Embedding environment and sustainability into corporate financial decision‐making

Abstract The business case for sustainability can be built upon: (i) cost reduction from efficient resource utilisation, (ii) revenue enhancement, (iii) risk management, and (iv) intangible assets. However, executives often adopt a short‐term perspective owing to executive compensation, investor pressure, and decision‐making criteria tied to fixed financial reporting systems. We propose an integrated conceptual framework, which highlights how firms could embed environment and sustainability into their long‐term financial decision‐making framework. To give this goal structure, the firm could adopt: (i) longer‐term executive compensation plans, (ii) longer‐term financial reporting, and (iii) flexible financial decision‐making models which embed intangibles.