The Long-Term Value of a Business Climate Program- Cedara Resources

Today, many business leaders are interested in launching corporate climate programs. Numerous stakeholders, including governments, customers, and even employees, are placing increasing pressure on businesses to adopt sustainable principles and focus on corporate responsibility. But some leaders may be concerned that implementing sustainable changes will be too costly, or that prioritizing Environmental, Social, and Governance (ESG) will put them at a competitive disadvantage in their industry.

However, business climate programs can actually benefit companies in numerous ways, and in the long run, the financial and social benefits of such programs can outweigh any initial costs. Let’s explore some key data illustrating the wide-ranging benefits of business climate programs in today’s corporate landscape:

1. Appeal to Investors: Climate change poses risks to businesses in various sectors around the world. Furthermore, with governments imposing new emissions on corporations, business leaders must be forward-thinking when it comes to sustainability so that they do not have to rapidly pivot to new operational strategies in the future.

Ultimately, businesses must be able to prove to their investors that they are prepared to mitigate climate risks. According to EY, current environmental risk disclosure practices leave much to be desired for investors, with 86% of dissatisfied investors stating that it is “critical for disclosures in this area to improve.”

Companies that invest in robust climate programs and responsible disclosure may be able to attract more investors. Many investors today view climate programs as a form of corporate future-proofing.

The 2019 McKinsey Global Survey revealed that “83% of C-suite leaders and investment professionals say they expect that ESG programs will contribute more shareholder value in five years than today.”
EY’s 2022 Sustainable Value Study shows that about 70% of 500 global companies “report higher than expected financial returns on climate initiatives benefiting the planet.”
Investors state that they are open to paying a 10% premium to acquire a company with a positive ESG record.

2. Stay Competitive: As more investors and individual consumers alike look to support sustainable businesses over emissions-heavy alternatives, businesses with strong climate programs stand out amongst their competitors. Many large corporations, including companies like Apple, DoorDash, and Amazon, are now committed to reaching lower emissions targets.

As this trend continues, small and medium-sized enterprises that constitute supply chains will have to follow in their footsteps. If your company is an integral supplier for other businesses, implementing your own climate program will enable you to work with larger corporations that are aiming to reduce their emissions.

Furthermore, today’s consumers are interested in patronizing sustainable businesses - and they’re willing to pay more for eco-friendly products and services. Businesses that implement and publicize their climate programs can draw in new loyal customers who are happy to pay a premium.

Plus, implementing a climate program often involves innovating and optimizing processes, which can lead to better customer service. For example, when DoorDash launched their eco-friendly e-bike program with subsidies to promote this mode of transportation for Dashers, they actually accelerated their average delivery times.

An EY analysis of the top sustainable corporations worldwide compared to their industry medians found that sustainable companies outranked their competitors in gross profit and net profit metrics.
GreenPrint’s Sustainability Business Index found that 66% of consumers are willing to spend more on sustainable products, with a full 80% of adults ages 18-34 agreeing with this statement.
Consumers show a strong interest in certain types of climate programs, with 73% stating that they “would sign up for a company’s voluntary rewards or loyalty program if it helped reduce the environmental impact of their purchases” and 60% stating they “would like to own a credit card that automatically offsets a percentage of the environmental impact of their purchases.”

3. Slashing Budgets: Business leaders might be surprised to find that climate programs can actually cut operational costs, contrary to the misconception that emphasizing sustainability is expensive. For example, eco-friendly actions like reducing business travel, boosting energy efficiency, and cutting back on utilities usage all save money in the long run. Leaders can also save by streamlining logistics and supply chain routes, as well as reducing product packaging and inventory waste.

The Cox Conserves Sustainability Survey indicates that 60% of small and medium-sized enterprises (SMEs) say that “cost reduction” is one of their primary motivations for investing in sustainability.
Marks & Spencer has cut operating costs by millions after implementing their Plan A corporate responsibility strategy. Over the past ten years, this major retailer has saved over £750M by leveraging energy-efficient technology, reducing their transportation miles, and cutting down on packaging.
Companies can save in surprising ways by making sustainable choices - for example, the salon brand Chop Chop London cuts on dry hair, using 70% less water than a traditional salon. Furthermore, the company’s Shoreditch salon location was renovated with recycled and second-hand materials, which saved up to £60K in renovation costs.

