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What is net value?

Our priorities define us

During the first week of November, Shaping Tomorrow’s Organizational Practices (STOP) put on their third annual Smart Business Week. Throughout the week the club held several events, and on one of the nights a speaker from Deloitte discussed sustainable valuation.

While the presentation covered many issues regarding work with local communities, upon being asked about environmental stewardship, the speaker admitted that corporate social responsibility (CSR) programs are usually not about making corporations better corporate citizens, but rather creating more value for the enterprise. Giving villagers cell phones to prevent them from destroying the corporation’s newly constructed pipeline is all well and good, but operating without causing harm to the fragile ecosystems in the area (assuming that no lawsuit is filed) is not likely to be on the agenda.

All financial valuation models rely on the concept of net present value (NPV), which is the present value of all the future cash flows received from a certain venture. This speaker made me think – beyond the money, what is the net value of the operations? Money is, after all, a social creation. You cannot eat it, you cannot build shelter out of it (though I guess you could try…), and you definitely cannot drink it. The most you can do is wipe your ass with it after you take a dump. We give money the “value” that it has, and all of the institutions built around it – stocks, bonds, rights, derivatives, dividends, et cetera – only exist as long as we say they do, that is, as long as we believe in their existence.

None of these things have intrinsic value (no matter what my finance professors tell me), and yet we base our livelihoods around them. We pursue more and more money, often at the expense of many things that do have intrinsic value – things like clean water, healthy ecosystems and human rights. Does this sound a bit like a child having an imaginary friend? That’s what it reminds me of sometimes: actions and decisions revolving around something that is a figment of our imagination. Those are the moments that I get really scared.

Here’s another fun fact: the top one hundred sustainable companies are judged on the sustainability of their operations, not their product. This means that oil and mining companies, who are inherently unsustainable based solely on the fact that their business relies on non-renewable resources (not to mention ecological destruction), are on these lists.

There is a course in the Faculty of Management called Social Context of Business, which tries to be the wakeup call for Management students. For better or worse, many Management students find the class to be a nuisance in their curriculum, and find the issues to be too “touchy-feely” and non-objective (read: not able to be monetized).

These issues are not tomorrow’s stock prices, toxic assets, or the interest rates in five years; these problems are access to water, toxin contamination, food security, and resource depletion.

The things that we declare important define our identity as a society. What is our net value?


Lillian Kilpatrick is a U3 Management student and the V.P. Finance of STOP.