The Business Case for Sustainability

SaveMoneyCutCarbon and Trevor French discuss the business case for sustainability following a recent survey conducted by Barclays, YouGov and The Times.

Environmental, Social and Governance (ESG) survey

Barclays recently carried out a survey with YouGov and The Times of 1,000 businesses across the UK¹, which showed that a number of UK companies have developed ESG strategies and already implemented measures to reduce their carbon footprint whilst others are not sure how to get started.

What did the survey show?

Embracing ESG

The survey also showed that there are potential opportunities for businesses who focus on ESG strategies. Some of the main points were:

• improving financial performance by customer attraction and retention and potential cost reductions
• improving employee recruitment and retention (positive sustainability credentials can be attractive to employees)
• complying with regulation and risk management.

Consumer expectations are changing, and many businesses are using their sustainability credentials to target new customers and markets. Some are achieving cost savings, for example, by reviewing energy usage and reducing waste which can give a pricing advantage and improving profitability. However, attracting and retaining talent is one of the biggest challenges facing companies today.

Larger businesses are increasingly driven by regulation to report their progress on ESG and this means that they will ask questions of those in their supply chains, typically Small and Medium Enterprises (SMEs), which account for 43% of business driven emissions in the UK. And for the UK to hit its net zero targets, its vital that SMEs play their part.

ESG challenges

Fewer than four in 10 of the companies surveyed feeling well informed about ESG. 23% cite a lack of funding as a potential barrier to pursuing ESG-focused projects (rising to 35% in Wales). The same proportion are concerned about the difficulty of identifying a clear return on investment on projects, finding it hard to assess what value ESG projects will generate.

The survey also indicates that some SMEs do not have the resource to create a dedicated Sustainability officer, often seeing this as complex – and don’t know where to start the ESG process.

In terms of getting started, the perception is that it is complicated or expensive, but it doesn’t have to be and can lead to cost reductions and improvement in business efficiency.

Customer attraction and retention

It’s also worth keeping in mind the government’s advice is that 85% of consumers are more likely to buy from a business with a reputation for sustainability, and that going green can help grow the economy.² (© Crown copyright. OGL^)

The government advises that integrating sustainability into business practices not only benefits the environment and society but can also offer many advantages to a business. It notes that consumers “are increasingly concerned about environmental and social issues. By demonstrating a commitment to sustainability, you can enhance your brand image and reputation. Investing in sustainable practices can attract environmentally conscious customers who are more likely to support and remain loyal to eco-friendly companies.”³ (© Crown copyright. OGL^)

Decarbonisation and climate technology

The government also advises that there is research which indicates the benefits of saving energy and reducing carbon emissions. It suggest that these measures could significantly save companies on their overheads.⁴ (© Crown copyright. OGL^)

It advocates:

• switching to EVs can not only cut running costs but also lower servicing and maintenance costs by around 40% compared to petrol or diesel cars
• with up to half of companies’ overall electricity bill coming from lighting, making changes such as switching to LED bulbs can help shave up to 40% off bills
• giving drivers fuel efficiency training can help save companies an average of 15% on fuel use and carbon emissions in transporting goods.⁵ (© Crown copyright. OGL^).

It also echoes the Barclays survey with research identifying that 90% of SMEs are keen to tackle climate change, but find it difficult to know how or where to start to find the right solutions to reduce their carbon footprint.⁶ (© Crown copyright. OGL^)

Regulatory compliance

The Climate Change Act of 2008 set legally binding targets for the government to reduce greenhouse gas emissions in the UK. This act aims to achieve net-zero emissions by 2050, emphasising the role of businesses in contributing to this ambitious goal.⁷ (© Crown copyright. OGL^)

In 2019, the UK government legislated a net zero emissions target by 2050. In 2021, the government set two additional interim targets to run a net zero power system and reduce emissions by 78% by 2035.⁸ (© Crown copyright. OGL^)

The government advises that current disclosure requirements for companies to reveal their net zero transition plans are on a “comply or explain” basis: this is required by the Financial Conduct Authority for listed companies and large asset owners, and the Government is considering extending this “comply or explain” requirement across the wider economy.⁹ (© Crown copyright. OGL^)

Financial incentives

There is a range of state financial support schemes that aim to encourage businesses to adopt green practices. The Climate Change Levy (CCL) is a tax on business energy usage and some energy-intensive businesses which match with energy efficiency or renewable energy criteria can qualify for exemption, that could help to reduce operational costs.¹⁰ (© Crown copyright. OGL^)

Enhanced Capital Allowances (ECAs) enable businesses to claim 100% first-year allowances on qualifying energy-saving equipment and technologies, providing significant tax benefits.¹¹ (© Crown copyright. OGL^) And finally, businesses involved in research and development activities to develop eco-friendly technologies or products may be eligible for tax relief which aims to foster innovation in sustainability.¹² (© Crown copyright. OGL^)

This article has been written by SaveMoneyCutCarbon and is correct at 30 November 2024. This content does not constitute advice and is for general guidance only. Always undertake your own research before taking any action.

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