Sustainable Growth Planning is comprised of the Four Pillars of organizational resilience strategies that include Competitive Advantage, Enterprise Efficiency, Operations Management (Sales/Marketing/R&D), and Global Enterprise Risk Management (GIRM). All assets, human capital, intellectual property, investments, operations, Information technology, and communications, regulatory compliance, and privacy must be considered when planning sustainability program components. From a finance perspective, Sustainable Growth Rate (SGR) is the maximum rate of growth that a company can sustain without having to finance growth with additional equity or debt. SGR involves maximizing sales and revenue growth without increasing financial leverage. Achieving a great SGR can help a company prevent being over-leveraged and avoid financial distress.  Companies with high SGRs are usually effective in maximizing their sales efforts, focusing on high-margin products and services, managing inventory, accounts payable and accounts receivable. 

A high growth rate may indicate the company is focusing on investing in R&D and NPV positive projects, which may delay the repayment of debt. A high growth rate company is generally considered riskier, as it likely sees greater earnings volatility from period to period. SGR = (1-d) x ROE, Retention Rate x ROI, or SGR= PRAT.  The Retention Rate is [ (Net Income – Dividends) / Net Income) ] which represents the percentage of earnings that the company has not paid out in dividends or retained earning : Net Income – Dividends equal Retained Earnings. Return on Equity (ROE) = (Net Income / Total Shareholder’s Equity). €This represents how much return investors have realized relative to the profit the company has generated.

On the other hand, low (insufficient) sustainable growth rate means that the enterprise is growing too slow and therefore under performing competitors who are growing at a faster rate.  When actual growth exceeds sustainable growth for longer periods, management must formulate a financial strategy from among the following options: 1) sell new equity; 2) permanently increase financial leverage (i.e, take on more debt); 3) reduce dividends; 4) increase the profit margin; or 5) decrease the percentage of total assets to sales.