Many Firms Struggling to Measure Sustainability ROI, Reveals Report

Corporate America faces mounting pressure to validate the financial value of its sustainability initiatives amid intensifying environmental, social and governance (ESG) scrutiny.

With shareholder proposals from anti-ESG groups, state-level legislation targeting ESG practices, and growing stakeholder demands, the challenges are set to increase in 2025. Despite these pressures, many companies are struggling to measure and communicate the return on their sustainability investments effectively, according to a new report.

A new survey by The Conference Board, conducted in collaboration with Weil, Gotshal & Manges LLP, reveals that approximately 40% of executives report their company’s sustainability ROI assessment is either underperforming or uncertain.

SUSTAINABILITY MATTERS

Executives are far less confident in measuring the return on investment (ROI) of sustainability initiatives compared to traditional investments. The survey highlights that 41% of executives believe their company’s measurement systems for sustainability ROI are inadequate or uncertain, while only 17% express similar concerns about traditional financial ROI.

According to Anuj Saush, Leader of The Conference Board EU ESG Center, companies have well-established frameworks for evaluating financial returns, but these often fall short when applied to sustainability investments. Saush emphasises the need for greater collaboration between finance and sustainability teams to align sustainability ROI metrics with traditional financial goals.

STRONG BUSINESS CASE FOR SUSTAINABILITY

The importance of measuring sustainability ROI extends beyond financial metrics. Half of the surveyed executives believe that effectively measuring sustainability ROI can help address the backlash against ESG practices. Strengthening the sustainability narrative is also a key driver, with 76% of respondents indicating that measuring ROI bolsters their sustainability story. Furthermore, 69% highlight the importance of ROI in embedding sustainability into broader operational goals.

When seeking approval for sustainability initiatives, executives prioritize operational performance, with 72% citing it as a critical factor, followed by increased market share at 50% and business continuity and resilience at 44%. Nathalie Risse, co-author of the report, notes that while companies often focus on tangible outcomes such as operational efficiency and market share, they sometimes overlook intangibles like employee engagement and brand reputation. To fully capture the value of sustainability, organisations need to assess both tangible and intangible benefits.

SUSTAINABILITY ROI

The study reveals significant challenges in communicating sustainability ROI to stakeholders, with only 30% of executives believing their companies are effective in this area. Nearly half of respondents are unsure about their communication effectiveness, while 22% acknowledge shortcomings.

Securing internal alignment and financial support emerges as the top driver for communicating sustainability ROI, with 82% citing this as a critical reason. Building stakeholder trust and meeting investor expectations are also important, mentioned by 43% and 39% of respondents, respectively. Rebecca Grapsas, Partner at Weil, Gotshal & Manges LLP, stresses the importance of tailoring sustainability messaging to different audiences, ensuring transparency, and aligning communications with evolving business goals and regulatory expectations.

SUSTAINABILITY METRICS

The report findings highlight the urgent need for companies to enhance both the measurement and communication of sustainability ROI. By integrating sustainability metrics with traditional financial systems, addressing stakeholder concerns, and effectively communicating results, companies can navigate the complex ESG landscape while delivering tangible and intangible benefits.

As 2025 approaches, the ability to demonstrate and articulate the financial value of sustainability will likely be a defining factor in how US companies manage ESG challenges and opportunities, noted the findings.

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