article thumbnail

How to Quantify Sustainability’s Impact on Your Bottom Line

Harvard Business Review

Our research has found that embedded sustainability drives financial performance through mediating factors such as innovation, operational efficiency, risk reduction, employee recruitment, engagement and retention, customer and supplier loyalty, competitive advantage, reduced cost of capital, and improved marketing and sales.

article thumbnail

Should Companies Retain "Strategic" Cash?

Harvard Business Review

Strategic cash usually is invested in high quality short-term securities; this ensures safety and liquidity, but produces a meager return on investment—especially in a low interest rate environment—and does not achieve the company's cost of capital. Earn a Low Return on Investment.

Company 13
Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

We Can’t Study Short-Termism Without the Right Metrics

Harvard Business Review

Repaying such profits to shareholders through share repurchases is better than misinvesting that cash to diversify into unrelated businesses in which management has no expertise or overinvesting in projects that may not return cost of capital. As I said earlier, measuring a company’s short-term orientation is incredibly tricky.

EPS 9
article thumbnail

The Case for Investing More in People

Harvard Business Review

In The Good Jobs Strategy , Zeynep Ton, a professor at the MIT Sloan School of Management, demonstrates how the best retail companies align their customer value proposition with their operations strategy and their approach to human capital. Small and large companies alike are experimenting with these concepts.

article thumbnail

Why the 21st Century Will Belong to Family Businesses

Harvard Business Review

The qualities often associated with family businesses that were a handicap in the previous century are turning out to be powerful sources of advantage, giving them the potential to be more adaptive to the increasingly intense competition that all businesses are facing. In the scale economy, capital was the lifeblood of success.

article thumbnail

The Comprehensive Business Case for Sustainability

Harvard Business Review

As the 24 th biggest industrial consumer of water, Coca Cola has now invested $2 billion to reduce water use and improve water quality in the communities in which it operates. SabMiller has also invested heavily in water conservation, including $6 million to improve equipment at a facility in Tanzania affected by deteriorating water quality.

article thumbnail

Finally, Proof That Managing for the Long Term Pays Off

Harvard Business Review

Earnings quality: Accruals as a share of revenue. The capital charge equals the amount of invested capital times the opportunity cost of capital — that is, the return that shareholders expect to earn from investing in companies with similar risk. In this case its capital charge is $800 times 8%, or $64.