Decision Rules for Integrated Value

Abstract

Future-oriented companies manage for integrated value rather than merely for shareholder value to earn their social license to operate. Managing for integrated value involves managing and balancing several types of value (financial, social and environmental) at the same time, often involving trade-offs. Companies need decision rules that help them make investment decisions accordingly.

This article derives model-based decision rules for integrated value. The decision model allows for the prioritisation of specific types of value, in line with a company’s purpose. The decision model is tested with several investment projects. It appears that companies can improve their integrated value with the new decision model.

Keywords: Capital budgeting, net present value, integrated present value, financial capital, social capital, natural capital

JEL Classification: G31, G34, G38