The Value of Sustainability to your Enterprise
Environmental responsibility is a not a new concept, however it is fair to say in recent years that responsibility on government, business and individuals has become more evident in the public’s psyche than ever before.
With regular coverage of the disastrous impact of environmental pollution being beamed into our homes, it’s no wonder that the public are demanding more sustainability in their every day life, whether that be the products they consume, the businesses where they work or the political parties they support.
In 2018, Chairman of BlackRock global investment management corporation, Larry Fink, wrote a letter to thousands of the CEOs of subsidiary companies, stating: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. This is why we are increasingly integrating environmental, social and governance matters into our investment process".
With that in mind then, the financial benefit to firms of having a robust sustainable environment policy is beginning to be prioritised. Carbon Accounting is not just an increasingly popular buzz phrase but also a key element that should be ingrained into an enterprise’s daily process.
We all know the importance of sustainability but it’s only now we are putting a true economic value to it in a business setting. This article explores that in some more detail and looks to current trends and players in the market.
So how does sustainability translate into financial benefits for a company?
Levies and fines: Whether it’s the consumption and types of energy a business uses or the sustainability of its raw materials or office supplies, there are wide ranging levies on business.
Tracking such consumption is crucial to business to help them avoid such costs and source materials more sustainably.
Tax Breaks: There are direct financial benefits of running your business with a focus on environmental responsibility. Energy-efficient machinery, for example, qualifies for a 100 per cent tax allowance in the first year you buy it. This allows businesses to offset the costs against taxable profits.
An enterprise that understands the sustainability of the products it buys will see such cost reduction benefits in a more responsibly source procurement process
Attracting customers: Consumers are increasingly demanding social responsibility from vendors and suppliers through sustainability and green practices. Sustainably sourced products, recyclable packaging and the ‘green credentials’ of firms, are shaping people’s buying patterns and behaviours.
Making your supply chain sustainable and as close to carbon neutral as possible becomes a strong marketing and sales message to the wider community. The Nielsen global online survey this year identified 66 % of its worldwide study respondents with this commitment to eco-friendly products, services and businesses.
What’s happening in the market?
As with SAP large enterprises are setting themselves time line targets to become carbon neutral and the successful businesses of the next decade will have to follow the same sort of pattern.
Business will require more detail about their supply chain not only for their own internal metrics but to be able to display their green credentials externally to customers and legislative bodies alike
I think we’ll also see more circular sustainable models across business operations, reducing the use of single use raw materials and their polluting output. Already, more than 60 countries have introduced measures to limit single-use plastic waste through bans or levies, while refill stations and reuse services have become more popular.
In short, companies with higher green credentials will find it easier to attract and retain customers, suppliers and employees and software that helps them both capture, monitor and report the key metrics around this will become more essential. With people embarking on their digital roadmaps they would do well to take such metrics into account and seek the best providers in this market
Reporting standards and initiatives
In my next article I want to explore the area of Carbon Accounting Reporting in more detail. In 1997 there were 60 environmental laws in place globally, today there are just less than 2000.
The issue is that with so many possible views of carbon accounting, business may miss opportunities in understanding the legislation most relevant to them and therefore any potential cost offset or financial savings.
Service providers in this space will succeed if they can guide enterprise through this often confusing picture and deliver their customers real value.