A methodology of sustainability accountability and management for industrial enterprises
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Corporate sustainability refers to business strategies that create long-term shareholder value while embracing opportunities and managing risks in order to add social and environmental values to external stakeholders as well. Although theoretical possibilities and generic business cases indicate that strategies improving environmental and social performance can increase shareholders' value as well, the absence of sustainability accounting methods hinders most companies' commitment to sustainability. To address this need, this research develops a methodology of performance evaluation to account the values and costs of corporate sustainability strategies in the framework of the "Triple Bottom Line". The methodology is comprised of three main elements: the TBL framework, the sustainability index system, and the sustainability valuation model. The systematic TBL framework is developed to categorize, track and measure the company's performance on sustainability. In this framework, an indicator hierarchy is established to characterize the attributes of the complex problem, which is further clarified in the sustainability index system based on six selection principles. Meantime, a sustainability valuation model is built up to embrace all the factors, where the relationships between different policy goals, the links between attributes and goals, and the interaction between different attributes are apparent. Utility of each index is estimated to represent decision makers' satisfaction on its current level, which is accomplished by applying proper formats of single-attribute utility functions. An additive utility function combines the component utility functions in correspondence with the decision makers' value structure and examines how social and environmental investments impact a company's bottom line. To illustrate the implementation of this valuation model, a business case is studied based on one of the leading companies in the issue of corporate sustainability. This methodology can help generate ideas combined with an evaluation of the stakeholder value impacts with which to compare alternatives, refine initiatives, and establish performance targets. Different to those qualitative measures in the literature, this is a quantitative method that can provide an explicit value for corporate sustainability. It will shed valuable light on the accountability of external values and costs that are not captured by traditional financial methods. Future research will need further data tracking about all indices and the determination of cost function for each index. With all these accomplished the knowledge of how to operate sustainably can be gained for strategic planning.