The Sustainable Value Creation Map: Connecting the Dots between ESG, ROI, and the Triple Bottom Line
WholeWorks’ Sustainable Value Creation Map helps leaders connect sustainability to their business strategy and results—and to positive social, environmental, and economic impact. It shows the potential cause-and-effect linkages between ESG initiatives and ROI. Mapping these linkages and making them explicit is a key step to making sustainability a core part of business operations.
For a recording of WholeWorks’ webinar “Mapping Material ESG Issues: Creating Sustainable Value,” click here and watch WholeWorks CEO Matt Mayberry & CSO Laura Asiala overview the Sustainable Value Creation Map—designed to help professionals and leaders ‘connect the dots’ between ESG issues; value to the company; and positive environmental, social, and economic impact to stakeholders.
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IMAGINE driving into an unfamiliar city looking for a good place to eat. You reach for your smartphone and search for restaurants in the area. Your phone’s dining app comes back with a list of restaurant names and customer ratings. You then filter the list to include only establishments with a 4- or 5-star rating that serve your favorite cuisines. So far, so good. You’ve identified 10 good dining options and your mouth is watering.
But wait! You realize that your dining app has provided you with no addresses and no navigation. You have a list, but no directions. This is little help when you’re eager to sample the local cuisine. Frustrated and hungry, you drive down the road to the first restaurant with a name you recognize from back home—a safe, but unsatisfying choice.
Unfortunately, that’s the same type of situation many organizations face today about ESG issues, covering a range of Environmental, Social, and Governance concerns. Various tools and methods can help narrow the list to high-priority issues that may impact the world and business. However, these tools don’t necessarily help leaders connect those issues to their company’s strategy and financial performance in a way that is actionable.
That’s the reason WholeWorks has developed the Sustainable Value Creation Map, a tool to help professionals and leaders connect sustainability to their business strategy and results—as well as to positive social, environmental, and economic impact. By ‘connecting the dots,’ leaders can more show the cause-and-effect linkages between ESG issues—and the initiatives to address them--and more traditional business drivers such as competitive strategy and shareholder value creation. Mapping these linkages and making them explicit is a key step to making sustainability a core part of business operations.
Moving Beyond False Trade-offs
WholeWork’s guiding premise is that there are many opportunities to both do well and do good in business, but they are often dismissed due to the inability to effectively address these two objectives together. As a result, leaders often fail to recognize the potential of sustainability to stimulate innovation, increase revenues, decrease costs, reduce risks, attract capital, and strengthen the business in other ways.
Instead, they see sustainability as an unnecessary expense, distraction from the core business, or something ‘nice to do’ if there’s enough time and money. This makes it more difficult to generate management support and gain traction with ESG initiatives, which in turn leads to a self-fulfilling prophecy where under-resourced ESG initiatives fail to deliver results, thus justifying their relegation to the sidelines.
Making ESG an integral part of the business requires understanding how ESG initiatives can strengthen a competitive strategy and create financial value.
Download a copy of the ‘Creating Sustainable Value: Connecting the Dots’ for a step-by-step approach with the Sustainable Value Creation Map (SVCM).
Strategy-driven Value Creation
The SVCM builds on the basic business value creation logic shown to the left. In simplest terms, a good, well-executed strategy enables a company to achieve a competitive advantage in its target market in a way that is profitable and with minimum capital investment.
An important part of strategy is defining dimensions of competitive advantage.
To create value, a firm must also establish and execute a set of core business processes that enable it to achieve its competitive advantage.
At a deeper level, value creation requires companies to build up unique capabilities and resources over time. They may require investment over years, but once these capabilities are built up, they enable the core processes to work more efficiently and effectively.
Introducing the Sustainable Value Creation Map
The Sustainable Value Creation Map (SVCM) depicts these key elements and interdependencies of strategy and value creation on a single page. This allows managers to explicitly trace the pathways along the value creation chain and literally ‘connect the dots’ from bottom to top.
Let’s look at an example of the SVCM for CareCo Natural, a fictional consumer products business that sells hair and skin care products through its retail partners.
The topmost layer of the map shows the four drivers of financial value: revenue, expenses (profit), invested capital, and risk. To create value, the firm must deliver a higher rate of return to its investors that they can get elsewhere with the same level of risk.
The layers of the SVCM above capture the most essential elements of CareCo Natural’s strategy. For example, the Competitive Advantage layer includes four factors that determine the Relative Attractiveness (RA) of CareCo Natural’s products relative to competitors: product, brand, price, and store presentation. The lower layers reflect key elements of the company’s competitive strategy: investments in Core Processes and Resources & Capabilities that ultimately drive the value creation factors at the top of the Map.
