A conceptual framework for developing the cost of capital of stakeholders: case study of Sustainable Hockerton Ltd.

Lakshmi, Geeta, Khan, Muhammad and Vortelinos, Dimitrios (2016) A conceptual framework for developing the cost of capital of stakeholders: case study of Sustainable Hockerton Ltd. In: European Business Ethics Network, Annual Conference, 19-21 June, 2016, Nottingham Trent University.

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In this paper, we introduce a framework for calculating the Weighted Average Cost of Capital (WACC) for stakeholders of a firm. Our framework is built upon the traditional WACC i.e. the weighted average of returns to shareholders and lenders, but extends the framework to incorporate the triple bottom line i.e. the planet, the people along with the notion of profit.
Although there is a voluminous amount of finance theory developed for corporate finance, there is little theory postulated for other types of businesses. Most papers concentrate on measurement for companies, but fail to capture the financial research for smaller businesses or businesses with multiple objectives. For businesses which have social objectives or “more than profit” objectives, share prices and profits are not enough. There is also a neglect of other stakeholders such as the environment and the community. There is thus a gap in terms of financial constructs to judge performance. We develop here a construct which can be of use to many types of businesses and territorial organisations, including community businesses. In doing so we make a link between finance and ethics or contextual knowledge to keep the subject current. While many papers discuss the normative role of stakeholder involvement, there remains a separatist divide between the normative and the instrumentalists. We seek to break down those barriers and introduce how shared values can be measured through a practical approach. We illustrate this concept by using a case study of Sustainable Hockerton Ltd. (SHOCK), a small community organization in Nottinghamshire, U.K.

Keywords:Stakeholder, CSR, Triple bottom line, cost of capital, sustainability, case study, community energy, social enterprise
Subjects:N Business and Administrative studies > N300 Finance
L Social studies > L110 Applied Economics
Divisions:Lincoln International Business School
ID Code:23105
Deposited On:26 Nov 2017 13:17

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