It is clear sustainability is not just about values and ethical principles, but has a direct impact on companies’ fundamentals and financials.
Brian Haugh, Director and Head of BDO Valuation & Financial Modelling Centre featured in The Irish Times Special Report on Green Finance.
Sustainability is much more than a buzzword or a “nice-to-have” these days. It has been at the forefront of the Government’s plans with the signing of the Climate Action and Low Carbon Development (Amendment) Act that was signed into law in 2021, which commits Ireland to a legally binding path to net zero emissions by no later than 2050, and a 51 per cent reduction in emissions by the end of this decade.
For businesses sustainability has also become much more important, with many industries similarly committing to net-zero measures. While it might be seen as a purely virtuous endeavour, there can be a competitive advantage for those companies who implement such measures.
Driving the change
There are several factors that are driving the move towards sustainability, says Brian. “Apart from the moral case for sustainable business practices, there are a number of strategic reasons that companies are adopting sustainability strategies. Many organisations are now using sustainability to differentiate themselves from their competitors, with customers and employees increasingly concerned with organisations seeking to make sustainability central to their brand image. However, the strategic case for sustainability goes far beyond brand management.”
“Large companies who have adopted science-based targets for net zero must consider the carbon footprint of their supply chain. This means that SMEs that are suppliers to these large companies will find themselves having to take measures to reduce their carbon footprint in order to ensure that they can continue to supply the company. SMEs who take early action to strategically position themselves as ‘low carbon’ suppliers will be best placed to capitalise on this trend.”
He says there are also cost benefits to many sustainability measures. “From an environmental perspective reducing an organisation’s carbon footprint is often closely linked to reducing the amount of energy utilised in the business, and so measures taken to reduce energy consumption have the double benefit of reducing carbon emissions and also saving costs.”
“The costs of achieving these measures are generally an upfront capital cost to install or replace systems within an organisation such as replacing existing lighting with LED lighting or installing solar panels. The cost of these interventions has been falling in recent years and with ever-increasing energy costs the business case for making these investments is becoming ever stronger.”
Content adapted from The Irish Times.
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