The Case For Sustainable Value Creation

Business risks, opportunities, and impacts linked to the sustainability agenda are no longer separate from core decision-making. What began in many firms as a philanthropic corporate social responsibility[1][2][3] initiative led by marketing or communications teams has rapidly evolved. First, it gave way to sustainability departments focused on growing regulatory demands[4][5], but today, the erosion of environmental, human, and social capital is no longer just an issue of corporate responsibility for stakeholders. It is an economic and financial one, deeply tied to enterprise value and financial performance. This shift has caught the attention of CEOs, CFOs, investors, and boards, turning sustainability into a strategic condition for businesses seeking to remain competitive, relevant, and resilient[6].

This leads us to the idea of sustainable value creation: a perspective in which business models are designed to create value both for the company and for society, at the same time[7]. This is no longer a choice – it’s the new business standard for success[8].

While this shift may feel new to many organizations, in several Asian economies, the integration of purpose and profit is familiar, as companies are often judged by the role they serve in society, balancing business success with meaningful contributions to the public good[9][10].

Navigating 2025: A corporate perspective

The global agenda is shifting. Disruptive elements such as the break-up of the post-World War II order, political fragmentation, wars, climate change, social inequalities, AI, or GDP overreliance have brought uncertainty to the markets[11]. Yet, most long-term sustainability goals, including the SDGs, remain intact[12]. This signals that deep transformation is essential, and that corporates will need to adapt their business models. As a result, internal and external stakeholders now expect more than commitments and want to understand the concrete strategic vision and roadmap to move from promises to action[13]. This is why transition planning has become today’s buzzword, much like ‘carbon footprint’ was a decade ago[14].

To navigate this complex landscape and create value across all stakeholders, companies must adopt a dual perspective:

• Value to Business (V2B)[15]: How dependencies across natural, social, and human capital affect short- and long-term financial performance, including risks, opportunities and future costs such as carbon taxes[16].
• Value to Society (V2S)[17]: How the company’s business model, including its value chain, affects societal well-being, directly or through changes in the environment[18].

Sustainable value creation is only possible when both dimensions – V2B and V2S – are considered together[19]. Both perspectives are interconnected: today’s externalities are tomorrow’s risks and the day after’s portfolio losses[20]. These risks are increasingly reflected in enterprise value, often through intangibles such as brand trust, social license to operate, or employee engagement. Conversely, positive societal impacts can unlock opportunities such as gaining access to new markets, building trust, and attracting investment -especially for companies that outperform their peers in environmental and social performance[21].

Making sustainable value creation actionable

Understanding the dual conception of value creation is only the beginning. Embedding it into decision-making introduces real-world complexity[22]: conflicting goals, imperfect data, shared responsibility across value chain actors and tough trade-offs between short-term costs and potential long-term benefits, or V2B and V2S[23].

As such, many actions deliver clear wins for both business and society, but in other cases, one perspective might suffer – at least in the short run. For instance, investing in sustainable packaging may incur short-term costs, but it can prepare the business for future regulation, adapt to new consumer preferences, and build brand trust (V2B), as well as reduce waste impacts along the value chain (V2S).

In this situation, perfection becomes the enemy of the good. The goal is to develop and implement pragmatic solutions – benefitting both the society (V2S) and the enterprise (V2B). Managing and accounting for impact needs to be interconnected with financials, and decisions must be made through the dual-value lens, balancing profitability with social and environmental outcomes[24].

Sustainable value creation requires rethinking how performance is defined, how targets are set, and how success is measured and accounted for. It’s not just about adding another dashboard, but about embedding systems thinking at the heart of corporate strategy, considering interdependencies and valuing long-term resilience[25].

Valuation tools can play a key role in this transformation[26][27][28]. For instance, comparing water efficiency or carbon-reduction projects by assessing their effects on the business (such as CAPEX required, NPV of savings or green premiums) and on society (considering the social cost of water per region and the social cost of carbon) using a common metric can significantly improve decision quality[29] and drive value creation for all.

A systems-thinking outlook

Sustainable value creation means blending purpose with performance, integrating risk, return and impact into every decision, and thinking in systems rather than silos. As system-thinkers, we must ask ourselves the following questions:

Can we imagine a future where the best-performing businesses are those solving the biggest problems of humanity? How could investors, markets and regulators recognize and reward the companies that create both financial and societal value in the long-term?

