Philip Dickemann

2024

Due to its strategic importance, one of the most important business decisions a company has to make is the facility location decision. Traditional models for solving location problems focus on maximizing economic profit. In recent years, multi-criteria problem solving has become the new gold standard. Especially the inclusion of environmental factors into the decision-making process is gaining popularity. Adding social indicators makes the triple bottom line accounting for sustainability (economic, environmental, social) complete.

In a case study with the Phoenix Contact Group, I evaluate the triple bottom line impact of a prospective production site in Vietnam. The results are used to add a sustainability dimension to the business plan and support a location decision. Therefore, I use the main idea of the Value Balancing Alliance, which is to convert key performance indicators in the dimensions economic, environmental, as well as human and social impact into monetary values. Monetary values are easier to understand and compare than indicator-specific units (e. g. tons of CO2- equivalents emitted), which is why they are predestined for executive decision-makers. The Value Balancing Alliance method, a relatively new approach, has been used for sustainability evaluation of businesses and decision alternatives in three pilot studies. To date, however, no study has used it to assess a production site that does not yet exist.

This work answers the questions of whether and how the economic, environmental, as well as human and social sustainability of a prospective production facility can be evaluated using the Value Balancing Alliance method. The results of such an evaluation are very useful for both internal as well as external reporting purposes. Internally, using the evaluation to solve the managerial problem in form of a location decision is just the first step. Later on, it can be used to monitor the actual sustainability and develop the business the right way. Externally, thanks to the methods accordance to the established reporting standards (IFRS, GRI, etc.), this method could set a new standard for sustainability accounting and reporting.

The results are very promising. At some points specific data are not available as a natural result of planning into the future. And therefore, certain values must be estimated. Nevertheless, the main idea of the Value Balancing Alliance method to convert all the indicators into monetary values is generally suitable for evaluating the triple bottom line sustainability of a future production site. It is a useful tool for decision-making and reporting purposes that is easy to understand and standardize.