The Integrated Value measurement provides a more comprehensive way of assessing corporate value in a world facing tremendous challenges. The new report takes this further by using the Integrated Value to calculate a Futureproofing Ratio, to indicate how prepared companies are for future developments. This ratio offers companies, investors and policymakers insights into companies’ long-term value.
The report yields several key findings, including:
- The aggregate Futureproofing Ratio of the DAX and AEX companies is 0.20, meaning 80% of the financial value of these companies comes at the expense of society.
- Thirty-one out of the 52 companies analysed have an Integrated Value that equals or exceeds their current financial value. This implies that a small number of companies with very large negative externalities dominate the weighted average, which results in a net societal loss.
- While companies generate a substantial net social value of € 5.9 trillion, this number is more than offset by a net negative environmental value of € 8.7 trillion. This shows that social good is not enough to outweigh environmental impact.
- Global progress on climate and biodiversity is halting, as evidenced by rising shadow prices for environmental factors, thereby reflecting higher estimated costs of environmental damage.
- Companies in the energy, materials and transport sectors have yet to respond sufficiently to worsening environmental conditions.
- Health care is the strongest sector with the highest Futureproofing Ratio, followed by the services sector. In fact, future earning capacity is increasingly found in services and health care. These sectors combine strong societal value creation with relatively limited ecological impact.
- The IT sector is essential for innovation and productivity, but its environmental footprint should not be overlooked.
Reshaping regulation, taxation and corporate responsibility
The report’s authors – Prof. Dirk Schoenmaker (RSM), Prof. Willem Schramade (Nyenrode), Asst. Prof. Moritz Wiedemann (RSM), and Wander Marijnissen (ftrprf) – wrote, “When assessing the value of organisations, stock markets tend to focus on the financial bottom line. The focus lies with the company’s ability to generate profit, revenue growth, balance sheet strength, cash flow, and debt levels. Current valuation methods fall short when taking a long-term perspective, as they overlook the social and environmental impact of companies.
“As societal and ecological challenges intensify, they will reshape regulation, taxation, and expectations around corporate responsibility. Both society and investors will increasingly factor these impacts into how companies are valued.”
How the EU should respond now
The report represents a new step toward an integrated European benchmark. In last year’s AEX Futureproof Index, the researchers focused on the Dutch market and discovered which companies do more damage than good to society (Tata Steel and Heineken, for example) and which are a net positive (the Dutch railway company NS and Philips).
By applying the methodology to the German market – the largest economy in Europe – more companies and sectors could be included in this year’s analysis.
Wander Marijnissen said, “The Integrated Value methodology is forward-looking rather than backward-looking. It captures a broader set of factors that drive long-term business success – not only financial performance but also social and environmental dimensions. In doing so, it makes often-hidden positive and negative externalities explicit.”
He continued, “The EU should use these insights to adjust its industrial policy now, while there is still time to build a more resilient and competitive economy.”