A high level literature review on how businesses can value sustainability investments examined the trends leading to increased importance of sustainability, the benefits of sustainability investments and the barriers to pursuing such investments.  The prominence of sustainability was found to be driven by society demanding good corporate citizenship from businesses, sustainability increasingly being linked to good business performance and the increase in sustainability reporting.  A number of financial and non-financial benefits were found for companies that make sustainability investments, including financial performance, access to capital, efficiency improvements, risk management, reputation management, employee loyalty and social benefits.  The barriers to the full implementation of sustainability investments were found to be lack of understanding of the link between sustainability and business performance, lack of information or reporting infrastructure and competitive/confidentiality issues.  The article ends by introducing the services of Next Renewable Generation who have built up a set of competencies and experiences to assist customers in developing and implementing sustainable energy strategies, understanding their energy footprints, developing energy efficiency improvement projects and to generate their own renewable energy.


Sustainability has increased in importance in recent years.  Despite this, some companies cannot effectively link sustainability to business results.  As a result, some companies are still lagging behind in deriving value from sustainability.  This paper explains the drivers responsible for the rise on the importance of sustainability, the benefits of sustainability and the barriers holding companies back from fully pursuing a sustainability agenda.  Finally, we introduce our services as Next Renewable Generation and how we can assist companies to bring to book an important aspect of sustainability, namely energy management.

 The drivers responsible for the increase in importance of sustainability

Three main drivers have been identified as being responsible for the rise in prominence of sustainability, namely, stakeholders demanding corporate citizenship from companies, sustainability increasingly being linked to positive business performance, and the growth of sustainability reporting.  We have analysed each of these drivers and discovered various interlinked factors behind each.

Stakeholders’ (customers, consumers, shareholders/investors, employees, governments, society) demand for corporate citizenship.

    • All 193 members of the United Nations adopted the 17 UN Sustainable Development Goals in September 2015, which include goal 12 “ensure sustainable consumption and production patterns”, goal 13 “take urgent action to combat climate change and its impacts” and goal 7 “ensure access to affordable, reliable, sustainable, and modern energy for all”.
    • Social license to operate, which applies particularly to mining companies, involves the acquisition and maintenance of the consent from local stakeholders for a business to operate in a particular location. It includes the environmental and resource stewardship.
    • Employees are increasingly expecting their companies to be good corporate citizens. Tshikululu Social Investments reported that about 75% of surveyed businesses leaders in South Africa felt at least a “moderate” amount of pressure from employees to engage in corporate social responsibility activities (Tracey W. Henry and Michael C. Rifer, 2013).
    • Customers – According to EY, consumers of products and services are increasingly demanding responsible and ethical organisations and make their buying decisions accordingly (EY and Global Reporting Initiative, 2014).
    • Governments – The Paris Agreement was signed in December 2015 by 193 member states of the United Nations, providing for each country to target a reduction in the greenhouse gas emissions.
    • Closer to home here in South Africa, the government released the Carbon Tax Bill in 2015, and has been conducting a public participation process to collate the views of stakeholders before the Act comes into effect. The latest estimate for the implementation of the Carbon Tax is 1 January 2018.  The tax proposes the imposition of a tax on the carbon emissions associated with the production and related activities of businesses.
    • South Africa has further institutionalised social spending through the Department of Trade and Industry’s Broad-Based Black Economic Empowerment (BBBEE) scorecards. The scorecards include the monitoring and reporting back on skills development and enterprise development in the areas that companies are operating in.
    • In South Africa, it was found that there is a slight nuance on the impact of regulation on the motivation for companies to perform corporate social responsibility activities. More than 55% of non-consumer-facing businesses said that regulation was driving their corporate social responsibility activities to a “very large amount”, and less than 10% consumer-facing businesses said the same (Tracey W. Henry and Michael C. Rifer, 2013).
    • Finally, the above study by Tshikululu Social Investments found 63% of companies surveyed in South Africa engage in corporate social responsibility to a “very large amount” due to their values and culture (Tracey W. Henry and Michael C. Rifer, 2013).

Sustainability increasingly being linked to business performance.

    • Risk reduction and access to capital. An increasing number of shareholders perceive firms with environmental risk management programme as being less risky and consequently reduce their risk premium (Capps, Tyler et al., 2016).  The cost of capital of firms with environmental Risk Management programmes is therefore lower than those without such programmes.  The information contained in the sustainability reports is increasingly being used as a proxy for management quality, to capture the parts of firm’s well-being that are not captured by the financial metrics in annual reports.
    • The publication of sustainability targets can lead to improved performance due to the observation of public accountability.

The above are contributing to sustainability issues enjoying the attention of the Top management of progressive companies, instead of being the exclusive domain of the sustainability function of the organisation.

Sustainability Reporting becoming mainstream.

EY sees sustainability reporting as reaching a tipping point where it moves beyond the early adopters and innovators into the mainstream (EY and Global Reporting Initiative, 2014).  Further developments in sustainability reporting are the reporting on upstream (supply chain) and downstream activities, the demand for accuracy of the non-financial information, just as much as the financial information.  Today more than 95% of the 250 largest corporations in the world perform sustainability reporting.

