The Company within Social and Planetary Boundaries

Dirk Schoenmaker and Willem Schramade
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Willem Schramade: Nyenrode Business University

Chapter 1 in Corporate Finance for Long-Term Value, 2023, pp 3-31 from Springer

Abstract: Abstract Society faces multiple sustainability challenges. The transition towards a sustainable and inclusive economy requires rethinking and reorganising many current practices. Companies play an important role in that transition because social and environmental impacts are generated primarily in the corporate sector. Some companies will survive the transition by providing valuable solutions; others will not, as their competitive positions are eroded. Sustainability is therefore also about corporate survival. Responsible companies are increasingly adopting the goal of integrated value creation, which unites financial, social, and environmental value. This raises the fundamental question in corporate finance: what is the objective of the company? The traditional objective is maximising profit, which boils down to maximising financial value for shareholders. This does not incentivise companies to act in a sustainable manner. An alternative view is to broaden the objective of the company to optimising integrated value (IV) for all stakeholders, which combines financial value (FV), social value (SV), and environmental value (EV). Applying this new paradigm of integrated value is the real innovation of this corporate finance textbook.

Keywords: Competitive positions; Corporate governance; Environmental value; Financial value; Impacts; Integrated model; Integrated value; Objective of the company; Planetary boundaries; Precautionary principle; Resilience; Shareholder model; Social and environmental impacts; Social boundaries; Social value; Stakeholder model; Sustainable and inclusive economy; Sustainable development goals; Transition (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-35009-2_1

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