Andrew Winston: There's only so many ways that we create value in business. We're either reducing the downsides in business, reducing costs, reducing risk or building the upside. You're driving revenues, you're building intangible value. And the sustainability lens, the way of seeing the world through this question of, what's our impact -- how do we, as a business, impact the world throughout our value chain in environmental and social ways, which ties, intimately, to financial performance, that question yields a lot of potential value. And there's many studies over years that list dozens of ways that companies create value with this sensibility.
I'm going to highlight just a handful in these four buckets. So first, the kind of obvious category, the one that's been known for many years is everything called cost reduction, everything called eco-efficiency, reducing your energy footprint, your water, your waste. That just, fundamentally, saves money, being much more efficient, getting a better return on your assets.
And then there's kind of specific costs that get reduced, like insurance costs, if you're a lower-risk business. Second, I think the other one that people get is everything that falls under risk. And traditionally, that was around regulatory risk, government risk. But I think there's a broader sense of risk the companies are measuring now, just reliability and resilience in the business supply chain reliability. Where are we getting everything from ? Is extreme weather disrupting our business? What are our input prices? There has been unbelievable volatility in commodity prices over the last 15 years, but especially the last couple.
And then just resilience in general. Not managing these risk issues can cost you an awful lot of money. I think what gets people excited about the sustainability agenda now, though -- and you hear CEOs talking more and more as the revenue side -- is being much more innovative, helping customers and clients solve their environmental challenges, increasing your market share, and sometimes getting higher prices. I mean, that can be hard at times. I think there's a lot of conflicting evidence. But certainly, in some categories like organic foods, certain cars, people are getting higher prices for the greener product.
Tesla is a great example of building revenues from a sustainability lens. And then, finally, there's this intangible story. And this is really, maybe the most important and the hardest to measure, and that's what I'm going to spend some time on, which is how are you building value that's very difficult to measure, but has real value to the business? You're differentiating your product and your business. You're building customer loyalty. And you're attracting and retaining the talent. When I talk to executives at companies, this last one is very big.
And you hear this from companies like PWC and SAP that have measured the value of retention of their sustainability-minded employees. And it has saved them, and is worth, hundreds of millions of dollars. So I'm on kind of the mega value creation here. And there's kind of a cross-bucket set of issues, which is that taking on this sustainability lens makes your business more innovative in general. It gives you a license to operate. That's a very valuable thing in many communities. And you get some first-mover advantage from that.
And, you know, all of this boils to, in a very simple terms, spending less money -- that's always good -- making your money flows, your cash flows more reliable reducing risk, making more money, ensuring future money -- that's what brand value really is, future revenues -- and then, of course, just higher business value and investor value. Now I just wanted to highlight something really important now, which is, if you think about these issues and these ways of generating value, just the ones I highlighted here, all of them are very hard to put numbers on, right? Very hard.
But I would argue that what we do in businesses is we often put a zero value on these things because we can't put a good number on them. And we ask businesses to justify everything they do in the name of sustainability in ways that are very hard to measure, even though there's tremendous value creation. So let me just give you a very simple framework. Basically, in very simple terms, there's two big things that we don't put value on very well in business. There's externalities, there's the classic economic externalities like pollution, both positive and negative externalities.
And when people talk about sustainability, they think we're really just talking about this. It's about helping the polar bears. It's about helping the planet in some removed way from the planet that we live on in and drive all of our resources from and have business and economy from. But we treat it like it's external. But for me, I think what's potentially more interesting, is the idea of all of this value that's created internally, that is value to the business, that we don't put good numbers on. And there's a couple of ways to deal with that.
But first, I just want to highlight a couple things. One, I mentioned the value of intangibles. Just to put that in perspective -- there's a consultancy, Ocean Tomo that works with financial companies that does intangible asset, intellectual property work. And they've done this study for a number of years where they do something very simple. And they said, in 1975 if you looked at the S&P 500 and the market cap, the total value, and said OK, what percentage of that is tangible assets. Like book value assets, hard assets?
It was around 17% in 1975. So everything you're measuring in the stock market in market cap is getting at the value of the business. Now what's changed dramatically, is by 2015, the intangible amount is something like 84%. I'm sorry I misspoke before. The 17% is the intangible. The 83% was the tangible. I flipped that by mistake. What I meant to say was 84% now is intangible. Ok? And there's a lot of reasons for this. It's the movement from manufacturing to service-based economy.
But it's just the value we're putting on brands, in general, and things like customer loyalty and employee loyalty. So everything we're doing an accounting, arguably, is just pointed at this 16%. Right? So that's a problem. And everything I think that we do under the banner of sustainability, some of it's very hard assets like reducing energy, improving your assets. But a lot of it falls into this 84% of the things that are hard to measure.
And so then, I think the challenge we have is that in business, we use this very classic idea of ROI, right, some version of that -- IRR or ROI to make investment decisions. Where do we put our capital? And I would argue that this tool is very broken. And the reason is that we're incredibly good at the I, right? How much, in terms of money and people time, are we putting into investment? Right? Very basic. We know that. We can measure it. What we're bad at is the R, the Return. And it comes back to all those buckets.
What is the value of things that are hard to measure? Let's go back to this idea of employee engagement, for example. I mentioned Unilever. They're probably the most sustainably-minded large company in the world. And they have seen one very big change over the last five to six years. They have become one of the most in-demand employers in the world in a company that makes, some would argue, fairly boring products, just personal care products, everyday products, not as supposedly exciting as tech. And of course, when you look at just something as simple as the measure of how many people follow a company on LinkedIn, the tech companies in blue are big, right?
This is a tech platform for linking to companies. So, of course, Google, Apple, Microsoft, thry're sexy, exciting companies. But then you've got Unilever. Right? And Unilever has measured this as the most in- demand in the fast-moving consumer goods, the most in-demand employer in 34 countries, basically the OECD countries. And by the way, this six-year plan they've been on, the sustainable living plan, they hit their stock all-time high this year.
So this is working. And you can see, versus some of these really big, very popular brands, they've got over 2 million followers now. So how do you put a value on that? What is the value of that? And that's part of my point that if you're doing things that, yes, you can measure the investment, but you're making your business more resilient. You're moving to all renewable energy, say. Or you're changing something about your supply chain, maybe you're paying people more, a living wage throughout the value chain -- people growing coffee around the world or other agricultural products or people making your apparel, whatever it is. It may raise your costs.
But what's the return on that? What is the return to your brand to people being attracted to your business to wanting to work for your business? And this is, I think, where we have trouble measuring. But the real value is there. And so currently we call it 0. That isn't the right way to do it. So these are the problems with ROI. So I want to make one final point, which is, given this challenge, I think it's very strange that we're even asked repeatedly, what's the business case for sustainability? Nobody really asks that about marketing. You don't have someone go, what's the business case for all of marketing, or all of R&D, or all of new market ventures.
The question is, what's the business case for a particular initiative? All of sustainability shouldn't be questioning it this way. We should be questioning it with tools like ROI, sure. We should be questioning individual initiatives. Where should we put our capital? What's the best place to put our capital？ Not the entire domain. And that, I think, has been a big mistake. There is a ton of value we can measure, literally billions of dollars companies are making in all these different buckets. But we don't always measure the things we should.