Working Report, 2/2005 – Environmental Shareholder Value

Environmental Shareholder Value

2 Introduction to the report

The purpose of this report is to illustrate the correlation between, on the one hand, the company's financial success expressed as Shareholder Value, and on the other hand, the company's environmental impact and environmental work. Furthermore, the report sheds light on the interplay between the company's environmental conditions, Shareholder Value and good Corporate Governance, as defined by the Nørby Committee's report on Corporate Governance. At the same time, the purpose of the report is to create a framework for the sub-elements of environmental economics in the company, from financial operation to investments and strategy.

The three key concepts in the report

Environment - includes the company's use of resources and impact on nature.

Shareholder Value - is the value generated by the company for its investors/shareholders. This includes the developments in the company's market value (stock-exchange value) and dividends paid to shareholders.

Corporate Governance - lays down the framework for responsible corporate management.

Shareholder Value is used as the financial concept in this report because it takes a forward-looking view contrary to other traditional retrospective accounting concepts. The forward view harmonises with the company's environmental work where the effect is usually not seen until well beyond the accounting year.

Shareholder Value and the environment both represent business goals, and as the report illustrates there are numerous correlations between the two goals. These correlations are sometimes positive and sometimes negative - however the two concepts seldom stand alone.

At present, only few companies are equipped to measure and manage these correlations. The introduction of Corporate Governance principles aiming at both Shareholder Value and environmental objectives is the operational approach to setting the correlations in motion.