The financial ROI determines just cash benefits to an organization. In contrast, the sustainable ROI takes into account both cash and non-cash benefits. This is a result of the fact that a green economy is built on the premise of maximizing the so-called triple bottom line of economic, societal, and environmental benefits.
On the other hand, a sustainable LCA quantifies both cash and non-cash flows over the project’s life. It starts by assessing the financial benefits, like a conventional LCA, and then adds to them the additional benefits realized from sustainable practices, such as lower carbon emissions, lower water use, improved health and productivity, and reduced waste generation. This expanded sum of benefits is adjusted for time value at an appropriate discount rate, and this is how the sustainable ROI is calculated.
For the corporation in our example with earnings of $5,148,000 and stockholders’ equity of $34,000,000 the ROE is equal to 15.14%.
In contrast, the green economy expands the bottom line to include not just profits, but also people and the planet. In a green economy shareholders are not the only stakeholder. Society and the environment are treated as additional stakeholders by companies aspiring to incorporate sustainability into their mission and vision.