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Sustainability

Funding the Future: Financial Enablement for Sustainability Initiatives

With only 12% of Fortune Global 500 companies delivering on their ESG targets despite having a clear roadmap on the steps to decarbonize, we must ask why. In today's economic climate, businesses face a multitude of pressures. Rising operational costs, supply chain disruptions, and shifting consumer demands are challenging traditional business models. Additionally, the global push towards sustainability is prompting companies to invest in eco-friendly practices. These factors, combined with the need to stay competitive in a rapidly evolving marketplace, are forcing businesses to innovate and adapt at an unprecedented pace.

As businesses increasingly recognize the urgency of environmental responsibility, sustainability programs are not just about 'going green'—they're also proving to be a smart financial strategy. These initiatives, once viewed as cost centers, are now revealing their potential to drive significant financial benefits. From reducing operational costs through energy efficiency to tapping into new markets, sustainability is becoming synonymous with economic savvy. We see time and again that when done right, sustainability pays. Success expands beyond decarbonization goals. For example, we know that sustainable companies with public commitments:

  • Outperform their competitors, showing better returns and corporate longevity. (source: Global 100, Corporate Knights)

  • Adopt more innovative solutions(source: 2020 Corporate Energy & Sustainability Progress Report, GreenBiz)

  • Have an easier time attracting investors and talent. (source: A Fundamental Reshaping of Finance, BlackRock)

One common barrier to action is financial enablement to pursue opportunities beyond immediate gains. Once quick wins are identified in sustainability programs, the remaining items often require significant capital expenditures, which may raise concerns for CFOs without a compelling business case. Overcoming this hurdle typically demands a robust financial enablement strategy, essential for any company seeking to move beyond low-hanging fruit projects.

We offer a wide variety of innovative funding models to meet the specific financial requirements of our clients. We guide our clients through the process of determining their top priorities. Are they looking for immediate results, or are they navigating complex, long-range planning with multiple financial barriers?

We recognize the significance of safeguarding our clients’ cash flow, prioritizing the reduction of financial risk and strategically offloading assets from their balance sheet when necessary. It is essential to acknowledge that these financial needs may change over time. Therefore, flexibility to blend and match models across various geographies or facility types enhances agility, allowing for greater adaptability to changing circumstances.

Amid the challenging economic climate, we are witnessing a notable increase in the emergence of  ‘as-a-service’ deals among commercial and industrial clients. This model allows them to move faster by seamlessly incorporating additional scopes of work into existing contracts. Let’s look at an example of such a deal with a recent client.

With support from a third-party finance company who specialize in Energy-as-a-Service investment, our client was able to eliminate 85% and 100% of Scope 1 greenhouse gas emissions at two sites, respectively, with zero upfront CapEx investment.  EaaS offers businesses significant advantages, including enhanced sustainability through reduced emissions, increased operational efficiency, and lower capital expenditure with a service-based model. EaaS also boosts resilience by transitioning to stable, affordable energy sources and improves business performance with tailored, scalable solutions. By addressing energy volatility and decarbonization pressures, EaaS provides businesses with a strategic advantage for the future.

When done right, sustainability pays! Companies with successful sustainability programs often see the following benefits:

  1. Reduced Operating Costs: Sustainability programs often focus on energy efficiency and waste reduction, which can lead to significant savings in utility bills, material costs, and waste disposal fees.

  2. Increased Brand Value and Market Share: Companies with strong sustainability programs can enhance their brand reputation, attract eco-conscious consumers, and increase their market share in a competitive landscape.

  3. Risk Mitigation and Regulatory Compliance: By proactively adopting sustainability measures, companies can avoid potential fines and penalties associated with environmental regulations, as well as reduce the risk of resource scarcity impacting their operations.

Contact us today to start making sustainability work for you by partnering with Schneider Electric.

Contributor:

For a deep dive into other obstacles within this series, check out our on-demand webinar with James Potach, Senior Vice President Sustainability Business.  

Sources

Climate Impact Partners. (2022). Reality Check: Climate Action & Commitments of the Fortune Global 500.