On their side, the question for companies is clear:

Can we lead by optimizing our strategy to create both business and societal value?

Those who succeed won’t just outperform the market – they’ll help redefine it.

 References

[1] Freeman, R., Kirsten M., and Bidhan P. “Stakeholder Capitalism.” Journal of Business Ethics 74, no. 4 (2007): 303–14 and Freeman, R and Elms, H. “The Social Responsibility of Business Is to Create Value for Stakeholders” (2018), MIT Sloan Management Review.

[2] Carroll, A. and Shabana K. “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice” (2010).

[3] Chan and Rajadhyaksha. “What do we know about corporate philanthropy? A review and research directions. (2021). Business Ethics, the Environment & Responsibility.

[4] European Commission. “Corporate sustainability reporting. What the EU is doing and why.” (2025) and European Commission. “Sustainable finance” (2025).

[5] Value Balancing Alliance. “Sustainable Value Creation Insights Report”. Forthcoming

[6] Freiberg, David and Rogers, Jean and Serafeim, George, How ESG Issues Become Financially Material to Corporations and Their Investors (2020). Harvard Business School Accounting & Management Unit Working Paper No. 20-056

[7] Value Balancing Alliance. “Sustainable Value Creation Insights Report”. Forthcoming

[8] Supported by movements such as the incorporation of integrated reporting principles to the ISSB workstreams. See ISSB consultation on Agenda Priorities (2024) and the IFRS’s guide on getting started with the Integrated Reporting Framework (2024).

[9] Boardman, Calvin & Kato, Hideaki. (2003). The Confucian Roots of Business Kyosei. Journal of Business Ethics, McKinsey (2021) Charting a path from the shuchu kiyaku to ESG for Japanese companies and

[10] Koehn, D. What Can Eastern Philosophy Teach Us About Business Ethics?. Journal of Business Ethics 19, 71–79 (1999) and

[11] Sustainalytics Insights: Record outflows to global sustainability funds (2025).

[12] Climate Governance Initiative. “Insight: Corporate climate action and geopolitics: navigating turbulent times” (2025).

[13] A4S. “Aligning Transition Planning and Financial Planning” (2025) and International Transition Plan Network (2025).

[14] ITPN. “Transition Plan Taskforce Disclosure Framework”(2023)

[15] Equivalent to financial materiality in the Double Materiality Assessment (DMA). See CSRD’s ESRS for more information on DMA.

[16] Value Balancing Alliance and KPMG. “Value to Business Framework”. (2025)

[17] Equivalent to impact materiality in the Double Materiality Assessment (DMA). See CSRD’s ESRS for more information on DMA.

[18] IFVI and Value Balancing Alliance. “Conceptual Framework for Impact Accounting” (2025).

[19] Value Balancing Alliance: “Sustainable Value Creation Insights Report”. Forthcoming.

[20] Pavan Sukhdev for GIST Impact (2025).

[21] IFRS Foundation

[22] Value Balancing Alliance. “Sustainable Value Creation Insights Report”. Forthcoming

[23] West D. and Euler D. “Back to the Future: The impact Valuation of Net Zero Transition Plans” (2024)

[24] Value Balancing Alliance. “Impact Accounting Use Cases” (2025), IFRS Foundation. “Integrated Thinking Principles” (2012), COSO and WBCSD. “Enterprise Risk Management” (2018) and Capitals Coalition. “Beta Framework for Integrated Decision-Making” (2024)

[25] Value Balancing Alliance. “Sustainable Value Creation Insights Report”. Forthcoming

[26] Barby C., Barker R., Cohen R., Eccles B., Heller C., Mayer C., Roche B., Serafeim G., Stroehle J., Younger R., and Zochowski R. “Measuring Purpose – An Integrated Framework“ (2021)

[27] Value Balancing Alliance et al. “Impact Valuation Sprint Report 2024” and Value Balancing Alliance. “Sustainable Value Creation Insights Report”. Forthcoming

[28] Value Balancing Alliance et.al. “The Case of Monetary Valuation” (2022)

[29] West, D. and Euler, D. “Agile Sustainable Development: A Primer on Corporate Impact Indicators and Valuation Factors via Agile Models” (2024)