Sustainability measures are no longer a purely ethical decision for companies – they also have tangible financial implications. But how can the economic benefits of ESG (Environmental, Social, and Governance) metrics be specifically measured? This is where return on impact comes into play. This methodological approach enables a monetary evaluation of ESG metrics , thus providing a data-driven foundation for strategic decisions.
In this article, you will learn how companies can use the Return on Impact approach to calculate the financial benefits of ESG initiatives – from cost reductions to revenue increases to risk minimization.
What is the Return on Impact approach ?
The Return on Impact approach is a methodology for the quantitative evaluation of ESG measures . It combines sustainability metrics with financial metrics and demonstrates how ESG strategies directly contribute to corporate success.
The four main categories of the Return on Impact approach:
- Direct cost reductions (e.g. lower energy consumption)
- Increase in sales (e.g. through sustainable products)
- Risk minimization (e.g. regulatory compliance)
- Intangible values (e.g. employee loyalty, brand value)
ESG as a business case: Why key financial figures are crucial
Many companies invest in ESG, but do not know the financial impact of these measures. Without a clear ROI calculation, investments in sustainability often remain vague and difficult to justify.
The Return on Impact approach addresses this by linking ESG strategies with clear monetary benefits – be it through lower costs, higher revenues or reduced risks.
The calculation method of the Return on Impact approach
Each ESG indicator is translated into financial values using a formula:
Formula:
Financial impact = ESG KPI × monetization factor
The weighting depends on the corporate strategy in order to enable a realistic valuation.
Examples of direct cost reductions through ESG measures
If companies are already striving to reduce their emissions or work more resource-efficiently in their value chains, they not only achieve their ESG goals, but also have a positive financial impact.
Examples of sales increases through ESG initiatives
Sustainability in the value chain or in the product portfolio can also lead to higher sales as companies tap into new markets or strengthen their brand.
- Sustainable product lines: Customers are willing to pay more for sustainable products. For example, higher sales prices per unit sold can be achieved.
- ESG transparency in the supply chain: Promotes trust and increases customer loyalty. Higher customer loyalty can, for example, lead to higher repurchase rates and sales.
- Green financing: companies with high ESG performance are receiving more and more favorable loans.
Examples of risk minimization through ESG strategies
Regulatory and environmental requirements are constantly increasing. The methodical Return on Impact approach helps companies minimize these risks.
Examples of risk minimization:
- Avoiding penalties: compliance with ESG regulations reduces fines. According to the EUDR Regulation (Regulation (EU) 2023/1115), penalties can amount to up to 4% of annual turnover in the EU.
- CO₂ tax savings: Companies that reduce emissions pay less tax in the EU ETS, as fewer CO₂ certificates have to be paid for.
- Reducing insurance costs: good ESG values lead to better policies. Like banks, insurance companies are also paying increasing attention to good ESG values and carbon footprints.
Examples of intangible assets: the underestimated ESG benefits
Not all ESG benefits are immediately visible in monetary terms, but they do have long-term financial effects. These can be determined with the help of practical assumptions.
Examples:
- Employee retention: ESG-friendly companies reduce staff turnover and save recruiting costs. According to studies, employees and applicants are increasingly paying more attention to the fact that the company acts sustainably.
- Innovative strength: ESG-oriented companies set trends and increase market share. The company "Rügenwalder Mühle" can be cited as a pioneer, which was already able to sell more environmentally friendly meat substitutes than actual meat products in 2022.
Combined in one key figure: The Return on Impact Score
The bridge between sustainability and business strategy
While sustainability teams strive for environmental and social improvements, finance and controlling departments focus on key figures such as sales, costs and risks. This silo mentality makes the strategic integration of ESG measures and their economic evaluation more difficult.
The Return on Impact Score bridges these two worlds. It not only makes ESG KPIs transparent, but also integrates them directly into a company's financial performance. With a unified metric, sustainable measures are no longer viewed as isolated CSR projects, but rather as strategic drivers of corporate success.
Are we talking about a game changer when it comes to return on impact ?
- Holistic corporate management:
ESG is no longer viewed as just a “soft” factor, but as a measurable, strategic factor that is integrated into the decision-making processes of CFOs and management. - Abolishing silo thinking:
Sustainability, finance and strategy departments no longer work in isolation, but speak a common language – the financial impact of ESG measures. - Clear business case for ESG initiatives:
Companies can prioritize sustainable projects that have proven positive financial effects and thus invest specifically in measures that bring the greatest added value. - Data-driven decision making:
The Return on Impact Score enables companies to evaluate ESG measures not only qualitatively but also with clear figures – this facilitates investment decisions and internal communication.
- Benchmarking and optimization:
Companies can compare their ESG performance with competitors, identify best practices and continuously improve their strategy.
Through the Return on Impact approach, ESG can not only become an integral part of corporate strategy, but also a driver for sustainable growth and long-term value creation.
How Planted can help you with Return on Impact
The ESG Strategy Hub integrated into Impact OS enables sustainability managers to centrally manage ESG goals based on defined metrics, continuously track progress, and transparently engage relevant stakeholders. The solution simplifies monitoring, automates tasks, and creates a reliable foundation for strategy and reporting.
We also support you in overcoming traditional silo thinking : Sustainability and financial strategy are no longer viewed separately, but rather combined in a common, data-driven approach. We accompany you in consultations to optimally improve your financial metrics with ESG initiatives. This creates a strategic, company-wide management of ESG measures that is not only ecologically sound but also economically beneficial.