4. Recruiting and Retaining Employees: Lots of job seekers want to work for employers who share their values. In fact, many workers would accept a pay cut to join a company with a climate program. With so many young professionals deeply concerned about climate change and the future of our planet, businesses with climate programs have advantages in regards to hiring and retention.

Three-quarters of millennial workers state that they would be open to accepting a smaller salary offer for the opportunity to work for an environmentally responsible company, while 64% say they would turn down an offer at a company that wasn’t socially responsible.
About 70% of workers say that a company’s sustainability plan would influence their decision to stay on board in the long run, while 30% have left companies because they lacked sustainability plans.
The majority of workers believe that businesses “should play a large role in advancing sustainability.”

Climate Program Challenges:

You might be eager to spearhead a climate program at your own company, but getting such a program off the ground doesn’t come without challenges. Understanding these potential obstacles ahead of time can help you successfully develop and execute your own program:

1. Gaining Buy-In: An individual business leader can’t launch or manage a climate program on their own. Therefore, you’ll need to ensure that your team and any necessary external stakeholders are on board.

You’ll want to gather information on the general benefits of business climate programs and explain the specific ways in which it would support rather than hinder your company’s growth. You may want to share examples of similar companies in your sector that implemented climate programs and how it helped their financial performance, recruitment and retention, or other aspects of business development. Furthermore, you’ll have to research and recommend tools and software that will allow you to accurately measure, evaluate, and report your emissions status and any improvements.

2. Supply Chain Management: Your climate program’s objectives aren’t limited to reducing emissions or waste produced by your physical office locations or internal programs. You also need to consider the environmental impact of your suppliers. If you work with emissions-heavy suppliers, you’ll have to partner with them to reach your climate goals - and you may even need to aid them in establishing their own climate programs.

For example, when the clothing company Everlane began measuring their emissions, they found that 99% of their emissions were actually produced by their suppliers. By collaborating directly with their suppliers to utilize recycled textiles and carbon-negative materials, as well as encouraging the adoption of renewable energy, the company reduced their emissions across their entire value chain by 9% in two years.

3. Publicizing Your Efforts: Plenty of consumers are interested in patronizing businesses with climate programs - but if you don’t incorporate information about your climate program and sustainability initiatives in your marketing materials, you won’t be able to draw in new customers on this basis. Furthermore, if you need to increase prices on your products and services due to your climate program, you’ll need to illustrate exactly why these prices are worth paying.

Incorporating details about your climate program into your marketing strategy is essential. You may want to publish sustainability certifications or reports on your website, include facts and figures about your progress towards your climate goals in digital and print marketing materials, and create educational consumer resources on sustainability topics relevant to your industry.

Building a Climate Program:

Establishing a climate program for your business now can help you strengthen your operational strategy. While building your company’s program will take time, it’s best to start the process as soon as possible. With all of this in mind, how can you go about building an effective climate program?

1. Measure: First, you’ll need to precisely assess your current emissions across your value chain. Make sure to use tools and software that will provide accurate data and easily generate the data analytics you need.

2. Report: In some cases, you might be legally required to report your emissions and environmental impact. Sometimes, you may choose to voluntarily report your emissions to key stakeholders. Either way, staying up to date with new disclosure regulations is essential, as you don’t want to be penalized for a failure to report important emissions data.

3. Set Goals: As you measure and report your emissions, you can set goals to reduce these figures in the future. Evaluate your current emissions, and identify areas where you can make impactful changes.

4. Act: Now, it’s time to start taking steps to reach these goals. This could involve implementing an improved inventory management system, switching your facilities to renewable energy providers, working with new suppliers, or even purchasing carbon offsets. You can always look to climate frameworks to tweak your goals along the way. As you take action, you’ll want to continuously report your emissions so that you can view your progress over time and adjust your strategy as necessary.

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References:

The Business Value of a Climate Program

How can slowing climate change accelerate your financial performance?

The ESG premium: New perspectives on value and performance

Businesses finding unexpected financial benefits from climate initiatives

High-impact climate action: three company success stories

How to enhance long-term business value through sustainability

Majority of US Consumers Say They Will Pay More for Sustainable Products

4 Companies Who Saved Money and Made Money by Going Green

Four ways to create real business value by addressing climate change

How Sustainability Can Reduce Costs & Help Grow Your Business

Most millennials would take a pay cut to work at an environmentally responsible company

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