Deloitte says CSR and green can boost M&A value

Many discussions about the business value of corporate social responsibility and "going green" highlight benefits such as brand distinction, customer loyalty, and employee morale -- and, increasingly, potential cost savings. A new white paper from Deloitte adds deal value in mergers and acquisitions to the list.

According to the authors, "companies that have strong corporate responsibility and sustainability (CR&S) programs in place are likely to be rewarded for their efforts. Those that don’t have such programs can expect to face increasing regulatory and marketplace demands for change."

The trend is driven by increasingly tight environmental regulations as well as broader trends toward greater transparency and accountability around potential social and financial risk. Energy companies are obviously front and center here, but the trend affects many industries, according to Deloitte, including manufacturing, transportation, and retail.

As CR&S wields growing influence on the strategy and operations of companies, so will it become an increasingly important aspect of M&A. Acquiring companies will want to know whether they are taking on sustainability problems or opportunities. Divesting organizations will want to know whether their sustainability profile will contribute to a premium or discount price.

Looking ahead, the Deloitte authors provide several useful suggestions for executives looking to buy or sell:

• Know your own backyard: Understand how well your organization is addressing sustainability issues
• Begin to incorporate CR&S metrics, goals, and targets into the deal valuation process
• Consider the potential economic impact of changes on consumer preferences, legislative changes, significant variations in energy prices and other supplier prices
• Plan for evolving regulatory conditions
• Engage in a formal alternative future/risk assessment scenario planning exercise
• Consider the people aspects