In the example above, Product Technology is highlighted as an important capability for CareCo Natural because it accelerates Product Development. This enables the company to develop more innovative products that are attractive to consumers, which in turn helps CareCo Natural gain market share. The increase in revenue drives value creation. This is just one of several cause-and-effect pathways that define how investment in product technology (like research) can contribute to the company’s strategy.
Connecting the Dots with Sustainability Initiatives
The logic of the value-creation pathways above may seem obvious. Without such a picture, however, leaders may have difficulty demonstrating how their decisions are contributing to business performance in a positive way. This is where the Sustainable Value Creation Map can help. It makes the logic of business systems thinking explicit.
The missing link is how sustainability can contribute in new ways to drive strategic value creation. Too often, sustainability is viewed as an expense without strategic benefit. But this neglects important ways that sustainability can stimulate new business ideas and create value.
The example below shows the Sustainable Value Creation Map for CareCo Natural with a new layer added for an initiative focused on Circular Packaging. This initiative seeks to eliminate plastic waste by finding ways to reduce, reuse, or eliminate plastic (especially single use) packaging.
The map above may look a bit like ‘spaghetti,’ but has several linkages that could contribute value. For example, it includes an industry partnership where CareCo Natural collaborates with suppliers and retail partners to develop new packaging solutions in a collaborative systems approach. This includes developing new technologies that convert Post-Consumer Recycled (PCR) materials into high quality feedstocks for packaging. It also includes redesigning products to reduce or eliminate packaging (e.g. shampoo bars, refillable bottles, powders) and to promote recycling or refilling of containers at retail stores. Ultimately, these new pathways can lead to increased revenue opportunities or cost reductions beyond what conventional business thinking might reveal. They also help reduce the risk that CareCo Natural will suffer in reputational damage from inaction, or have regulations imposed that constrain the business in unproductive ways.
The circular packaging initiative is an example of an ESG initiative that clearly has the capacity to create value for the firm. However, such an initiative also creates value beyond the firm, addressing a broader perspective of sustainability across the ‘triple bottom lines:’ environmental, social, and economic.
The SVCM is not only a means of visually representing the business case for sustainability. It is also a way to push the boundaries of business strategy to reveal new product and service possibilities and achieve new competitive advantages. And it can help push the boundaries of environmental, social, and economic value creation at a broader systems level.
Achieving the dual objective of creating positive impact on the macro scale while strengthening the business isn’t easy. It requires thinking creatively about what new connections ESG initiatives can generate, rather than viewing them as necessary evils. Mapping these connections and making them explicit is an important step in finding ways to contribute to a more just and sustainable world.
Download a Copy of the ‘Creating Sustainable Value: Connecting the Dots’ White Paper
Download a copy of the ‘Creating Sustainable Value: Connecting the Dots’ for a step-by-step approach with the Sustainable Value Creation Map (SVCM).
Looking for Help in Integrating Sustainability in your Organization?
As with any mapping tool, the power of the Sustainability Value Creation Map comes from the strategic thought process that takes place as a management team draws and debates new connections. It’s this process that separates ‘check the box’ sustainability exercises from meaningful integration—and is best learned through practice.
This is why we’ve developed several virtual and/or in-person opportunities to accelerate our clients’ ability to do that with very practical approaches, including assessment, analytics, mapping, simulations (our own or customized), workshops, coaching, and facilitation. We have nearly 400 alumni from 36 countries—leaders and professionals from more than 150 companies—who have completed a WholeWorks Sustainable Business program.
Our goal is to help organizations move sustainability from the sidelines to the frontlines and thereby achieve their aspirations to benefit society and the environment as well as their investors.
If you’re interested in learning more, contact us at Support@WholeWorks.com or WholeWorks LLC on LinkedIn.
Cover photo by Jean-Frederic Fortier on Unsplash. Other images are the property of WholeWorks LLC.
About the author:
Matthew J. Mayberry, Ph.D.
Matt Mayberry is founder and CEO of WholeWorks. For more than 25 years, Matt has developed and delivered award-winning, simulation-based leadership programs for leading firms that include: Dow Corning (now part of Dow, Inc.), Nike, Wendy’s, British Columbia Ferry Services, and Starwood Hotels and Resorts Worldwide. In addition, he has led WholeWorks’ systems modeling consulting that has enabled numerous organizations to successfully address complex challenges and opportunities. Matt received his Ph.D. in physics from M.I.T. and his MBA from Stanford. Matt has developed and taught numerous courses in sustainable business and systems thinking at both the undergraduate and MBA level, including Green Mountain College, and the University of Vermont Grossman School of Business’s Sustainable Innovation MBA program.
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