'Businesses need to create long-term value to succeed'

Financial results of the companies are important but they must focus on creating "long-term value" taking into account environmental and social issues to ensure success, a top former United Nations official said Tuesday.

"I believe there is no solution to our sustainability challenges without a central role for business. However the businesses that succeed will be those that innovate, invest and create long-term value," said Yvo de Boer, former executive secretary of the United Nations Framework Convention on Climate Change.

"This notion of value is crucial. The ability of a company to create financial value is important. But what about the value that a company creates for people and the planet through its operations, and the goods and services it delivers," he said.

"We need to explore a much broader and longer term sense of what company value actually means and how the system can be evolved to recognize this," said Boer, who is currently KPMG global chairman for climate change and sustainability service.

Boer was addressing the third edition of "India Sustainability Conclave" organised here by the Federation of Indian Chambers of Commerce and Industry (FICCI).

Boer emphasised that policy makers need to deliver the right policy framework for action and countries should formulate their own climate and sustainability targets through a process of debate and public scrutiny and business leaders need to do a better job of communicating to investors and explain them why sustainable businesses are a better long-term investment bet.

"By monetising the impact of the company on society and the environment and setting this off against its financial results, we can reveal key areas of business risk and the potential impact on future profitability," he said.

"We are seeing a growing business understanding of Future Value that is broader than the share price and quarterly financial performance and there is still work to be done to develop the tools and to make them standard practice," he added.