Investors are warned that their investee companies' value is at risk if sustainability perceptions of stakeholders are not aligned with their sustainability performance.
First launched at the World Economic Forum in Davos earlier this year, the so-called Sustainability Perceptions Index showed that for many of the world’s most valuable businesses, there can be billions of dollars of financial value to be gained from enhanced ESG action and associated communication.
Utilising data from CSRHub, the firm Brand Finance recalculated the valuations of a number of brands by considering their ESG performance.
The newly derived values, in conjunction with the Sustainability Perceptions Scores (SPS), disclosed in the latest Sustainability Gap Index report, look at whether the public perceptions align with the actual performance of a brand.
To illustrate its case to investors, the report singled out a number of well-known brands, most prominently Tesla.
Tesla, Microsoft and Chanel
Tesla received the highest proportion of value underpinned by sustainability perceptions of any brand (26.9%), resulting in a Sustainability Perceptions Value of $17.8 billion.
However, the strength of this perception creates its own risk, because whilst Tesla performs well on environmental components of sustainability, it is weaker on governance and measures of social sustainability.
Tesla’s weaker CSRHub scores therefore create a value at risk of up to $4.1 billion, more than any other brand mentioned in the report.
Conversely, Microsoft has the highest positive gap value of any brand according to Brand Finance’s research, $1.5 billion.
This reveals that Microsoft’s sustainability performance exceeds its sustainability perception; meaning there is an opportunity for Microsoft to generate up to $1.5 billion through enhanced communication of its sustainability initiatives and services.
Finally, luxury fashion house Chanel is an example of a brand that has both a relatively high Sustainability Perceptions Score (4.88/10) and a high CSRHub score.
