Rethinking Finance


There is a lot of confusion and debate on whether it even makes sense to put numbers and figures into sustainability. Many argue that sustainability should be a way of life, a norm. Is it okay to keep doing air travel and then simply plant a tree to offset this? Is it okay to label coffee as fair trade, and put figures onto how much meat consumption is acceptable? Many say that if you give standards and boxes to tick, people will find ways to circumvent and cheat the system. It is the same for companies. When you suddenly begin ranking firms based on sustainability criteria, then they will do the minimum required to comply and look good, perhaps neglecting the bigger picture of whether their practices really do have a positive impact, or at least reduce the negatives.

Even more difficult is the democratization and politization of rankings and assigning value. It is arguable that energy efficiency is high on the agenda of many nations whose gender balance, when it comes to people in leadership and pay scale, remain questionable. Many companies can be high on internal best practices and employee retention such as Apple, and yet still be criticized for demeaning labor standards in their outsourced operations or parts of their supply chain. And because of this, many companies are hesitant to join the bandwagon of reporting, case in point: Scandinavia. They have some of the most gender-balanced, social-protectionist, environmentally conscious operations in the world, and yet barely report on it. They do not feel the need to do so, with some of them even saying that the lengthy process of reporting takes away resources, time, and effort from simply doing the thing instead.

From a theoretical perspective, we must first go back to the definition of valuation, what matters to people, and what it means.

Valuation in the sociology of finance literatures is the process of bringing order to mere differences. A valuation process comprises two dimensions: first, determining that something is of worth and then, second, assessing that worth. From a sustainability standpoint it is to determine what should be measured, and then measuring it. The sociology of worth argues that individuals and organizations have “orders of worth,” a set of common values that they pursue and that evaluation criteria are attached to these values. For instance, market evaluation criteria, such as financial performance measures, are tied to the worth that individuals and/or organizations attach to the market, whereas family evaluation criteria such as standards of parental love are tied to the worth that individuals or society attach to the concept of family.

However, recent research in the sociology of valuation shows that the opposite relationship is also possible: the choice of evaluation tools might instead determine what is then of worth or valuable. Think of IT systems, web-based rating systems, appraisal systems: such evaluation tools can contribute to the reinforcement of particular value systems within an industry and affirm certain values over others. To wit, calculative devices, categorization, classification, standardization: all these can institutionalize sustainability and make it happen even if this was not de facto part of what was deemed of value. This happens in an accounting framework like what the UN PRI (Principles for Responsible Investment) is doing and the GRI (Global Reporting Initiative). In having to report about sustainability, companies are obliged to create sustainable practices to report on.

And so, what can be measured, gets done. For instance, one can argue that the fact that carbon emissions can now be measured contributes to making the environment (financially) valuable to organizations. In this way, sustainability accounting has been identified as a key lever for pushing practices towards sustainability and reinforcing its value. Finally, this process is iterative and requires the involvement of multiple actors and discussions often involving conflicts and power struggle. Such expression is key for the transformation of practices towards sustainable development.

And indeed, attention over the past decade has shifted from the dominance of quantitative economic value towards the commensuration of non-economic value. Unlike financial performance indicators, which over time have become more precise and standardized, to date there has been no convergence upon universally accepted environmental and social performance indicators, making such information questionable and difficult to measure, and unverifiable. Despite their limitations, these methodologies dominate since they are useful for assessing such a complex concept and they are effective in convincing actors to engage using their financial language. In fact, tools are performative; they shape practices independent of their validity, simply by their usage. Research shows that while established evaluation tools largely guide and frame action, reflexive agents actively take and transform the usage of existing tools to fit their own purposes, making the value of sustainability, not something to be proven but rather, something to be created.

Note: This article is based on a working paper entitled “Valuing Sustainability Without Financializing? The Case of the Reporting and Assessment Framework of the United Nations Principles for Responsible Investment (UN-PRI)” written by the author with Diane-Laure Arjalies of Ivey Business School, Western University (Canada) and Nicolas Mottis of the Ecole Polytechnique Paris. References are available upon request.


Daniela “Danie” Luz Laurel is a business journalist and anchor-producer of BusinessWorld Live on One News, formerly Bloomberg TV Philippines. Prior to this, she was a permanent professor of Finance at IÉSEG School of Management in Paris and maintains teaching affiliations at IÉSEG and the Ateneo School of Government. She has also worked as an investment banker in The Netherlands. Ms. Laurel holds a Ph.D. in Management Engineering with concentrations in Finance and Accounting from the Politecnico di Milano in Italy and an MBA from the Universidad Carlos III de Madrid.