Consulting firm Deloitte has come up with an AI-enabled framework tool that can communicate environmental and social sustainability projects in a language executives can better appreciate—finance.
The company released a new framework called Sustainability Fusion, a digital tool designed to help the C-suite measure how sustainability investments drive business outcomes.
With this, it’s challenging the notion that sustainability exists outside of business as an add-on that is just used to comply with environmental, social and governance (ESG) requirements.
On the contrary, Sustainability Fusion argues that sustainability is just like any investment, which can affect revenues and costs, and therefore, it can also be valuated like any other investment under the financial principles of returns and risks.
“The challenge is not that sustainability investments are fundamentally different from other business investments; they are not,” the company said in a research note.
“The issue is framing,” it said. “Because sustainability investments have historically been articulated in a language distinct from standard business investment logic, they have been harder to evaluate and prioritize by leaders who rely on financial value creation as their primary decision lens.”
This framework was informed by a working group of more than 25 senior sustainability leaders from corporations, NGOs and independent advisers. It is designed particularly for chief sustainability officers (CSOs) and chief financial officers (CFOs). It comes with an AI-enabled web-based evaluator for organizations to apply the framework to any sustainability investment.
With this, organizations can evaluate sustainability investments using standard financial principles, including cost, revenue and risk, to better assess potential returns, Deloitte said.
The framework also allows them to translate sustainability assumptions into cash-flow impacts to improve decision clarity and credibility, harnessing tax-adjusted cash flow (TACF) as the core metric for expressing incremental value.
As a result, it creates a repeatable, enterprise-wide approach for prioritizing and comparing investments, while bridging sustainability, finance and executive leadership.
“Sustainability leaders don’t need a new set of metrics; they need a better way to connect their work to what drives business performance,” said Laura Bryce, Fusion co-lead at Deloitte, in a statement.
“When organizations can clearly articulate the financial value of sustainability investments, they can make decisions with greater confidence, move more quickly on priorities, and build competitive advantage in an increasingly dynamic business environment,” she said.
A sample case study illustrated how this framework can function: a global food manufacturer’s executive team is reviewing its exposure to tightening deforestation regulations in the European Union. They are mulling on a proposed sustainability investment to enhance supply chain traceability to support deforestation and conversion-free commitments.
“The question was not whether the investment was ‘good for the planet.’ The question was whether the investment would ‘outweigh the cost of inaction.’ To answer this question, the team applied Fusion,” Deloitte said.
Fusion translated the project into a way to protect revenue streams, which would allow company to continue participating in key markets. If the manufacturer invests in traceability to verify its compliance to its deforestation and conversion-free commitments, then it can maintain access to regulated markets and reduce the likelihood of penalties or disruptions.
“By the time the analysis was complete, the conclusion felt less like a calculation and more like a recognition: This investment was not about generating upside. It was primarily about revenue protection and was secondarily about cost avoidance,” Deloitte said.
“The result was a decision that the organization could confidently stand behind,” it added.
