An ROI of public goods: Connecting business performance and its usage of the commons

Economists and business analysts often deplore that there are not enough joint efforts to measure both economic and sustainability performance on the level of businesses and the overall economy.  One way out of the disconnectedness might be through expanding the concept of ‘‘economic value added’’ (EVA). EVA, a well-established measure of overall corporate performance is based on the idea that shareholders gain when the return from the capital employed in a corporation is greater than the cost of that capital. From there it is a short way to proclaiming that all stakeholders gain when the value created by a corporation is greater than the cost of the capital employed in the corporation and the capital employed in whichever commonly available resources outside the corporation are employed by its business. This would be equivalent to internalizing costs that have hitherto been viewed as ‘‘external’’, thus shifting the costs from society to the private sector, i.e. to those who are consuming public goods. It might also lead to determining a composite index that reflects how much exertion is required from businesses to maintain and expand public goods.

In addition the index would suggest that creating private value might consequently have to encompass creating public value. The expansion of EVA that is envisaged here would be to enlarge the cost of capital by the costs that are caused by that part of ‘‘public goods’’ which is available to a corporation.  There is still a significant theoretical obstacle: valuating public goods is a research field that has not yet reached the status of generally accepted applicability, at least with regard to aggregative monetary value. But the index that is envisaged here would also foster what has been called the ‘‘micro-macro link’. The paper covers the theoretical as well as the practical questions related to the topic. It shows that pursuing the idea of a ‘‘composite metric’’ might be a worthy undertaking in a time when business is seen more than ever as the agent of a wide group of stakeholders. If the journey goes towards integrating social, environmental, governance and other relevant non-financial ‘‘business-impacting’’ factors into a comprehensive report, the ‘‘cost of public goods capital’’ approach would become one milestone on this road.