Challenges for the CFO focusing on integrated value

How do you compare projects on integrated value?

March 26 2024

"Wer die Wahl hat, hat die Qual” is a German saying. In other words, when it comes to making choices, it's a real pickle. This pretty much sums up the biggest challenges for financial professionals aiming to steer towards integrated value. Surprisingly, the oft-cited issue of data availability isn't the main hurdle for these individuals. The real challenge lies in decision-making.

In my previous blog post ("Which CFO focuses on integrated value?"), I talked about searching for CFOs interested in steering towards integrated value. This call sparked many interesting conversations, not only with CFOs but also with controllers and sustainability experts – pioneers who see the importance of integrated value as self-evident. I asked them: what obstacles do you encounter when steering towards integrated value? Their answers were intriguing and somewhat surprising. Because, contrary to common belief, the issue of data availability wasn't the primary challenge for them. Internally, a lot of data is indeed available if you know what you're looking for. The most frequently mentioned challenges revolve more around decision-making: how do you make structured decisions that consider multiple goals (and types of values)? How do you compare projects across multiple metrics simultaneously?

What goals? What metrics?

If organizations have different goals, they'll need different metrics. It was clear to all conversation partners that the purely financial metrics like NPV (net present value) or payback period aren't sufficient for comparing potential investment projects. More than just financial metrics are needed, but what that "more" entails is less clear and varies from one organization to another.

For example, for a publicly listed company, it's crucial to consider contributions to emission reduction and strategic positioning. The emission reduction goal is non-negotiable. This means that certain projects with a positive NPV can't be pursued, or that despite their negative NPV, some projects must be pursued within certain limits. A service-oriented company we spoke with aims not only for profit but also for a positive impact that is a multiple of its revenue. But how do you compare different types of impacts? And how do you deal with the primary bottleneck: the number of man-hours that can be allocated to projects? The CFO of a non-profit described the challenge of balancing various, often conflicting, social goals, where the financial aspect is merely the final piece of the puzzle.

How do you compare the incomparable?

Financial aspects remain important, and of course, NPV and payback period calculations are still done. But their outcomes aren't decisive for the subsequent decision-making. They're just inputs among others. The real question is: how do you compare things that are fundamentally incomparable and measured in different units? How much profit are you willing to sacrifice for a certain level of emission reduction? How much emission reduction are you willing to sacrifice, for example, for better social outcomes? Etcetera. 

In our research, we try to make this concrete using hypothetical but recognizable examples. When given a choice between two projects, what aspects do people truly value? And how do they weigh them? And when faced with a dozen projects differing along a handful of dimensions, what choices do they make? And why? Can you then create company-specific decision trees in this manner?

The horizon problem: costs now, benefits later

But also, how do you weigh costs now against benefits later? Often, potential paths to a more sustainable business model are visible, but there's doubt about their financial feasibility or their acceptance by shareholders.

Completely overhauling a business model is very risky. But the same goes for changing nothing. If an organization does nothing, they risk losing their license to operate, or their activities may simply become outdated. Experimenting on a small scale with a new business model might be an option, as it can provide valuable experience for launching new activities on a larger scale.

Improving the pipeline of proposals

Furthermore, CFOs not only want to evaluate their projects better but ideally also improve the pipeline of projects they receive. If you're looking at projects from an integrated value perspective, you want your employees to do the same. This can be achieved by, for example, adding additional requirements for sustainability aspects or other goals to investment proposal templates. But this only makes sense if you know what you're aiming for.

Data is secondary

So, are data not a problem at all? Isn't CSRD coming? Yes, data are important, but assumptions can get you a long way. In fact, with CSRD, we're putting the cart before the horse because now the data come first and then the questions. Ideally, it should be the other way around: you first determine what's strategically important and then gather information about it. It's a pity that CSRD is doing it the wrong way around. But it's probably still better than not getting the cart moving at all. Companies need to get to work now. I'm very curious to see what choices that will lead to.

If you'd like to share your thoughts, please feel free to email me at

Prof. Dr. Willem Schramade is a professor of Finance at Nyenrode Business Universiteit. He is part of Nyenrode's Faculty Centre for Corporate Reporting, Finance & Tax. His main research themes include Sustainable Finance & Sustainable Investing. With over 20 years of experience in finance, he has extensive expertise in advising national and international clients in the fields of finance and ESG.

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