New research reveals how a growing focus on short-term financial performance is delaying investment in sustainability and transition planning, potentially exposing organisations to greater long-term costs and operational risks
A new analysis of 52 leading AEX and DAX-listed companies by Erasmus University Rotterdam, Nyenrode Business University, and ftrprf highlights the growing gap between financial performance and wider social and environmental value creation. The DAX-AEX Futureproof Index Report suggests progress on reducing environmental impact has slowed, while the combined social and ecological costs associated with the companies analysed equate to approximately 80% of their financial value. The findings underline the increasing financial and operational risks facing organisations that fail to address climate and biodiversity-related impacts as expectations from regulators, investors and wider society continue to evolve.
As climate and biodiversity-related risks continue to shape the business landscape, proactive action and transparent reporting will be critical to building resilience through the transition. The researchers plan to build on the enhanced reporting standards introduced through the EU’s Corporate Sustainability Reporting Directive (CSRD), broaden the range of issues assessed, and further develop Integrated Value measurement. The expansion to include DAX-listed companies marks the first step toward establishing a scalable European benchmark.
Short-term uncertainty can create long-term business risk
Across the 52 companies analysed, the research points to a growing focus on short-term financial performance, often at the expense of longer-term resilience and sustainability priorities. In an environment shaped by geopolitical tension and economic uncertainty, businesses are facing increasing pressure to deliver immediate returns to shareholders. However, delaying investment in sustainability and transition planning may expose organisations to greater long-term costs and operational risks.
The analysis also highlights a significant rise in the estimated shadow price of CO2, increasing from approximately $200 to more than $300 per tonne. As environmental regulations and market expectations continue to evolve, organisations that are slower to adapt may face higher transition costs and increased competitive pressure in the years ahead.
While corporate executives are often well aware of long-term risks, they struggle to incorporate them in their decision-making processes, since these tend to be dominated by short-term financial considerations. By showing the value of companies beyond the value for shareholders, the method makes companies’ social relevance much more visible – for better and for worse.
This can enable better and more nuanced discussions on corporations’ roles in society, and for corporations to better navigate the dilemmas they face.
As one of the professors explains: “What I find so exciting is the enormous potential for better understanding companies’ value creation and role in society – and to improve it. These analyses are extremely helpful in my MBA classes, where students use integrated DCF models to model value in various scenarios and devise strategies accordingly.
“It’s just such a pity that this kind of analysis is not yet widespread in business – companies could learn so much about the potential of their own business by connecting the dots in ways they haven’t done before.”
Further reading
Click here to read the DAX-AEX Futureproof Index Report.