Return on investment (ROI) : Attempting to estimate it

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In recent years mining companies have multiplied their investments in sustainable development (CSR, Social Development and local content), but unfortunately, these investments are not integrated in their operational/financial models. Thus, there are no ways to analyze the return on investment of these investments or to optimize and rationalize them.

A specific tool

Deloitte, in collaboration with Rio Tinto Alcan, IFC and  CommDev, have tried to develop a specific tool for the extractive industries whose main objective is to provide a methodology for planning return on investment in sustainable development /community relations and estimate the financial value of sustainability ( for example: community relations programs, programs for community health or ecosystem management) in the development of extractive projects.

Return on investment (ROI) : Attempting to estimate it

The Net Present Value

The model estimates the net present value (NPV) provided for a portfolio of investments in sustainable development for a given project. This approach allows to retrieve data for value creation and value protection to the firm and thus provide a framework for strategic decision making.

Calculation of NPV

The calculation of the expected NPV is the sum of two calculations: the direct value (creation), which corresponds to the results of the analysis of costs and benefits of direct investment (cost of inputs decreases or increases in productivity) and indirect value (protection) which corresponds to the potential mitigation of risks related to indirect investment (less downtime periods, etc..)

Although this is still a pilot project, this model will certainly add understanding to the planning and evaluation of the impact of these investments in sustainable development.

Caroline Chaumont, Borealis

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