The Global Reporting Initiative (GRI) was established in 1997 and is an organisation that has established a framework for the reliable and consistent reporting of sustainability information.  The latest GRI standards were released in October 2016 and will be required to be implemented by July 2018.  There are currently more than 7,500 companies that reference the GRI framework for sustainability reporting.

The King III Code on Corporate Governance for South Africa was released in 2009.  South Africa was one of the first countries to require an integrated report, in line with the King III code, as a listing requirement on the Johannesburg Stock Exchange.

 Benefits of sustainability

 Financial performance. A 2016 study by EY and Boston College established that companies with corporate sustainability programmes had about a 4.4% increase in share price per year, and such companies had stronger cashflows, innovation, reduction in waste and insight of where growth opportunities lay (EY and Boston College Center for Corporate Citizenship, 2016).

Access to capital. The global sustainable investment market has grown strongly, being about $13.3trillion in 2013 and growing to $21.4 trillion in 2014 (Capps, Tyler et al., 2016).  As discussed in section 2 (b) above, companies with sustainability initiatives and reports are viewed favourably as investment destinations compared to others.

Innovation, waste reduction and efficiency. SAICA introduced the concept of Integrated Thinking, rising out of the need for integrated reporting, which has resulted in improved efficiency in the areas of skills, supply chain, energy and information management (The South African Institute of Chartered Accountants, 2015).

Risk management. The process of collecting and monitoring sustainability data can lead to insights into a company’s value chain that companies can use to  improve efficiencies, access new markets and to reduce resource and regulatory risks (EY and Global Reporting Initiative, 2014).  SAICA elaborates on Integrated Thinking, which aims to broaden the lens through which an organisation looks at its activities, and include non-financial metrics that may affect the performance of the organisation, thereby improving risk management (The South African Institute of Chartered Accountants, 2015).

Reputation and consumer trust. Expanding transparency and the reporting of good deeds are the some of the ways of increasing public trust in businesses and to improve firms’ reputations (EY and Boston College Center for Corporate Citizenship, 2016).

Employee loyalty and recruitment. A study of USA graduates revealed that 75% of USA workforce entrants saw social responsibility and environmental commitment as a criterion for choosing employers.  A study at Stanford University found that MBA graduates would sacrifice about $13,700 in salary to work for a socially responsible company (Network for Business Sustainability, 2009).

Social benefits. While it may be difficult to ascribe a direct financial benefit to social responsibility investments, there are benefits, specifically in creating a vibrant marketplace, bolstering the company’s presence and profile in the marketplace, creating the future talent pool that will be accessible to the company and to the sector as a whole (Tracey W. Henry and Michael C. Rifer, 2013).

Barriers to the implementation of sustainability

The following have been identified as barriers to the adoption of sustainability in businesses:

  1. Lack of understanding the link between sustainability and business performance. Today most valuation models have a bias towards short term financial returns (EY and Global Reporting Initiative, 2014).  According to Capps, et al (2016) 85% of a firm’s market value is not shown in the balance sheet.  According to the Sustainability Business Network (SBN), sustainability measures suffer from a perceived lack of measurability (Network for Business Sustainability, 2010).  However, the SBN encourages organisations to map sources of value from social and environmental benefits, to financial benefits and finally to end-state metrics such as share price.
  2. The unavailability of concrete and reliable data or the lack of resources to collect such data to support sustainability reporting. This has been identified as one of the barriers to reporting.  For large organisations with substantial supply chain activities data gathering data may include liaising with suppliers as well as subsidiaries, some of which might not have the same infrastructure for gathering data and as such those parent companies may have to step in to assist with the reporting.  (EY and Boston College Center for Corporate Citizenship, 2016)
  3. Competitive/confidentiality reasons. Some companies may feel that putting sustainability performance figures in the public domain, especially without their competitors also doing so, exposes them to competition from their peers, and also such disclosures could have them penalised in the eyes of stakeholders as some stakeholders do not fully understanding the value of sustainability (Capps, Tyler et al., 2016).

Our services

Next Renewable Generation is an Independent Power Producer (IPP) focused on the Commercial and Industrial sector, an energy project developer and energy services company.  We have been operating for more than 8 years in the South African Renewable Energy space under our current name.  Our previous corporate names were NRG Renew Africa and Kayema Energy Solutions.

We are well equipped to assist companies and organisations to develop and execute their energy strategy such that it integrates into the overall sustainability and company strategies and initiatives.  This while delivering both financial and non-financial benefits for the customer.

Our competencies/achievements include: –

  • More than 50 energy audits completed
  • Energy efficiency project of the year award (2011)
  • First truly private PPA signed in South Africa
  • Professional, well rounded team, with business acumen, Professional Engineers and Certified Measurement and Verification Measurement Professionals


  1. Capps, Tyler, Habbestad, Stig, Karde, Anders, Kerrest, Juliana, 2016. Engaging Companies in Sustainable Reporting.
  2. EY and Boston College Center for Corporate Citizenship, 2016. Value of sustainability reporting.
  3. EY and Global Reporting Initiative, 2014. Sustainability reporting – the time is now.
  4. Network for Business Sustainability, 2010. valuing sustainability – primer.
  5. Network for Business Sustainability, 2009. The New Normal – Sustainable Practices Your Future Employees Will Demand.
  6. The South African Institute of Chartered Accountants, 2015. INTEGRATED THINKING – An exploratory survey.