Published: 06 October 2022
Sustainability and ESG involve big price tags, long time horizons and difficult-to-quantify returns. But these investments typically fail traditional ROI and net-present-value-based equations. Executives need a new enterprise value equation to support investment decisions and measure impact.
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Existing enterprise value equations are focused on prioritizing investments based on shareholder and financial value.
Two main changes are driving the need for a new enterprise value equation: the rising influence of stakeholder priorities and the importance of nonfinancial value.
The Gartner Enterprise Value Equation overcomes these limitations by including stakeholder objectives, value enablers, stakeholder outcomes and realized return.
Executives should leverage a new enterprise value equation by providing data in the following areas:
Identify stakeholder priorities through a materiality assessment.
Invest in the right value enablers by aligning with the strategic ambition for sustainability and environmental, social and governance (ESG).
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