By Johan Potgieter, Cluster Industrial Software Lead at Schneider Electric
18 September 2023
With COP 28 only a few months away and the globe experiencing record highs and lows in temperature, organisations are now in earnest prioritising the move towards a greener, more sustainable business operations.
The case has been made and our role as custodians for the environment cannot be overstated. However, going green also makes a lot of business sense, delivering tangible benefits such as cost savings, regulatory compliance, enhanced competitiveness, innovation, and diversification and enhanced brand reputation.
It ticks several important boxes and should, if anything, incentive business to take the next important steps to realise these benefits.
Interestingly, in a Harvard Business Review article published almost 30 years ago; It is Not Easy Being Green” argues: “…being green is no longer a cost of doing business; it is a catalyst for innovation, new market opportunity, and wealth creation.”
Investing in green energy sources and implementing energy-efficient operations, businesses can reduce their energy consumption and save on energy bills, a no-brainer really. Second, by implementing sustainable practices, organisations can enhance their competitiveness by again reducing costs whilst increasing their operational efficiency and improving their brand reputation.
Going hand in hand with brand reputation, is compliance and regulation. Investing in green energy sources and implementing more efficient operations will assist organisations in meeting regulations and avoiding penalties. Furthermore, this investment can also foster innovation and diversification by encouraging the development of new products and services within new, greener business models.
Financing greener operations
The above already makes a firm business case but from a financial point of view the benefits are also significant. Here organisations can implement the following strategies towards greener, financial operations:
- Sustainable investing - businesses can invest in sustainable funds, portfolios or individual companies that prioritise environmental, social and governance (ESG) factors.
- Implement a green procurement policy - organisations can prioritise suppliers that have sustainable practices and reduce the environmental impact of their supply chain by purchasing eco-friendly products and packaging.
Furthermore, organisations can also support sustainable purchasing by encouraging employees to buy eco-friendly products and office supplies which are in line with its green procurement policy.
- Sustainable financing - businesses can gain access sustainable financing options such as green bonds or sustainability-linked loans, which are tied to sustainability targets and incentivise companies to improve their ESG performance.
- Carbon pricing – companies can implement internal carbon pricing mechanisms, which involve assigning a monetary value to carbon emissions to incentivise reductions in greenhouse gas (GHG) emissions to promote more sustainable practices.
- Reporting – organisations can report on their sustainability performance to stakeholders, including investors, customers, and employees. This will improve transparency and accountability, bolstering a company's reputation and financial performance.
Overall, a sustainable finance perspective requires a focus on long-term sustainable growth, integrating environmental and social considerations into its decision-making whilst fostering a culture of sustainability within an organisation.
