, or need to evaluate the feasibility of a project, let us help you understand the full costs and benefits ahead of time so you can get the most out of your efforts and chart your course with a triple bottom line in mind.