Return on Sustainability Investment (ROSI™) Methodology
ROSI is used by corporate leaders and investors to bridge the gap between sustainability strategies and financial performance.
Proving Sustainable Business is Good Business
Embedding sustainability into business strategy is good management and creates financial value through operational efficiency, innovation, sales & marketing and other benefits. Yet most corporate leaders are not tracking their sustainability-related returns.
CSB has developed the Return on Sustainability Investment (ROSI™) methodology to help identify, prioritize, and track sustainability-driven returns. The methodology and associated monetization tools (organized by industry and sustainability strategy) support quantifying the full range of costs and benefits, including intangibles, both in terms of current performance and scenario planning.
While the tools are primarily for corporate leaders, ROSI can also help investors improve decision-making, valuation, and communications - by assessing where relative value exists in corporate strategies and investments, and better integrating, measuring, and reporting on financial performance driven by sustainability strategies. (See our private equity page)
Take a quick look at how several sustainability strategies can drive financial value
Decarbonization drives:
- energy cost savings
- avoidance of energy pricing volatility
- avoidance of carbon fees
- avoidance of regulatory and market risk
- potential increased market share, premiums, and/or consumer loyalty
- more resilient supply chain partners
- lower cost of capital
ROSI in Action: Gundersen Health System collaborated with NYU Stern CSB to calculate energy retrofits at an existing facility created $1 per sqft in annual benefits, while net zero building design for a new facility created a potential for $2 per sqft in annual benefits.
Circularity drives:
- operational efficiency (reduced input and waste disposal costs)
- new product sales, increased market share, premiums, loyalty
- reduced customer acquisition costs (lower entry point)
- reduced supply chain risk through closing the loop
- ability to make sustainability claims
- earned media benefits
ROSI in Action: an automotive company worked with NYU Stern CSB to determine that recovery and recycling of materials from end of life vehicles could create $100 million in total EBIT savings annually from reduced virgin materials, process savings, and lower disposal costs.
Sustainable sourcing commitments drive:
- increased market share, premiums, loyalty
- reduced reputational, operational, market, regulatory risk
- more resilient, loyal and high quality suppliers
- ability to make sourcing claims
- community support and license to operate benefits
- reduced cost of capital
ROSI in Action: Natra assessed the investment in full traceability for their cocoa products, which led to a shift from a commodity to a specialty item and estimating €2.4M present value over 1-4 years.
Employee satisfaction, safety, and well-being drives:
- productivity
- retention/lower recruitment costs
- reduced risks fo employee lawsuits
- reduced insurance costs (safety)
- good corporate reputation
- customer satisfaction
ROSI in Action: REI implemented a mission-aligned employee sustainability program, leading to reduced turnover and hiring costs and increased productivity among its highest performers totaling a net benefit of $24M, approximately 5% of their payroll expenses.
ROSI™ Corporate Sustainability Value Creation Assessment Tool
Take the first step! This tool enables corporations to assess and prioritize where the greatest potential financial value may lie in a given set of sustainability strategies and it provides suggested sustainability and ROSI KPIs for tracking value creation. Instructions for the tool here.
PEER (Price/Earnings Effect of Emissions Reduction) Tool
The PEER Tool, co-developed with Valutus, helps companies estimate how much their carbon emissions might strengthen or weaken price/earning multiples. Give it a try here!
ROSI™ Research Database
ROSI™ Industry Frameworks
Healthcare Delivery Systems Decarbonization Framework
Leveraging the Return on Sustainability Investment (ROSI™) methodology developed by NYU Stern CSB, the Healthcare Delivery Systems Decarbonization Framework identifies 8 decarbonization strategies that healthcare delivery systems understand which decarbonization options fit with their budget and decarbonization journey and how to calculate the value associated with each practice and make the internal business case for decarbonization to secure resources.
Food & Agriculture Sustainable Strategies Framework
The Food and Agriculture Sustainable Strategies Framework was designed applying the ROSI methodology in three HSBC-funded projects with Anheuser-Busch, Hero Group, and Ingredion as well as various independently-funded corporate engagements. The framework identifies 12 strategies across the value chain, as well as practices and monetization models to address critical environmental and social challenges, build more resilient organizations, and drive financial value.
Apparel Industry Sustainable Strategies Framework
With support from HSBC Bank USA, NYU Stern Center for Sustainable Business partnered with a set of apparel companies on the ROSI methodology to estimate the value of tangible and intangible benefits that apparel companies can accrue by making strategic investments in more sustainable business practices. We engaged companies including EILEEN FISHER, Reformation, and REI in the project, and conducted both primary and secondary research leveraging industry experts, company contacts, and academic literature to inform our framework.
Resources for Understanding and Implementing ROSI
CSB offers extensive resources on ROSI for current and future business leaders to better understand how sustainability drives financial performance, including:
- An in-depth step-by-step overview of the ROSI process
- Original research publications in top tier academic and corporate journals
- Case studies on implementing ROSI in industries such as automotive, utilities, and agriculture
- Excel tools for testing ROSI focused on risk, talent, and operational efficiency
Collaborate with CSB on a ROSI Research Project
CSB partners with companies to deploy ROSI and unlock financial value within organizations. During the ROSI collaboration process, we will:
- Conduct research and interviews to determine benefits and construct monetization frameworks
- Analyze company data and perform monetization analyses and investigations
- Deliver key project findings that can be leveraged in core business strategy moving forward
- Educate and train senior leadership on applying ROSI internally throughout the firm
Reports and Papers
How to Talk to Your CFO About Sustainability
Most companies have committed to sustainability efforts—and yet many CFOs still see those efforts as a cost rather than a source of value. That makes it hard to unlock the internal financing needed to scale them up. This article demonstrates how the Return on Sustainability Investment (ROSI) methodology can help CFOs measure the financial returns on their sustainability activities.
Unleashing Sustainable Value in Food & Agriculture
A research collaboration between CSB and Deloitte, “Unleashing Sustainable Value in Food and Agriculture” provides deep dives into five segments of the value chain: processors, manufacturers, food services, restaurants, and retailers, with research and survey data on sustainability strategies that generate financial benefits in the food and agriculture industry.
Finding the Return on Sustainability Investment
Published in the Journal of Financial Transformation, managing for the material environmental and social issues affecting business today requires new strategies, practices, and tools. Our research explores how to best understand and track the financial return on sustainability investments, to assist companies with their decision making, and improve their bottom-line as well as societal impact.
Building the Financial Case for ROSI™
At the 2024 Practice Forum, Founding Director Tensie Whelan presents the latest cases studies of companies using ROSI™ to identify, track, and monetize sustainability returns driven by innovation, operational efficiency, employee engagement, brand enhancement, and risk mitigation.
PARTNERING WITH BUSINESS LEADERS TO DRIVE CHANGE
