Turning sustainability into financial value: lessons from the evidence

Companies regularly complain that sustainability has commercial value, but their ability to translate that value into financial outcomes remains highly challenging.

KPMG surveyed 2,024 senior executives in 19 countries between November 2025 and May 2026. Seventy-two per cent said they had a detailed understanding of their sustainability strategy and its performance. Only nineteen per cent applied robust quantification to the financial impact. Eighty per cent could not measure the effect on profit, cash flow or valuation at all.

How can this be? Companies have sophisticated financial methodologies to prove ROI on everything. It doesn’t make sense that sustainability is the exception.

 

Mike Kelly, a Chartered Director had the same question. He conducted primary research to explore whether there are structural reasons that impede the ability of companies to prove financial value from sustainability investments. The results of his research shine a new light on the deeper reasons that may lie behind the issue.

 

Kelly is the Founder of Nemetan, a specialist in helping companies understand sustainability opportunity discovery. His firm maintains an “evidence base” library of more than 2,000 verified sustainability projects that delivered a real, measured outcome. By interrogating this library Kelly was able to discover why many companies actually can prove ROI on their sustainability investments, and what others can learn from those methods.

 

What the research shows

 

The research discovered that whether a project ends up with a ROI figure depends on the formality and structure of the process used in the early stages of the initiative’s development, especially how targets were built and recorded. For example, energy projects carry a financial baseline and target from the very beginning of a sustainability initiative 83% of the time. Biodiversity projects only 53% of the time. Energy arrives with a meter and a monthly bill, so the saving automatically shows up as a structured ROI number without anyone having to build a case for it. Habitat work starts with nothing like that, and a benefit nobody was counting before, that does not readily fit in the accounting system rarely gets published with a ROI figure.

 

Examples of companies being able to fully prove ROI on sustainability investment are everywhere. Ecolab built USD 7.2 billion of 2023 revenue on helping other companies use less water. Shahi Exports gave reading glasses to sewing machine operators over 35 and lifted productivity 6%, returning about three times the cost in three months. South Colonie Central School District in New York spent $7,800 replacing oversized water meters and saved $35,000 a year. The difference is in the process they used to build the business case for the investment in the first place.

 

The majority of business models from the evidence library fall into three distinct categories:

 

The best returns in the library came from removing something. A chemical, a machine, an hour of idle running. Removal costs almost nothing and the saving starts immediately. Two Massachusetts metal finishing shops did exactly that. Neither of them has twenty staff or a sustainability department. New Method Plating saved about $57,000 a year by dropping trichloroethylene, and CD Aero saved $46,000 a year after retiring a degreaser.

 

Not making the waste means not buying the input, and the input had a price on an invoice. Recycling and recovery sit further down the chain, where the value is spread thin and often ends up with somebody else.

 

How you start matters as much as where you finish

 

The usual reading is that valuation technique needs to catch up. The sector split says otherwise. The industries using advanced valuation methods are banking and capital markets at 33% and energy and natural resources at 31%. Even at the top of that range two-thirds cannot do it. The companies with the deepest quantitative benches would have solved a modelling problem first. So sophisticated financial modelling is not the answer.

 

Whether a project reported a financial return came down mostly to the formal inputs: what the approval form and final report templates asked for. Where the forms asked for cost, investment, a dated twelve-month measurement period and a verification method, a money figure was published almost every time. On forms that asked for none of those, fewer than one project in ten had one. One programme asked for savings without saying where the figure should come from, and got physical quantities multiplied by assumed rates. The box was filled in and nobody could tell what the project returned.

 

“Discovery-Driven Planning” and “Precedent-Grounding” may be the answer

 

Part of the challenge with proving ROI on sustainability initiatives seems to be that unless they are risk-aligned they are not treated systematically. Risk analysis has a process, but opportunity discovery tends to be left to more ad-hoc methods such as brainstorming. This can lead to less financial discipline in the early stages of the project when baselines and targets are being established. This of course has knock on effects for the next time a Board is asked to approve a sustainability investment. The business case for new investment is weak because the ROI on previous investments remains unproven. Most sustainability business cases are built on assumptions and presented as forecasts. So, what are sustainability professionals to do?

 

Rita McGrath and Ian MacMillan wrote discovery-driven planning for this type of problem in the Harvard Business Review all the way back in 1995. It starts with a reverse income statement, where you decide the return the business needs and work back to what would have to be true to produce it, instead of taking a supplier's number and testing none of it. You then write the assumptions down and set checkpoints where the next tranche of money depends on the last claim holding up, so the spending happens in stages while the unknowns get smaller.

Grounding comes before any of that and it is a vital tool. Before anyone generates an idea or writes an assumption down, each of the company's priority material topics is “grounded” by matching it to named precedents that have already done something similar, with a record of what each one achieved, in numbers, and exactly what it depended on.

McGrath and MacMillan made benchmarking against the market and competitors the second of their five disciplines, straight after the reverse income statement. For a new product line those benchmarks are usually easy to find in sector margins and sales cycles. A sustainability project rarely has anything comparable to hand. Very few companies publish what they got back from cutting a solvent out of a process or reusing their wastewater, so teams fall back on a supplier's figures or their own optimism, and the assumptions get tested against nothing.

Grounding supplies that missing benchmark. When the reverse income statement sets a target return, the precedents show what paybacks similar moves have already reached, so a target well beyond anything on record gets questioned before any money is committed. Each precedent comes with the conditions it depended on, such as a plant running three shifts or a customer willing to pay more for recycled content, and those go straight onto the assumptions list to be checked against the company's own operations. Where a precedent published a return, it shows what had to be measured to get that figure, which tells you what each checkpoint should ask for.