Sustainable Value in the Mineral Industries

In this article we present Sustainable Value, a valuation methodology to assess sustainable value creation of companies. Sustainable Development posits that decisions must not only take into account economic capital but also natural and social capital. Sustainable Value, the methodology presented in this paper, borrows the idea from financial economics that the return on capital has to cover the cost of the capital. Capital costs are determined as opportunity costs, i.e. the forgone return that would have been created by an alternative investment. By expanding the well established logic of the valuation of economic capital in financial markets to also cover natural and social capital we provide a methodology that allows an assessment of the most efficient allocation of economic, natural, and social capital for sustainable value creation in companies. We demonstrate the practicability of the methodology by the valuation of the sustainability performance of British Petroleum (BP).