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Value‐based environmental management. From environmental shareholder value to environmental option value

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  • Frank Figge

Abstract

Whether and how environmental management can create enterprise value is intensively debated. There are a number of concepts that aim to link environmental management and enterprise value. These concepts are usually based on net present value approaches such as Rappaport's (1986) shareholder value model. What is usually overlooked is that environmental management based on net present value concepts risks making companies (eco‐)efficient but vulnerable to environmental and social shocks. This article introduces the environmental option value concept as a compliment to concepts such as environmental shareholder value. As this article shows, creating environmental option value creates flexibility that allows companies to be shielded from the detrimental effects of possible future environmental and social shocks. In combination the two approaches can help environmental management to contribute to creating long‐term enterprise value. Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment.

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  • Frank Figge, 2005. "Value‐based environmental management. From environmental shareholder value to environmental option value," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 12(1), pages 19-30, March.
    • Handle: RePEc:wly:corsem:v:12:y:2005:i:1:p:19-30
    DOI: 10.1002/csr.74
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    3. Tobias Hahn & Frank Figge, 2011. "Beyond the Bounded Instrumentality in Current Corporate Sustainability Research: Toward an Inclusive Notion of Profitability," Journal of Business Ethics, Springer, vol. 104(3), pages 325-345, December.
    4. Elina Dace & Agnis Stibe & Lelde Timma, 2020. "A holistic approach to manage environmental quality by using the Kano model and social cognitive theory," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 430-443, March.
    5. Stefan Schaltegger & Jacob Hörisch, 2017. "In Search of the Dominant Rationale in Sustainability Management: Legitimacy- or Profit-Seeking?," Journal of Business Ethics, Springer, vol. 145(2), pages 259-276, October.
    6. Castilla Polo, Francisca & Gallardo Vázquez, Dolores, 2008. "Social information within the intellectual capital report," Journal of International Management, Elsevier, vol. 14(4), pages 353-363, December.
    7. Wagner, Marcus, 2010. "The role of corporate sustainability performance for economic performance: A firm-level analysis of moderation effects," Ecological Economics, Elsevier, vol. 69(7), pages 1553-1560, May.
    8. Figge, Frank & Hahn, Tobias, 2012. "Is green and profitable sustainable? Assessing the trade-off between economic and environmental aspects," International Journal of Production Economics, Elsevier, vol. 140(1), pages 92-102.
    9. Pall Rikhardsson & Claus Holm, 2008. "The effect of environmental information on investment allocation decisions – an experimental study," Business Strategy and the Environment, Wiley Blackwell, vol. 17(6), pages 382-397, September.
    10. Holm, Claus & Rikhardsson, Pall, 2006. "Experienced and Novice Investors: Does Environmental Information Influence on Investment Allocation Decisions?," Financial Reporting Research Group Working Papers R-2006-02, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    11. Lawrence Loh & Sharmine Tan, 2020. "Impact of Sustainability Reporting on Brand Value: An Examination of 100 Leading Brands in Singapore," Sustainability, MDPI, vol. 12(18), pages 1-17, September.
    12. Tze San Ong & Ah Suat Lee & Boon Heng Teh & Hussain Bakhsh Magsi, 2019. "Environmental Innovation, Environmental Performance and Financial Performance: Evidence from Malaysian Environmental Proactive Firms," Sustainability, MDPI, vol. 11(12), pages 1-18, June.
    13. Jason West, 2015. "Capital valuation and sustainability: a data programming approach," Review of Quantitative Finance and Accounting, Springer, vol. 45(3), pages 591-608, October.
    14. Nathalie Meißner & Ulrike Grote, 2017. "Motives, opportunities, and risks for private sector investment in protected areas with international importance: evidence from German companies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(1), pages 199-219, February.

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