Treasury Today Country Profiles in association with Citi

Sustainability: the new revenue driver

Wind turbine located in field outside city

Corporate cost-cutting and brand reputation have been displaced by revenue growth as the key driver for sustainable strategies, says a new report.

According to a report published by ING, driving revenue is the primary reason CFOs and treasurers decide to implement sustainability strategies, ahead of more established factors such as cutting costs and brand reputation.

The report, ‘From sustainability to business value: finance as a catalyst’, is based on a survey of 210 US-based CFOs, senior treasury professionals, finance directors and financial controllers from medium and large corporates. It questioned the impact on their business of sustainability strategies, including improving energy efficiency, rethinking supply chains and transforming business models.

Some 81% of US firms surveyed claim to have formal initiatives in place, 48% saying that sustainability concerns now actively influence their growth strategies.

Growth driver

Among firms with a mature enterprise-wide sustainability framework, 43% say revenue growth is their main driver for acting. Across all companies, revenue growth is the most important guiding factor, with 39% of all respondents ranking this first. Cutting costs (35%) and brand reputation (30%), followed. It also shows that 87% of firms that have fully committed to sustainability – this has led to increased revenues and improved credit ratings as a result.

However, the report also reveals that 52% of respondents are still finding it difficult to identify sustainability-led opportunities. The reasons suggested for this include limited integration between sustainability teams and other parts of the business, difficulty in qualifying the impact of sustainability initiatives, challenges in identifying sustainably-led investment opportunities and a lack of understanding about how to access green financing instruments.

It is clear from the results that for organisations to translate sustainability initiatives into growth, support from finance and treasury leaders is critical, with 53% saying that the lead role within the firm was taken by these roles.

The greatest appetite for green bond issuance is among firms with over US$10bn revenue, 48% of these having issued in the last two years and 36% planning to do so in the next two years. Of the smaller companies responding, 37% plan to issue green bonds in the next two years.

A starting point

Make the benefits tangible. It is necessary to track and measure metrics such as resource usage, emissions and ROI of existing sustainability initiatives. Doing so requires an individual ‘champion’ to take responsibility for tracking these new metrics, and the setting up of reporting lines to all senior management to ensure awareness and engagement.

Integrate sustainability across the organisation. Sustainability professionals should be able to cover the full spectrum of the organisation’s decision-making activity. Companies should also consider creating a sustainability governance framework, with a cross-functional steering committee meeting regularly to align objectives and activities to this framework.

Ensure the finance function is engaged. This will help initiatives get off the ground, using treasury expertise in particular to help access the green finance market.