What’s the overarching goal for most companies? In most cases, it’s maximising company profits (and shareholder value). Profit comes first; everything else takes a back seat.
However, things are changing. Environmental matters are further up the corporate agenda than ever before, thanks to shows like Our Planet and activists like Greta Thunberg influencing the way customers purchase. Companies now have to be seen to be making a difference, with an emphasis on sustainability and a positive impact on society. Finance and sustainability now go hand-in-hand.
The good news is, companies don’t have to sacrifice profit to boost their eco-friendly credentials. In fact, it’s the opposite. In her book Powered By Purpose, Sarah Rozenthuler wrote that organisations with a purpose other than profit outperform the market by 42%. Larry Fink, CEO of the investment giant Blackrock, wrote in 2018 that he expects to have more in-depth conversations around the societal purpose of the companies he invests in going forward, ensuring their sustainability strategy is in alignment.
Today’s generation of startups seem to understand all of this better than the giants. Many founding mission statements mention sustainability. Founders want to drive change, be progressive and break the mould.
In this article, we’ll explain three ways that your finance function can help make your company more purpose-driven, through making it be a more environmentally friendly company. When finance buys into your sustainable objectives, you are much more likely to achieve them.
The entire company, including finance, needs to communicate and agree on financial and non-financial metrics that can be tracked and budgeted through the year.
Finance needs to take the lead on setting these metrics, because:
There are examples in the corporate world where this is already happening.
B Corps is an organisation that certifies companies that balance their purpose and profits. Companies that want B Corps certification (which is a selling point in itself) must agree to ensure the happiness of their staff, customers, shareholders, suppliers, community and the environment. More than 3,500 companies in 74 countries have now achieved B Corp certification, including Guardian Media Group, Cook and Bridges Fund Management.
In the corporate world, Cisco is leading the way in setting environmental metrics, as well as financial ones. It publishes some of them on its site, including their goal for the 2022 Financial Year of having 85% of the electricity in the business and supply chain coming from renewable sources. Currently, the figure is 83%.
Finance is ultimately made up of ‘transactions’, but there will be an associated CO2 emission for every transaction that takes place. Ideally, you will use your finance software to track both of them together, saving time and money.
There are several examples of carbon accounting software than can automate this task for you, including Carbon Analytics, that integrates with Xero.
Look for carbon accounting software that can automate the process of taking emissions information from other sources in your business and transferring it into one report. This data could include:
Your emissions will also be linked to your business expenses, such as employee travel by road, rail or plane. Try to get this information in your reports too.
Some companies have chosen to put their CO2 emissions in their reporting alongside their finance figures. Finance has oversight on reporting, so they can produce the correct figures and help when auditors demand to know more about the numbers quoted.
The art is in the detail (and the paperwork)!
As the drive to go green gains traction in business and society, the Government provides more and more incentives for eco-conscious initiatives.
Responsibility for grabbing these Government sustainability subsidies should lie with the finance function. Finance is in the best position to understand the startup green investment opportunities that are out there. They should have the knowledge to advise on the best course of action.
For example, the Bioenergy Capital Grants Scheme awards companies money to pay for biomass-fuelled heat and electricity generation equipment. These initiatives are beneficial as they lower dependence on fossil fuels, but they are expensive. Grants such as these are extremely helpful.
Being more sustainable ultimately requires investment, whether that’s in software, new vehicles, or even new business premises. Finance can find the most efficient way to make these investments happen from an accounting and tax perspective. For example, in 2019, we looked at the implications of buying an electric car through your limited company.
Going green in your business starts with your finance function. They are in the best position to help your company become more environmentally conscious, by advising on budgets, forecasting, adapting your finance software and working on startup green investments.
Talk to your finance function today to get ahead of the opportunities that are out there. The planet will thank you.
At Quantico, we’re a team of FinOps experts. That’s Finance Operations – where finance, operations and technology meet. We provide inhouse finance teams to fast-growing businesses just like yours, giving you the systems you need to scale, without the admin and hassle.
If going inhouse sounds like the way forward for your business, visit our site today.