Red sky in the morning
The notion of ‘return on investment’ is broader than a simple financial analysis. Ensuring an adequate financial return is simply good business sense, and will be required for all business decisions; but sometimes returns from sustainability initiatives will offer returns that can’t easily be measured in immediate financial terms. For example, the value of enhancing stakeholder relationships, or initiatives that are designed to enhance brand value are not easily measured in immediate dollar amounts, but may add value in both the short and longer term.
Ideally, an initiative will provide a sufficient commercial return – in both dollars and any additional in tangible value – whilst helping advance towards the strategic goals of enhancing sustainability performance. If the initiative does not provide an identifiable and sufficient return then, for obvious reasons, serious questions should be asked as to whether it is an appropriate step to take.
One of the common questions that arises during the return on investment evaluation, is over what period the return, or pay-back, will occur. This is particularly so with large capital cost items, like buildings that can involve significant additional up-front costs to integrate features that will improve efficiency and occupant health (and thus provide savings) over its lifetime. Traditionally, businesses have required a fairly short pay-back period, which often rules out design features or initiatives that will provide savings over the longer-term. As customers and employees show increasing preference for businesses and organisations that demonstrate a genuine commitment to sustainability, pressure will increase for them to accept longer pay-back periods to ensure they can meet the rising expectations.
- Watch this 2nd Whistler video which covers return on investment (ROI)
- Reflect on the Whistler Energy video again and look at it from the perspective of ensuring an appropriate return on investment.
- Post a WEnote comment with your thoughts, for example:
- ROI: The most important message in the video is…
- ROI: There is pressure on businesses to …
- ROI: Rising expectations from customers …
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The notion of ‘return on investment’ is broader than a simple financial analysis. Ensuring an adequate financial return is simply good business sense, and will be required for all business decisions; but sometimes returns from sustainability initiatives will offer returns that can’t easily be measured in immediate financial terms. For example, the value of enhancing stakeholder relationships, or initiatives that are designed to enhance brand value are not easily measured in immediate dollar amounts, but may add value in both the short and longer term.
Ideally, an initiative will provide a sufficient commercial return – in both dollars and any additional in tangible value – whilst helping advance towards the strategic goals of enhancing sustainability performance. If the initiative does not provide an identifiable and sufficient return then, for obvious reasons, serious questions should be asked as to whether it is an appropriate step to take.
One of the common questions that arises during the return on investment evaluation, is over what period the return, or pay-back, will occur. This is particularly so with large capital cost items, like buildings that can involve significant additional up-front costs to integrate features that will improve efficiency and occupant health (and thus provide savings) over its lifetime. Traditionally, businesses have required a fairly short pay-back period, which often rules out design features or initiatives that will provide savings over the longer-term. As customers and employees show increasing preference for businesses and organisations that demonstrate a genuine commitment to sustainability, pressure will increase for them to accept longer pay-back periods to ensure they can meet the rising expectations.
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