Making a business case for sustainability is a step-by-step process that becomes easier once you understand it from front to back.
Making an ethical case for sustainable business practices is easy. For the good of our species and our planet, we all need to come together to reduce our environmental impact, because the ramifications of failing to do so are dire.
Making a sustainability business case? Slightly less easy. You know this. We know this. The simple reality is that many executives and investors must see the business upside before and after signing off on transformative efforts or substantial investments.
But there’s plenty of good news on this front for sustainability leaders. For one, the mounting evidence of climate change, and the increasing need to address it, is making these organizational needs self-evident. Additionally, perhaps most importantly, bottom-line factors regarding the value of sustainability are becoming far more appealing for a variety of reasons.
Every company is at a different stage of maturity when it comes to sustainability. Very few have zero measures in place, but even fewer have a comprehensive, continually evolving strategy for dealing with this utterly essential point of focus. Building a business case isn’t a one-and-done endeavor, but rather a living and breathing process in which we should position ourselves to be nimble and proactive.
Let’s explore the stakes, the business value, and a general framework to put your organization in good shape, now and moving forward.
Why Sustainability Matters More Than Ever
With population growth, rapid urbanization, economic booms, and other developing trends, we’re seeing unprecedented urgency in addressing the environmental risks exacerbated by climate change.
A study released in late 2018 by the Intergovernmental Panel on Climate Change (IPCC) reached this inescapable conclusion: we’re almost out of time. As Nathan Hultman writes in the linked article via the Brookings Institution, “The diversity and severity of impacts from climate change read like a narrative we might see in a Hollywood movie, but are in fact, and disconcertingly, the clear-eyed projections of where we are heading in reality, barring massive economic mobilization and rapid transition to cleaner technologies.”
“It’s a line in the sand and what it says to our species is that this is the moment and we must act now,” Debra Roberts of IPCC told The Guardian. “This is the largest clarion bell from the science community and I hope it mobilises people and dents the mood of complacency.”
Failing to change course may result in extreme heat, drought, floods, and poverty, among other consequences, in as little as 12 years, according to the world’s leading climate scientists. So the general impetus for taking action is — as we said — easy to see. Luckily for sustainability leaders, the business case is being made stronger and easier to convey thanks to clear and undeniable advantages that align with what investors and executives really care about.
The Business Value of Sustainability
We believe that the next frontier for business is embedding sustainability into corporate decision-making. Companies that fail to do this are only delaying the inevitable, and setting themselves back. To do this, business decisions must be framed through a shared value solution that encompasses environmental, social, and economic dimensions. The prestigious Business Roundtable echoes this sentiment, recently releasing a Statement on the Purpose of a Corporation that now includes a commitment to create value for customers, employees, suppliers, and communities, as well as shareholders.
While businesses have traditionally been able to recognize and track certain economic dimensions tied to sustainability initiatives, such as operational efficiencies, the full spectrum of benefits are rarely captured. There are a wide variety of potential benefits including:
- Gaining a competitive advantage. Many of your competitors may remain mired in complacency when it comes to sustainability actions. This your chance to take the lead and push ahead of the pack.
- Improving risk management. There are the material risks — issues like water shortages, climate shifts, and work conditions, which can disrupt the supply chain among other operational functions — as well as those tied to the image and reputation of your company. Plus, pressure from consumers, investors, and other stakeholders are mounting in the face of insufficient action.
- Spurring innovation. Exploring and implementing new sustainability solutions leads to unseen business efficiencies that can yield major long-term savings while also positioning your company on the cutting edge.
- Boosting financial performance. Related to the item above. Greater investment in sustainability initiatives delivers clear ROI while reducing dependence on resources that may grow more scarce and costly.
- Creating customer loyalty. People, in general, are coming to care more and more about climate issues, and data shows that they’ll increasingly do business with companies that demonstrably share this concern. Consumers no longer demand sustainability; consumers expect sustainability. The more emphatic your commitment, the more you can strike this critical chord.
- Improving employee advocacy and recruiting. Not only do customers prioritize organizations that are committed to sustainability; so do quality employees. Failing to assert your company in this regard could be costing you in terms of talent acquisition, retention, and internal advocacy.
How to Build Your Sustainability Business Case
With the aforementioned benefits in mind, investing in your company’s sustainability for the present and future should be a no brainer. However, if companies cannot quantify the full value that an investment in sustainability will bring, they will face challenges aligning the investment with organizational priorities, securing resources, and building/maintaining momentum. Our step-by-step guide to crafting a sustainability business case will allow you to avoid those pitfalls and drive decision-maker confidence.
1. Get the Lay of the Land: Conduct a Materiality Assessment
Buy-in is critical for generating the momentum to move your sustainability efforts forward. A materiality assessment will help you secure it, enabling you to engage stakeholders and uncover the things that matter most to them. You can leverage the insights gained through this process to develop a strategic plan for moving ahead.
Conducting a materiality assessment and taking stock of your current situation will also help you detect blind spots and identify immediate opportunities for environmental and business gains. These are essential milestones in beginning to chart your sustainability roadmap. Plus, this process is crucial for any sustainability reporting you do, whether it be for internal or external disclosures.
2. Run the Sustainability Numbers
Once the material topics have been framed, a business case for the sustainability investment must be made, and without detailed financial metrics the value of that sustainability investment cannot be accurately forecasted and tracked. Our approach allows for the full range of costs and benefits, including intangibles, related to a sustainability investment to be identified, quantified, and monetized so that its business value can be captured and tracked over time. We do this using a three-step process:
- Decomposition – we perform a systematic inquiry into the business benefits derived from the sustainability investment.
- Quantification – we then go about credibly estimating, determining, or calculating the quantity of these benefits using internal company data and publicly available information.
- Monetization – lastly, we convert or express the investment benefits in terms of financial value, i.e. costs avoided, cash saved, or revenue grown.
Through our approach, we can make seemingly intangible – tangible - by quantifying the benefits and the forecasted financial impact a sustainability investment will have on an organization. Our approach and methodology can be the differentiator between sustainability initiatives that get the investment needed to come to fruition, and those that exist only as ideas. Antea Group’s accounting for sustainability service, AA4S, can help you build a business case for your sustainability initiative using our methodology, demonstrating the impact of your company’s investment down to each dollar spent.
3. Engage Deeply with Leadership
You’ve already engaged and consulted various stakeholders. Now it’s time to get the most crucial of buy-in: your company’s leaders. When executives and board members are vocally invested in sustainability efforts, it sets an example throughout the entire organization.
You’ll find it easier to earn this investment having carefully gone through the previous two steps, coming with specifics in hand regarding numbers, costs, returns, forecasts, and other key business considerations.
In order to maximize resonance and reduce friction, it’s recommended to communicate with each party in the method they prefer (e.g. email, phone, in-person) and customize your dialogues around the things that are most important to them. Highlight benefits specific to the areas they’re accountable for. Lay out the ripest opportunities for efficiency and innovation. Show your passion and energize the conversation.
4. Finalize Your Roadmap
You’ve secured buy-in from requisite stakeholders and the company’s leadership. You’ve accounted for all regions, departments, and functions throughout the business. You’ve hammered out the specifics in terms of cost, investment, resource allocation, analysis, and forecasting.
This final step is about plotting your opportunities, actions, and endeavors out across a firm timeline, accounting the necessary resources and budget at each point, with measurement and benchmarking built in. By now your sustainability initiative should feature little ambiguity but it should still be agile. You’re ready to put it into motion by organizing and presenting a case that covers every base and is fully attuned to the people receiving it.
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