Making allies with finance

How sustainability helps you in finance…

Sustainability…

• saves costs: sustainability initiatives drive efficiencies, such as lower energy use, which help to drive down costs. It is estimated they could boost operating profits by as much as 60% [McKinsey, 2020].

• accelerates revenue growth: purpose-driven companies are expected to generate 10% higher growth between 2021-2036 than those with no clear sense of purpose  [Enacting Purpose Initiative, 2021].

• retains customers: almost 80% of executives believe that sustainability initiatives result in increased customer loyalty [Capgemini Research Initiative, 2020] .

• increases investor confidence: 90% of institutional investors believe businesses with strong ESG credentials represent better long-term opportunities [EY Global Institutional Investor Survey, 2021], translating into a share price premium or a 10% lower cost of capital [McKinsey ‘Why ESG is here to stay’, 2020].

• lower taxation, higher incentives: PwC’s green taxes and incentives tracker identifies more than 300 incentives across 20 countries for businesses working to reduce their environmental impact.

• increases operational resilience and reduces risk: extreme weather events interrupt business operations and damage offices, data centres and other business facilities, resulting in lost revenues and higher insurance premiums. Weather-related losses reached $56bn in 2019 [Swiss Re].

• provides career development opportunities for your team: Management accountants have many of the skills needed for carbon accounting and are ideally placed to take on responsibility for sustainability reporting.

• reduces staff turnover and associated costs: Six in 10 Gen Z employees would stay longer with a company that had strong sustainability credentials [Bupa ‘Environ-mental health burden survey’, 2022]. 58% of UK workers would consider changing jobs for a more sustainable job [Aviva ‘How we live report’, 2022].

Your  role in sustainability

Finance is crucial in helping the organisation to achieve its sustainability goals by:

• Ensuring funding for sustainability initiatives, either in the form of additional investment or by agreeing how savings from sustainability projects are reinvested in future initiatives.

• Ensuring compliance with emerging fiscal and regulatory requirements, for example, Task Force on Climate-related Financial Disclosures (TCFD), Carbon Border Adjustment Mechanism (CBAM), Energy Savings Opportunity Scheme (Esos).

• Managing investor relations and reporting on the organisation’s sustainability initiatives and impact.

• Ensuring the same robust standards are applied to sustainability reporting as financial reporting, reducing the risk of greenwashing or other reputational damage.

• Assessing the impact of changes to the organisation’s business model, such as via the transition from a product-based approach to a service-based model.

• Adapting processes to incorporate sustainability, including: creating internal carbon pricing or cost-benefit assessments for the organisation’s impact on nature; updating expenses procedures to capture air miles as well as flight costs; or including sustainability and impact in business plans.

Important questions you should ask

If you are in Finance and are only just starting to work on your organisation’s sustainability initiatives, you may want to ask your sustainability colleagues these questions:

• Can you explain the organisation’s sustainability strategy, targets and timeframes and how it is likely to impact the finance department? 

• Where can I learn more about the organisation’s sustainability strategy/ sustainability in general?

• Have you conducted a materiality assessment? Does the materiality assessment incorporate investor priorities, alongside those of other stakeholders?

• What major risks did the materiality assessment identify?

• Did the materiality assessment identify any opportunities for the organisation from taking action? 

• What sustainability-related data has been collected so far and how has that been collected?

• What are the most important sustainability-related regulatory changes that I need to be aware of?

• Is there financial data that would help sustainability track progress or make the business case for sustainability initiatives?

How could finance and the sustainability team start working together?

• Collate data to assess the organisation’s carbon footprint, for example energy bills, travel expenditure and supplier costs.

• Identify the company’s top 10 suppliers and explore ways to work with those suppliers to reduce Scope 3 emissions.

• Review company pensions and investments and identify opportunities to transfer to more sustainable investments.

• Update expenses guidelines to incorporate guidance on travel choices and how much more employees can spend to travel by train rather than flying.

• Explore how to incorporate sustainability into existing business templates, encouraging all teams to think about the impact of any new project on society and the environment.