Value Impact of Climate Action
What’s the link between climate action and organisational value? There are so many! Think of cost reduction through more efficient operations, entering new markets with innovative products and services, as well as increased trust & transparency enhancing your brand image.
Too often, organisations are looking at climate initiatives as a matter of cost and compliance. However, it has been demonstrated that a sustainability agenda actually drives value, if accounted for it the right way.
It starts with redefining value and moving away from the notion of ‘growth’ in its monetary sense. Our current economic model with GDP as primary performance indicator is showing shortcomings when it comes to ESG (environmental, social, and governance) matters. Looking at prosperity and progress from a purely financial-economic angle – with monetary growth as measurement of success – simply doesn’t make sense anymore as resources are getting depleted, biodiversity is shrinking, and the climate is changing faster than ever before. We must challenge our current KPIs of what’s ‘good’ and look at what truly creates value for people and the organisations they operate in.
However, as current decision-making is still mainly based on the usual value expectations, it remains relevant to define a framework that helps organisations understand and quantify different value levers. We need the sustainability transition to happen now, therefore we shouldn’t expect organisations to be limiting themselves to the ethical case for climate action, when there is a clear business motivation too.
So, what are the value drivers of corporate climate action? Let’s look at how it’s not only part of corporate social responsibility, but also at how it makes good business sense. Next to lowering CO2 and other greenhouse gas emissions, your climate journey will also create value through different tangible and intangible levers with different time horizons – as it’s mostly part of a wider sustainability transformation at organisational level.
The most concrete ones impact the bottom- and top-line by reducing costs and increasing revenues. How? On the one hand, by future-proofing the business model and potentially diversifying the portfolio and accessing new markets, you secure solid sales and cashflows. On the other hand, there is a significant savings potential in carbon emission reduction programs, as you’ll be increasing process intelligence and operational excellence, which in turn reduce resource consumption and different types of risks (think of regulatory, physical, etc.). Next to that, you might avoid penalties or (carbon) taxes, stabilize your supply chain and related exposure, as well as reduce volatility and increase reliability. This comes down to a higher resilience in case of rapid change or disruption.
On the longer term, additional, more indirect value drivers can be identified. By becoming a sustainable organisation that acts on the climate emergency, stakeholders will increasingly trust and support your brand. Starting with transparency (carbon disclosure) with a clear intention of effectively reducing your environmental footprint, reputational risk will go down as brand image goes up – which will also impact the bottom- and top-line in the end: lowering the cost of capital, attracting funds and new talents, lowering employee attrition and increasing customer retention, but also opening doors for new partnership opportunities.
Conclusion? Sustainability initiatives create value in so many ways. There are simply no downsides to this pathway forward and the positive impact is projected to become even more evident in the future. Join us at the Belgian Alliance for Climate Action to accelerate your journey, spread the word and make climate action an everyday reality.
Source: Accenture Sustainability, 2021.
On 23 February, we are co-hosting with South Pole our second big ‘anchor’ event around the SBTi climate journey. On the agenda is a lecture about how to make the business case for Science Based Targets (SBTs), including testimonials from companies active in Belgium with validated climate targets. We hope this article already inspired you about what that business case might look like – and don’t forget to register for the webinar via this link.